The Bureau of Labor Statistics (BLS) released the Employment Situation report for December on Friday. The establishment survey indicated payroll employment increased by 155,000 with private sector payrolls increasing by 168,000 and a loss of 13,000 in the government sector. Estimates for the prior two months were revised upward by a net of 14,000.
The household survey indicated the unemployment rate held steady at 7.8% in December after revising the November figure up to 7.8% from 7.7%, based on updated seasonal adjustment factors. The updated factors had little effect on the overall pattern in the unemployment rate for 2008 forward, the period covered by the revisions.
However, the stability in December’s unemployment rate did benefit from some favorable rounding. November’s unrounded rate was 7.753%, rounding up to 7.8%. December’s rate was 7.849%, rounding down to 7.8%. The labor force expanded by 192,000 persons in December, 28,000 of them employed, 164,000 of them unemployed. A swing of 2,000 from employed to unemployed would have pushed the unemployment rate to 7.9%.
December’s payroll gain of 155,000 was in line with the monthly average of 153,000 in 2012 and helped expand payrolls by just over 1.8 million for the year, only marginally lower than in 2011. So last month, last year and 2012 have come in consistently at a level too low to make rapid progress lowering the unemployment rate. In all of 2011 and 2012 the rate has come down just over one percentage point, from 9.0% to 7.8%. At this rate it will take the better part of 4 years to lower the unemployment rate to 6.0%, the high end of the range economists consider “normal.”
Unfortunately, this math is consistent with the Federal Reserve’s economic projections, which anticipate the unemployment rate will be between 6.0% and 6.6% by the end of 2015. A more robust (and not unrealistic) recovery would have job creation at twice this pace. With monetary policy arguably nearing the limits of its effectiveness and the tax rates part of the fiscal cliff behind us, let’s hope the remaining fiscal policy issues can be resolved in a way that adds to rather than subtracts from growth. The labor market, a broader economic recovery and the housing market all would benefit.