Put another way, there was a decline in the labor force participation rate by 446,000 people. As a result, the overall participation rate dropped to 62.7% while the rate for the 25 to 54 year old age group dipped to 81.4%. In general, people leave the labor force when they are discouraged about job prospects, hence this is normally not a positive sign, even though it results in an improvement in the unemployment rate.
Population-adjusted unemployment claims are near their lowest levels since the late 1960s. They briefly dipped to their lowest level since the data has been recorded in September, before rising slightly in October and November.
However, Average Hourly Earnings was another blip on the radar of an otherwise generally upbeat jobs report as they declined from a 2.8% year over year (Y/Y) rise in October, to 2.5% Y/Y in November. That said, the overall upward trend for 2016 continues, suggesting that inflation may slowly be coming into play. This may finally convince the Fed to raise interest rates in December.
Some of the unemployment numbers may not be as rosy as they appear, given that underemployment is a factor that doesn’t appear in the numbers. The fact that workers who are seeking full time jobs but taking part time work, or continue to accept positions for which they are overqualified, is an ongoing concern. That said, with the Fed on the brink of an interest rate hike, the outlook is certainly closer to optimism than it is to despair.
Hafeez Esmail is the Chief Compliance Officer at Main Management, a participant in the ETF Strategist Channel.
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