November’s 203,000 Payroll Jobs Not Enough

Popular Economics Weekly

The U.S. Bureau of Labor Statistics reported today unemployment declined from 7.3 percent to 7.0 percent in November, and total nonfarm payroll employment rose by 203,000. But that shouldn’t be enough good news for the Federal Reserve to begin to raise longer term interest rates, which is what will happen when they begin to ‘taper’ their monthly $85 billion in securities purchases. Too much money is still on the sidelines, rather than being invested in future growth.

In fact, if anything, the Fed will probably announce that tapering might begin in the spring, if such higher employment numbers persist. That’s because, coupled with the upward revision of Q3 GDP growth to 3.6 percent from 2.5 percent, the economy isn’t showing any inflation. Higher inflation is a sign of increased spending and investment, rather than all those excess reserves sitting idle in safe Treasury bonds, or other so-called MZM accounts (money at zero maturity), which totals $12 trillion, according to the St. Louis Fed.


Graph: Calculated Risk

Both the number of unemployed persons, at 10.9 million, and the unemployment rate, at 7.0 percent, declined in November. Among the unemployed, the number that reported as being on temporary layoff decreased by 377,000. But this largely reflects the return to work of federal employees who were furloughed in October due to the partial government shutdown.

And the civilian labor force rose by 455,000 in November, after declining by 720,000 in October. In fact, total employment as measured by the Household Survey increased by 818,000 over the month, following a decline of 735,000 in the prior month, so higher household employment just cancelled out the prior month’s drop.

Then why should the Fed wait longer to begin to taper? According to the BLS, there are 4.066 million workers who have been unemployed for more than 26 weeks and still want a job. This was up slightly from 4.063 million in October. Though generally trending down, it is still very high.  Long term unemployment remains one of the key labor problems in the US, in part because so much of the record corporate profits are not being put to work towards future growth, as I said.

One eye-opener is the continuing record corporate profits, in part because wage and salary growth has been depressed. Profits in the third quarter increased an annualized 11.5 percent, following a gain of 8.5 percent in the second quarter. Profits are after tax but without inventory valuation and capital consumption adjustments. Corporate profits on a year-on-year basis increased 5.8 percent versus 5.3 percent in the second quarter.


Graph: Econoday

MarketWatch columnist Rex Nutting believes that is the real growth problem. “Since June 2009, he says, “real average weekly earnings have increased 0.3 percent per year , even as productivity has increased 1.5 percent per year. Most of the income gains have gone to the highest paid workers, including the bosses. Real median weekly wages have actually declined 0.8 percent per year since 2009.”

And inflation is still a problem. That is, it’s too low, which means not enough money is being spent that would stimulate more growth, as I said. So though employment is up some 2.9 million jobs, the other two items the Fed is looking at before they decide to taper are inflation (core PCE is only up 1.1 percent year-over-year), and a budget agreement.   We are seeing some indication that an agreement can be reached, but it will do little to boost growth, though it should head off another government shutdown, which is something to cheer about.

Harlan Green © 2013

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About populareconomicsblog

Harlan Green is editor/publisher of, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
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