Jobs, Labor Productivity, and Our Forecast

The Labor Department’s jobs report for November indicates that job growth has slowed and unemployment has risen from October. We had forecasted a gain of 50 thousand jobs and a steady unemployment rate. The actuals were a gain of 39 thousand jobs and a rise in the unemployment rate from 9.6 percent to 9.8 percent. The biggest change in November’s sectoral pattern of growth was in Retail, which had a gain of 13 thousand jobs in October but a loss of 28 thousand jobs in November. This will be a sector to watch in December. The number of long-term unemployed went the wrong direction as well, rising from 6.2 million in October to 6.3 million in November.

With GDP growth at 2.5 percent and anemic job growth we might presume that third quarter labor productivity was strong and that was corroborated by Labor Department statistics that were published Wednesday. They reported that third quarter productivity rose 2.3 percent, which followed a 2 percent decline during the second quarter.

Our recent economic forecasts have been decently close on job growth but pessimistic on GDP growth, which means that we are missing strength in labor productivity. As we prepare for our next United States and California Economic Forecast release December 15, we are keeping this in mind.

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