US Unemployment Rate Stays At 3.7 Percent, Wage Growth Picks Up Pace – Analysis
By Dean Baker
The Bureau of Labor Statistics reported the economy added 155,000 jobs in November, with the unemployment rate unchanged at 3.7 percent. With a modest downward revision to the job growth reported for the prior two months, the average over the last three months was 170,000, a clear slowing from the 204,000 average rate over the last year. Both the overall and prime age (ages 25–54) employment-to-population ratios (EPOP) were unchanged in November at their highs for the recovery.
Within the prime-age population there have been notable differences in employment patterns over the last year. Overall, the EPOP is up by 0.7 percentage points over the year. Monthly data are erratic for subgroups, so taking three-month averages finds the sharpest increase is for men and women between the ages of 25–34, with a rise of 1.0 percentage points for both. The rise for the former group is especially noteworthy since some economists had previously argued they had lost interest in work due to the attractiveness of video games.
Using three-month averages, the EPOP for men between the ages of 35–44 was unchanged over the year, while it rose 0.5 percentage points for women. For men between the ages of 45–54 the EPOP rose by 0.5 percentage points, while it rose by 0.8 percentage points for women in this age group. The EPOPs for men in all three age groups were still below prerecession peaks. For women, the EPOP for the 45 to 54 age group was still close to a percentage point below prerecession peaks. For the 35 to 44 age group, it is comparable to prerecession peaks but still close to two percentage points below 2000 peaks. For the 25 to 34 age group, the EPOP was above prerecession peaks and comparable to 2000 levels.
Other data in the household survey were mixed. The duration measures of unemployment all fell, with the median duration, at 8.9 weeks, tying its low for the recovery. By demographic group, the 5.9 percent unemployment rate for black workers tied its lowest level on record.
On the negative side, the number of involuntary part-time workers rose by 181,000, putting it 423,000 above the low reported in August. Voluntary part-time employment fell by 604,000, putting it below year-ago levels. The steep drop is likely an anomaly, but weakness in this measure could be due to increased difficulty getting access to insurance outside of employment (either from Medicaid or the Affordable Care Act (ACA) exchanges).
The percentage of unemployment due to voluntary quits also edged downward to 11.8 percent. This measure of workers’ confidence in their job prospects is inconsistent with the low overall unemployment rate. It was over 14 percent in 2000 and peaked at 15.2 percent in April of that year.
The employment gains in the establishment survey were broadly based. Health care added 32,100, a bit more than its average of 27,400 over the last year. Manufacturing added 27,000 jobs, in spite of the continued rise in the trade deficit. Employment in the sector is up by 288,000 (2.3 percent) from year-ago levels. Restaurants added 21,200 jobs, while retail added 18,200.
Job growth in construction was weak at just 5,000, which is consistent with falling housing starts. Employment in the motion picture industry fell by 9,700 and is now 12,700 below its year-ago level. There was also a drop of 8,200 in the number of workers in state and local education. Employment in public education is up by just over 0.1 percent over the last year.
There is some evidence that wage growth is picking up. The average hourly wage has risen 3.1 percent over the last year. The annualized rate for the last three months (September, October, November) compared with the prior three months (June, July, and August) is up 3.3 percent. With inflation likely falling back to near its core rate of 2.0 percent due to lower energy prices, this allows for modest real wage gains. On the flip side, there was a modest drop in the length of the average workweek in November, so the average weekly wage actually dipped slightly.
On the whole, this is a mostly positive report indicating a decent pace of job growth, but items like the low share of voluntary quits and drop in hours provide some evidence of weakness.