In the past few weeks, the US unemployment rate fell sharply to it lowest level in 32 months. Recent data has been promising optimistic results, and the recent fall to "just" 8.6% unemployment hints at momentum in the US. Although, seemingly never-ending crises in Europe and slowdowns in emerging markets could dampen US growth in the coming months.
On Friday, December 2, the Labor Department reported that employers added 120,000 jobs in November (as indicated by the positive trend in the right-hand graph in the picture). Significant gains were in the retail and hospitality sectors, while manufacturing experienced little change. Upticks in consumer holiday spending also hinted at signs of upcoming recovery. Although this data seems promising, we have to look at the big picture: the Labor Department's report also revealed that fewer Americans are working or looking for work, i.e., they have dropped out of the labor force. (The downward trend in labor force participation can be observed in the right-hand graph in the picture.) Therefore, unemployment optimism may be overstated with an increasing number of people no longer counting as unemployed. A more realistic number may be the constant 5.7 million people who are experiencing long-term unemployment, a number that has hardly budged.
Source: The Wall Street Journal
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