“Ultimately, this has been a speedy labor market recovery, and one that appears to have more room to run. Policymakers have every reason to take the win and continue adjusting to that reality.”

New York Times: Why the November Jobs Report Is Better Than It Looks
By Neil Irwin
December 3, 2021

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Most notably, the jobless rate fell to 4.2 percent from 4.6 percent, a remarkable swing in a single month. The speed with which unemployment has gone from a grave crisis to a benign situation is astounding. Unemployment was 6.7 percent last December. In one year, we’ve experienced an improvement that took three and a half years in the last economic cycle (March 2014 to September 2017).

Sometimes a falling unemployment rate is driven by a pernicious trend: People drop out of the labor force. The opposite was true in November. The survey of American households on which the data is based showed uniformly positive signs. The number of people working was up by 1.1 million while the number of adults not in the labor force — neither working nor looking for work — fell by 473,000.

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Even the disappointing number on job creation, derived from a separate survey of employers, has some silver linings. For one, it was accompanied by positive revisions to September and October job growth numbers, amounting to a combined 82,000, which takes some of the sting away. Revisions have been uncommonly large, and mostly in a positive direction, in recent months, reflecting challenges collecting data in a pandemic economy.

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But in terms of policy, this increasingly looks like an economy on the right track. The work of macroeconomic stabilization appears to be pretty much complete. At its coming policy meeting, the Federal Reserve will seriously consider winding down its program of bond-buying faster than planned, Chair Jerome Powell said this week.

Despite the soft job creation numbers, the overall November employment report appears to support those plans. Fed officials would like to see a stronger rebound in labor force participation, but that measure was at least heading in the right direction in November. And ultimately it isn’t Fed policy that will decide whether, for example, a 62-year-old who left his job during the pandemic decides to start working again.

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If the Fed succeeds, the economy will keep growing steadily and the labor market will continue its gradual improvement. But it’s worth noting just how rapid the improvement has already been. In February — a mere nine months ago — the Congressional Budget Office was forecasting the unemployment rate would be 5.3 percent in the current quarter. It has ended up a full percentage point below that level.

Ultimately, this has been a speedy labor market recovery, and one that appears to have more room to run. Policymakers have every reason to take the win and continue adjusting to that reality.

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