- The Washington Times - Friday, December 3, 2004

Following a sizzling October, during which a revised 303,000 nonfarm payroll jobs were created, November employment inched up by a relatively lackluster 112,000 jobs, the Labor Department reported yesterday. November marked the sixteenth consecutive month during which nonfarm payrolls increased. Over that period, employment rose by 2.26 million jobs, averaging 141,300 per month. By the standards of previous recoveries, that’s small change.

The last time the unemployment rate (5.4 percent in November) was lower was in September 2001, when 5 percent of workers were unemployed. That was two months before the 2001 recession ended in November, when the unemployment rate stood at 5.6 percent. Interestingly, despite the fact that nonfarm employment is considered a coincident indicator — meaning that it rises and falls in near tandem with gross domestic product — payroll jobs continued to decline for 21 months after the economic expansion commenced in November 2001. That seemingly irregular pattern actually mirrored a similar trend after the 1990-91 recession ended in March 1991. Back then, it took 14 months before nonfarm employment in May 1992 finally exceeded employment at the trough of the recession. By contrast, nonfarm payrolls almost perfectly performed their role as a coincident indicator following the deep recessions of 1973-75 and 1981-82. Then, payrolls exceeded their recessionary trough levels four months and two months, respectively, into recovery. One apparent business-cycle lesson to be derived from the past two recessions is that the more shallow a recession is, the more slowly the economy is able to reverse employment deterioration and to begin to add jobs.

On the 2004 employment front, the bad news for the White House is that its official forecast vastly overstated employment growth for this year. Recall that the 2004 Economic Report of the President projected that average monthly nonfarm payrolls for 2004 would exceed the 2003 average by 2.6 million. An arithmetic quirk — derived from the virtually insurmountable fact that December 2003 payrolls were lower than the January 2003 level — made achievement of that goal nearly impossible. Now, in order to meet that prediction, nonfarm payrolls would have to increase by more than 15 million jobs this month. That is unlikely to happen.

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