Economy Unexpectedly Gains 151,000 Jobs in October

Today the uber-important nonfarm payroll report was issued by the Bureau of Labor Statistics.  For a change, the report was good*.  The economy added 151,000 jobs in October, well above the consensus predicted increase of 60,000 jobs.  Unemployment remains high at 9.6 percent.

*This report is really only good in comparison to the last couple of reports.  A more accurate way to describe this report would be “not bad”.  While it is nice to see an increase in jobs, we have lost 7.5 million jobs since 2007 and there are currently 14.8 million unemployed in the United States.  Given expected increases in population, it would take us until sometime in the next decade to return to a normal level of employment at this pace of job creation.  Jobs should be the number one priority of every politician and economic policy-maker today.

While the surface numbers are good, there are some blemishes when you dig a little deeper.  The labor force participation rate actually decreased in October.  There are currently 1.2 million discouraged workers, which is an increase of more than 400,000 from the year prior.  These are people who would like to work but have stopped looking for work because they believe there are no jobs.  These people are not counted in the unemployment numbers.  As the employment situation improves, we should expect to actually see the unemployment percentage increase as these discouraged workers resume their job search.

Long-term unemployment is still ridiculously high.  There are 6.2 million people who have been unemployed for more than 26 weeks who are still looking for work.  Clearly, this is very bad.  This is where all the talk about structural unemployment comes into play.  The idea that some part of the weakness in the labor sector is going to become permanent is truly scary.  The longer the unemployment numbers remain high, the better the chances that some percentage of that becomes structural.

Is this the beginning of a recovery for the labor market?  I’m not ready to say that yet.  We need to see a few more strong months before we are even remotely close to being out of the woods.  Even so, isn’t it nice to see a report that isn’t out and out terrible?