More Good News for the Job Market

For the fifth successive month the Bureau of Labor Statistics (BLS) household survey showed sizeable employment gains, gains that were fast enough to reduce the unemployment rate to 8.5%. Revisions in seasonal adjustment changed the timing of the unemployment-rate decline over the past few months. There can be little doubt, however, that the household survey shows a faster rate of job growth than the one needed to keep up with the growth in the population. Since July the fraction of adults who report holding a job has increased 0.3 percentage points. To be sure, the gains have been modest compared with the drop in the employment-to-population rate caused by the Great Recession. (Between December 2007 and July 2011 the adult employment rate fell a total of 4.5 percentage points.) Still, the employment picture is much brighter in December than it seemed in July.

According to the household survey, an additional 176,000 Americans found jobs in December, capping a 5-month period in which employment gains totaled 1.34 million. Over the same period the ranks of the unemployed fell by 811,000 and the unemployment rate shrank 0.6 percentage points. For the first time since July, the BLS employer survey showed faster job gains than those estmated in the household survey. Employers report that their payrolls went up 200,000 in December. Unlike the household survey, which suggests job gains were concentrated in the second half of 2011, the employer survey showed a more stable pattern of employment growth over the course of the year. In the first half of the year, payroll gains averaged 131,000 a month; in the second half, 142,000 a month. Both the household and payroll survey show total job gains of about 1.6 million in 2011, but the household survey indicates the job growth was concentrated in the second half of the year.

Private sector payroll gains were spread across a variety of industries in December, including construction, manufacturing, wholesale and retail trade, transportation, health care, and food services. Government employment shrank in December as it has in all but two months since July 2010. Encouragingly, the rate of public employee job loss slowed in the second half of 2011. In the first half of 2011, public-sector payrolls shrank an average of 34,000 a month; in the second half of the year, employment fell only about 13,000 a month.

The good news on job growth has improved the outlook for the nation’s long-term unemployed. Over the course of 2011 the number of unemployed workers who have been jobless 6 months or longer fell 833,000. The number of long-term unemployed in December—5.6 million—is still astonishingly high by post-war standards. Nonetheless, it has fallen 17% since reaching a peak in the spring of 2010. Broader indicators of unemployment have also improved in recent months. The so-called “U-6” unemployment rate, which accounts for unemployed workers who have stopped looking for work but who have searched in the previous year and for the employed who involuntarily work on part-time schedules, fell 0.4 percentage points, to 15.2%, in December. This is the lowest level of the U-6 unemployment rate since February 2009, and it is 2.0 percentage points below the peak level attained at the end of 2009.

Even though the labor market recovery from the Great Recession has been disappointingly slow, the persistence of the current expansion has produced modest but noticeable gains for the unemployed. The pace of these gains picked up in the second half of 2011.