November Brings Large Drop in Unemployment

By Toni Vranjes

December 2, 2011

The jobless rate fell dramatically last month, driven not only by higher employment but also by a drop in the labor force.

The Labor Department reported today that the unemployment rate dropped to 8.6 percent in November, compared to 9 percent the previous month. This is the lowest level it has reached since March 2009.

According to a survey of employers, the economy added 120,000 new jobs last month. Employment rose in several areas, including retail trade, leisure and hospitality, professional and business services, and health care.

A separate survey of households — from which the jobless rate is derived — showed that employment was up by 278,000.

Meanwhile, the number of people in the labor force declined by 315,000 last month, the Labor Department reported.

In a commentary, IHS Global Insight Chief U.S. Economist Nigel Gault emphasized that the big news emerging from the report was the sharp drop in unemployment.

“About half the drop came from fewer people looking for jobs, as the labor force declined, which is unwelcome, but the other half came from an increase in household employment that was more than double the payroll increase,” he wrote.

“Over the last four months, the household survey has consistently shown far higher employment growth than the payroll survey. That might mean that the household survey is picking up ‘start-up’ employment that the payroll survey is missing. But it is worth noting that over longer periods (like the past twelve months), the two surveys show roughly the same increase in employment.”

Although the economy has improved in the second half of the year, many challenges remain, including slowing growth in the rest of the world and the Eurozone’s financial crisis, according to Gault.

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