A surprise drop in the jobless rate Friday and a new measurement showing a sharp drop in consumer sentiment underscore what’s at stake for a sluggish economic recovery threatened by the coming political showdown in the nation’s capital.
Employers added a better-than-expected 146,000 jobs in November and the unemployment rate tumbled two-tenths of a percentage point to 7.7 percent, the Labor Department said Friday in a report that suggested the economy is gaining a bit more economic steam.
But weighing against the positive numbers, the University of Michigan released its monthly measurement of consumer confidence Friday and found that it had plunged by more than 8 percentage points. It’s a clear indicator that Washington’s squabbling over possible tax hikes and steep government spending cuts in 2013 is affecting consumers and can serve either to kick-start or hurt growth.
“Bottom line is that the job market is holding firm despite rising worries over the fiscal cliff. If Washington can get it together reasonably soon, the job market will kick into a higher gear,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics.
In an investor note, Bank of America Merrill Lynch economist Michelle Meyer added that “businesses have cut back investment in capital in the face of the cliff, they have yet to do so with labor. This shows some stability heading into year-end.”
Still, bitter partisan political battles are worrying ordinary Americans and may affect their behavior. On Friday, financial and insurance giant Allstate released its latest Heartland survey, which also found flagging sentiment.
Asked whether the country is moving in the right direction, 75 percent of Democrats surveyed said the economy would improve over the next 12 months, while 63 percent of Republicans queried said it would get worse.
“That’s what we’ve seen consistently in our polls: a pretty even split, deeply divided,” said Joan Walker, an Allstate executive vice president.
The measures of sentiment help explain why the political parties remain so dug in to their positions as the so-called fiscal cliff approaches.
Missing from Friday’s jobs report, it seemed, were the effects of super-storm Sandy, which devastated the East Coast as it made landfall Oct. 29. The Bureau of Labor Statistics, part of the U.S. Labor Department, felt compelled to say as much when it released the monthly report.
“Our analysis suggests that Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November,” the BLS said, noting that response rates to its survey from businesses were within normal ranges.Statisticians revised down the previous employment estimates for September and October by a combined 49,000 jobs. Friday’s report included an unusually large revision to October’s government hiring numbers. The agency said there were 51,000 fewer government jobs than first reported for October.
Revisions have become political issues, in part because former General Electric chief Jack Welch made unfounded allegations last month that the BLS was manipulating data to favor President Barack Obama’s re-election.
Friday’s revision to October government hiring estimates is due to incomplete data sent by local school systems nationwide that month, said Kara Sullivan, the BLS economist who compiles jobs data on the government and health care.
The revisions were made when more complete data from school systems became available, she said, noting a surge of local hiring for education in August and September that tailed off in October.
More surprising than the stronger-than-expected numbers was the drop in the jobless rate to the lowest it’s been since December 2008. The White House and many economists no longer think the rate is a statistical anomaly.
“Over the last 12 months, the unemployment rate has decreased by 1.0 percentage point as a result of growing employment, and the labor force participation rate has been essentially unchanged,” Alan Krueger, the head of the White House Council of Economic Advisers, said in a blog posting on the jobs report.
The jobless rate is holding below 8 percent even as the labor force participation rate has averaged 63.7 percent over the past six months. During the same period, the unemployment rate declined from 8.2 percent to 7.7 percent, meaning that the falling jobless rate isn’t due simply to a shrinking pool of workers.
“The unemployment data are painting a brighter picture on the economy than any other data series we can think of and, therefore, are out of sync with other indicators and hard to understand,” John Ryding and Conrad DeQuadros of RDQ Economics wrote in a research note. “Our best take is that the economy is growing at a moderate rate at the end of 2012 despite the uncertainties of the fiscal cliff and the impact of Sandy – a testament to the resiliency of the U.S. economy.”
November’s job gains were fairly broad, across most sectors. Retailers led the charge, with 52,600 additional hires, followed by professional and business services at 43,000. Leisure and hospitality, a reflection of consumer and business sentiment, rose by 23,000, followed by health care adding 22,000 jobs.
On a down note, however, the hard-hit construction sector shed another 20,000 jobs and manufacturing went negative, too.
“Manufacturers shed 7,000 workers in November, building on the weak economic environment that we have seen since July. The industry has lost 26,000 workers on net in the past four months,” Chad Moutray, the chief economist of the National Association of Manufacturers, wrote in his Shopfloor.org blog. “Prior to that point, the manufacturing sector had added 172,000 employees in the months of January through July, or 16.3 percent of all of the nonfarm payroll jobs created in the first seven months of the year.”
The number of long-term unemployed, people who’ve been out of work for 27 weeks or more, remained stuck around 4.8 million in November, and these Americans account for 40.1 percent of the ranks of the unemployed.
The number of people employed part time who want to work full time, known as involuntary part-time workers, stood unchanged at 8.2 million in November. These are generally workers whose hours have been cut back. There are another 2.5 million people who are considered marginally attached to the workforce, a number that’s unchanged from a year before. These are people who aren’t in the labor force but are available for work and had looked for jobs sometime in the last 12 months.
“The stronger than expected monthly jobs report for November is good news, but jobs still elude the long-term unemployed and unemployment overall is still hammering millions of Americans,” Christine Owens, the executive director of the National Employment Law Project, said in a statement that called for extending unemployment benefits for the millions of Americans who are long-term unemployed.