Wondering if Those Jobs Numbers Work

The Labor Department's November jobs report was relatively positive: 120,000 jobs were added. But it didn't read that way in many of the national headlines. You didn't have to look hard for warnings to "curb your enthusiasm" or find someone wondering, "is it really good news?" or concluding it "isn't as good as it sounds."

Much of the pessimism focused on the unemployment rate, down 0.4% to 8.6%, according to the Bureau of Labor Statistics Survey of Households. It was the lowest rate since 2009, but here's where the pessimism comes in. In addition to new jobs, the unemployment rate was down because 487,000 people left the labor pool in November. Fewer people in the pool lowers the unemployment rate, the BLS noted.

Economist Chris Thornberg describes the household survey as volatile. "It's a noisy survey," says Thornberg, founding partner of Los Angeles-based Beacon Economics. "You have to look at the trends in the last four or five months, rather than just the last month. We look at payroll numbers because they're reasonably accurate on a month-to-month basis."

There are a lot of ways to look at employment. We've put together a handy slideshow for you, showing some of the various measures to consider. Click on the image below to see some of the things you may have been wondering about the state of jobs nationwide -- and share some of your own thoughts about it on the message board.

Unemployment state by state

The Labor Department's monthly jobs report consists of two different surveys -- the Establishment Data, a payroll survey of businesses, the most accurate account of job growth; and the Household Data, a survey of households, which provides the unemployment rate, based on an entirely different jobs number than the payroll survey. The household survey reported 278,000 newly employed in contrast to the 120,000 net jobs (140,000 private sector jobs minus 20,000 government jobs) in the payroll survey. "The data tends to be clunky," Thornberg observes.

The household survey sample is small -- 60,000 households. The payroll data represents 140,000 businesses.

Though it was widely reported that people left the labor pool because they couldn't find a job, there are other reasons people leave, such as retirement. Thornberg notes that some of the people leaving the workforce are no longer in the employment pool because their unemployment benefits expired.

People are considered in the labor pool while they're receiving unemployment benefits, because they're required to look for work. And while it may be cynical, and certainly not applicable to every unemployed person, the reality is that some people are more diligent in their job hunt when their benefits expire.

Though the household survey may be unreliable on a monthly basis, it is an important survey for long-term trends. It's also more expansive, offering data the payroll survey doesn't, according to Thornberg. For example, the sample includes freelance workers as well as undocumented immigrants and informal workers who aren't picked up in the payroll survey.

But there is a better number in the jobs report that's largely being ignored. "The most important numbers out there right now are the revisions," Thornberg says. The Department of Labor revises its job numbers twice in the two successive months that follow the initial monthly report. For August, September, and October, the number has been revised upward. In August, job numbers were revised from zero to 104,000. In September, the number was revised from 158,000 jobs to 210,000, and October was revised up from 80,000 to 100,000.

"The fact that they keep revising the numbers up is, for me, one bit of evidence that the economy is picking up steam," Thornberg says. Granted, if the European debt crisis goes unresolved, it could cause more trouble for the US economy. And it's certainly not time to declare economic victory. But the economy, while far from being on fire, is sparking.

Just yesterday, the Labor Department reported initial jobless claims dropped by 23,000 to 381,000 in the week ended Dec. 3, the fewest since February. The number of people on unemployment benefit rolls and those getting extended payments also decreased, the report showed.

Who is hiring? The sectors that saw employment growth included leisure and hospitality, adding 22,000 jobs, driven by an increase in hiring at restaurants, bars, and other food and beverage establishments. For the year through November, leisure and hospitality added 253,000 jobs. An increase in hospitality employment could be a sign that people have more disposable income to spend.

Retail was also up by 50,000 jobs in November, adding an average of 14,000 jobs per month since Dec. 2009. Professional and business services were up by 33,000 jobs, with modest gains in temporary employment. Healthcare saw an increase of 17,000 jobs. For the year through November, healthcare has added an average of 27,000 jobs per month. There was little change in manufacturing and construction employment, while government employment continued to decline, trending downward since the second half of 2008.

Moreover, job growth is a sign of an economy on the mend, Thornberg says. "Jobs aren't the problem for the economy. The economy is the problem for jobs." The gaps in the economy boil down to local governments still trying to recover from budget problems, the trade deficit (importing more than we export), and a lack of new home construction because of excess supply, according to Thornberg. (Note that not all economists consider trade deficits a bad thing. If anything's been learned from the recession, it's that economists disagree on a lot of things -- see Need an Optimist? Go Wesbury.)

In past recessions, consumer spending has led recoveries. But this recovery can't be consumer-led because the recession was caused by overspending (putting aside the role of the financial industry for the moment). Thornberg believes overconsumption drove the trade deficit. Consumer spending needs to get back in line with income.

"The problem with consumer spending is it stimulates China's economy more than ours," he says. "We still have consumers that are overspending, and we still have a trade deficit that's too large. That's one reason we haven't caught up. We haven't fully burned off the excesses of the early part of the last decade. It's not about consumption. It's about production."

Another thing: taxes. "Ultimately, we have to raise taxes." But it has to be done slowly. "It won't hurt the economy if you do it over time."