WASHINGTON – The surprising drop in November’s unemployment rate to 8.6 percent overshadowed what may be a more significant positive trend: a sharp upturn in hiring by the nation’s small businesses.
Overall, U.S. employers added 120,000 jobs in November as the unemployment rate fell sharply from 9 percent, the Labor Department said in a report that brought holiday cheer.
Private-sector employers added 140,000 jobs last month, the Bureau of Labor Statistics reported in its survey of nonfarm payrolls, but the net job gain was dragged down by 20,000 government jobs lost at federal, state and local levels.
The BLS also revised the September job estimates sharply upward from the original 158,000 to 210,000, a strong number. October’s estimate of 80,000 jobs gained also was revised up by 20,000.
“The job market is firming at year’s end. Job growth has picked up in recent months, particularly among smaller businesses. The employment gains have also broadened out across industries from retailing to manufacturing,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics. “The sharp improvement in unemployment is encouraging, but overstates the improvement. The job market is still struggling, but it is gaining momentum going into 2012.”
Economists think the BLS payrolls report may be undercounting hiring by small businesses. This may explain why a key private-sector employment gauge on Wednesday posted surprisingly strong numbers that were somewhat at odds with Friday’s BLS data. The ADP National Employment Report said 206,000 private-sector jobs were created in November. Employers with more than 500 workers accounted for about 6 percent of the hiring, the ADP report said, while employers with fewer than 49 workers accounted for 53 percent of the new jobs.
The National Federation of Independent Business, which surveys the pulse of smaller firms, also said Friday that its members were seeing an uptick in hiring.
“The percent of owners cutting jobs has returned to ‘normal’ levels,” said William Dunkelberg, the group’s chief economist. “And the percent of owners adding workers continued to trend up. Reports of new job creation should pick up a bit in the coming months.”
The sharp fall in the unemployment rate, while a potential boost to the political fortunes of President Barack Obama, stemmed from two factors.
First, there was an outsized decline of 315,000 people in the workforce. Those presumably are people who gave up looking for work, and they are likely to return to the workforce eventually. The rest stemmed from growth in the number of jobs.
“About half of the drop in unemployment in the household survey was due to a decline in the labor force … and about half to employment growth,” Alan Krueger, the new head of the White House Council of Economic Advisers, said in a statement.
The unemployment rate is derived from a survey of households, while the job-growth number is drawn from a survey of businesses. Economists at RDQ Economics, a New York forecaster, argued in a research note that the household survey has shown stronger employment gains than the payroll survey has for four straight months. RDQ said the unemployment rate had shown “a more rapid decline than one would have expected given the data on the broader economy.”
The strong job numbers add to a recent trend of positive economic indicators, including sharply rising consumer confidence, auto sales, Black Friday retail sales and a key manufacturing index by the Institute of Supply Management. It all points to a firming U.S. economic recovery, with the biggest shadow cast by Europe’s debt crisis.
“November’s employment gain, augmented by net upward revisions of 72,000 to September-October readings, continues the run of U.S. economic data showing heartening (and in its degree somewhat surprising to us) resilience in the face of the deepening euro area debt crisis,” Alan Levenson, the chief economist for Baltimore-based investment giant T. Rowe Price, wrote in a research note.
Stocks rallied as trading opened Friday, but concerns about Europe, where leaders hold key meetings next week, killed off the rally late in the day. The Dow Jones industrial average ended down 0.61 point to close at 12,019.42. The S&P 500 was off 0.30 point to 1,244.28 and the Nasdaq composite finished up 0.73 point to 2,626.93.
There wasn’t much optimism for the hard-hit construction sector, which shed another 12,000 jobs in November. In the past 12 months, the construction industry has added just 18,000 jobs, and a surge is unlikely next year, according to the trade group Associated Builders and Contractors.