Unemployment Rate Hits 5-Year Low

The average rate of job growth is slowly inching upward.

Job seekers wait in line to enter the San Francisco Hire Event job fair on Nov. 9, 2011, in San Francisco.
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U.S. employers added 203,000 jobs in November, the government reported Friday. The figure comes in well above consensus estimates, which were at 180,000, according to Bloomberg. The unemployment rate also ticked downward to 7.0 percent from October's 7.3 percent.

The latest measure of jobs growth is roughly in line with October's pace, when employers added 200,000 jobs. It is faster than the average job growth for the first 10 months of the year, 187,000 per month, and may signal that the labor market is showing real signs of healing. The three-month rolling average of job growth, which irons out some volatility, was as low as 146,000 in July and below 170,000 for August and September. But it was 204,000 in November, and this month it is still strong at 193,000.

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Job growth was broad based, with all industries adding to their payrolls except finance, which lost 3,000 jobs, and information (an industry that includes broadcasting and motion picture recording), which lost 1,000. The healthcare and social assistance industry added nearly 30,000 jobs, professional and business services added 35,000, and retail added more than 22,000 workers. Goods-producing industries also had a strong month, with construction adding 17,000 jobs and manufacturing adding 27,000.

On its surface, the big tick downward in the unemployment rate may look encouraging; the jobless rate hasn't been this low since November 2008, and declines of 0.3 percentage points in the jobless rate are rare. The last decline of 0.3 percentage points was in September 2012, and before that, the last one had come in November 2011. However, the movement of the unemployment rate is tougher to gauge this month, as the October government shutdown distorted that month's figures, counting furloughed government workers as unemployed and bumping the jobless rate up to 7.3 percent from September's 7.1 percent.

That still means the jobless rate came down one tenth of a percentage point from September's undistorted numbers. In addition, a broader measure of unemployment, the U-6 rate, which includes people working part-time for economic reasons and discouraged workers, fell from 13.6 percent in September to 13.2 percent in November.

However, even while the labor market has strengthened, a decline in the labor force participation rate – the share of Americans either working or looking for work – also has helped to bring jobless rates down over the longer run. That's because the unemployment rate counts only Americans looking for jobs.

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Currently, only 63 percent of Americans are in the labor force. That's up from October's distorted 62.8 percent but down from 63.2 percent in September and 63.6 percent one year ago. That may signal that some American job seekers are choosing not to look for work, says one economist, but demographic factors also play a part

"Those of us who are baby boomers are retiring, and they're not going back into the labor force," says Joel Naroff, chief economist at Naroff Economic Advisors. "And some have lost their jobs," he adds, noting that many older workers who have lost their jobs will not return to the labor force.

He believes another factor pulling the participation rate downward is that workers who have exhausted their jobless benefits are also falling out of the labor force.

Though there is a long way to go before the job market might be considered healthy, recent data have signaled that consumer spending is improving, a factor that could play a big part in boosting job growth. The most recent data show retail sales rose in October and auto sales for the month of November were up by 8.9 percent from the prior year, according to Autodata.

"I think we've had some pretty consistent job growth recently," says Gus Faucher, senior economist at PNC. "You've got less drag from fiscal policy, you've got continued improvement in the housing market, ... you've got a pickup in business investment, consumer spending continued to increase on cars, appliances, that type of thing."