November Employment: The Good, the Meh, and the Bleh

From the BLS November employment report:

• Good news: Significant drop in the unemployment rate, to 8.6% (from 9%)

• Less good: Mediocre employment growth of 120,000 jobs (a "treading water" pace)

• Not good: Labor force participation falls by 0.2 percentage points to 64%

 
The employment growth number comes from a survey of businesses (the "establishment survey") while the unemployment rate is calculated from a household survey (which has a smaller sample).  Continuing a recent pattern, employment growth looks better in the household survey: 278,000 more people said they were employed.  Also continuing the pattern of recent reports, the previous establishment survey numbers were revised upwards; September's job gain is now 58,000 higher and October's is up by 20,000.  Over the past several months, the revisions have been bringing the establishment report figures up closer to the better household survey numbers (which aren't subject to revisions).

By itself, 278,000 more people employed doesn't get the unemployment rate down by 0.4 percentage points.  The labor force fell by 315,000 (thus bringing the participation rate down).  The unemployment rate is measured as a percentage of the labor force, and to be counted in the labor force, someone must either be working or looking for work.  Another way of looking at it is that the number of people who were unemployed fell by 594,000 - roughly half of them got jobs, while the other half quit looking.

On a non-seasonally adjusted basis, the unemployment rate in November was 8.2% (down from 8.5% in October, mainly due to a big drop in participation) and payrolls rose by 339,000. That is, November is a month when the seasonal adjustment makes things look worse... it will be the opposite in January when all the extra holiday employees lose their jobs.