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Contradictory job reports rattle markets, some analysts

By Danielle DiMartino
The Dallas Morning News

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The unemployment rate fell to an eight-month low of 5.9 percent in November, the U.S. Labor Department reported yesterday, but the separate payroll survey brought the disappointing news that employers have reined in hiring activity. Employers added just 57,000 jobs, far less than the 150,000 that economists had expected.

The report stunts the notion that the surprisingly strong jobs report in October marked a clear end to what many have been calling a jobless recovery. Federal Reserve Governor Ben Bernanke said last month that population growth alone demands the creation of 150,000 positions each month. Anything less indicates net job losses.

"Over the next 12 months, even if we create 1.8 million jobs, the unemployment rate won't budge," said Mark Zandi, chief economist at Economy.com.

Financial markets focused on the negative implications in the reports. All major U.S. stock indices fell. The bond market, considered a safe haven in riskier times, rallied with a level of enthusiasm not seen in more than a year.

Employment report • The number of self-employed workers grew to almost 9.6 million, the highest level since tracking began in 1948. • The unemployment rate for teens age 16-17 dropped from 20.9 percent to 16.9 percent. • New confidence in the economy sparked voluntary job departures, with 939,000 people leaving, up from 783,000 in October. • Unemployment for those without a high school diploma fell from 8.9 percent to 8.5 percent. • Unemployment among people with bachelor's degrees increased from 3 percent to 3.1 percent. • More workers were forced to work part time, with 4.9 million people saying they were doing so for economic reasons, up from 4.8 million in October. • 8.7 million people were unemployed. • The jobless rate for blacks dropped 1.3 percentage points to 10.2 percent. • The rate for Hispanics increased 0.2 point to 7.4 percent. • The rate for women fell 0.1 point to 5.1 percent. • The rate for men increased 0.1 percentage point to 5.7 percent. Source: Bureau of Labor Statistics; Challenger, Gray & Christmas

The debate between which of the two jobs surveys offers a better read of the labor market, which had largely subsided with the encouraging October numbers, is sure to heat up once again with the new reports.

The household survey used to calculate the unemployment rate polls 60,000 households. It reported that the number of employed rose by an impressive 589,000. On the other hand, the payroll survey, which offers a broader sampling by polling 400,000 establishments, showed that the economy created far fewer jobs.

"The household survey is not nearly as accurate as the payroll survey," Zandi said. "And that's not just because the payroll survey is larger, it has also gotten better and now captures what's going on in smaller companies."

Some analysts had been hoping yesterday's report would show that for the first time since November 2000, job creation had more than absorbed the natural labor force expansion by adding about 200,000 jobs.

To be sure, after last month's upside surprise, so-called whisper numbers may have inflated expectations unreasonably. Some estimates reached as high as 250,000 jobs.

The Labor Department was quick to emphasize the bigger picture, saying that a total of 328,000 jobs had been added to the economy since July, a marked improvement over the long string of months the economy shed jobs.

And though many registered disappointment in yesterday's report, not all were left discouraged or dismissive of the good news in the household survey.

"The labor report wasn't a total wipeout by any measure because you had such a big gain in the household survey," said John Lonski, chief economist at Moody's Investors Service in New York.

Lonski pointed out that the last time such a large discrepancy existed between the two surveys was in 1982, preceding a big boom in the economy.

One challenge the Labor Department may have, some say, is convincing those who have been out of work for an extended period that the labor market is in better shape. About 2 million people — nearly 24 percent of the unemployed — have been searching for a job for more than 27 weeks, the highest since the recession of the early 1980s.

"What's disconcerting is that if you're unemployed, you're staying unemployed," Zandi said.

Employment is still down 235,000 from where it was at the same time last year, according to an analysis of yesterday's report by the Center for Economic & Policy Research.

And since job creation began to rise in July, 270,000 workers have accepted part-time jobs though they would prefer to be working full-time. Those numbers don't even include those who are so discouraged that they have dropped out of the job force altogether.

"The main thing is the fact that we have fewer people in the labor force than you would typically expect to see," said Dean Baker, co-founder of the economic research center, based in Washington, D.C. "And that what's kept the unemployment rate down."

What may be more disturbing to economists who are banking on consumer spending sustaining the recovery is that of those who are working, wages have just about come to a standstill.

Wage growth has slowed to a 0.8 percent growth rate since August, which lags inflation considerably.

"This is the lowest rate of nominal wage growth that we've seen since 1964, when data was first collected," Baker said.

Though he said it's implausible that wages remain at such depressed levels, it is still cause for concern given the disappearance of the twin supports that have benefited the economy this year — the mortgage refinancing boom and the tax cuts.

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