Hitting the New Normal
The economy created 171,000 jobs in October, while the unemployment rate rose to 7.9 percent. The rise in the unemployment rate was to be expected after the anomalous September decline. Broadly read, the report showed evidence against continued weakening:
- Job creation in August and September was revised up by a total of 84,000 jobs.
- Job creation was more broadly spread than in previous months, with increases in both the goods- and services-producing sectors.
- The labor force grew by 578,000 and the participation rate rebounded by 0.2 percent to 63.8 percent.
However, the report was not unambiguous good news, as the foundations of income growth weakened:
- Average weekly hours of work declined.
- Average hourly earnings declined.
- The average weekly earnings and index of weekly hours showed sharp declines.
- The Hispanic unemployment rate mirrored the overall rate, rising from 9.9 to 10.0.
There will be celebration in some quarters over the top line job growth, but this is a triumph of diminished expectations. The report is a solid base hit – not a home run – in a game where the U.S. is over 20 million runs behind.
Data junkies here’s your fix: the October U-6 (the broadest measure of unemployment) was down 0.1 to 14.6 percent.
The bottom line: The October jobs report showed solid jobs, weakness in income growth, and an expected rise in unemployment. It is consistent with the slow recovery thus far and not evidence of an economy bullet-proof from the threats from Europe and the fiscal cliff.