Ed Dolan's Econ Blog

Long-Term Unemployment Falls as U.S. Job Market Ends 2012 on a Quiet Note

The Bureau of Labor Statistics reported on Friday that the U.S. job market ended 2012 on a quiet note. Both the narrow and the broad unemployment rates were the same in December as in November. The economy added 155,000 payroll jobs, almost exactly equal to the month before. A jump of 30,000 in construction jobs suggested that Superstorm Sandy may have had an impact on the numbers, but there was no indication that the labor market was affected either for better or worse by uncertainty surrounding negotiations over the fiscal cliff.

The most significant change was a drop in the percentage of unemployed who had been out of work for 27 weeks or more, from 40 percent to 39.1 percent. As the following chart shows, that is the lowest level since October 2009. Long-term unemployment has been far higher throughout the recent recession and recovery than during earlier post-World War II contractions.

The next chart shows monthly increases in payroll jobs. The December figure was almost exactly equal to the monthly average for the year of 154,000. The 1,846,000 jobs added during 2012 were boosted a bit by an upward revision of the November figure from the previously reported 146,000 to a revised 161,000. Pending possible further revision, the 2012 total was 111,000 jobs higher than in 2011.

168,000 of the new jobs for December were in the private sector. In addition to the 30,000 construction jobs mentioned above, manufacturing added a respectable 25,000. As usual, the bulk of new jobs, 96,000, were in the service sector. Health care, followed by leisure and hospitality, were the biggest gainers. The government sector lost 13,000 jobs, mostly in local government education. Government as a whole lost 68,000 jobs during the year, 42,000 of them at the federal level.

The seasonally adjusted unemployment rate was unchanged in December at 7.8 percent, as the next chart shows. The labor force, the number of employed, and the number of unemployed all increased. Previously, the November rate had been reported at 7.7 percent, but the latest report restated it to 7.8 percent. Unlike the establishment survey on which payroll job data are based, the BLS does not revise the raw numbers derived from the monthly survey of households that underlie the unemployment rate. However, at the end of each year, it does revise its seasonal adjustment factors. The revisions are usually minor; only one other month was affected in 2012. The BLS also publishes a broader version of employment conditions, U-6, which includes workers who are marginally attached to the labor force and those who are working part time but would prefer full-time work. U-6 , like the standard unemployment rate, was unchanged in December.

The relatively robust performance of the job market at the end of 2012 suggests that the advance estimate for Q4 GDP, due to be released on January 30, is likely to show continued moderate expansion as in Q3. After that, the direction of the U.S. economy in 2013 is anyone’s guess, with much depending on the impact of the New Year’s Day tax hikes and further critical fiscal policy decisions that Congress and the White House will have to make in the coming months.

5 Responses to “Long-Term Unemployment Falls as U.S. Job Market Ends 2012 on a Quiet Note”

princess1960January 6th, 2013 at 5:50 pm

i think 2013 will be difficult too…becouse high tax ..make high unemployment …
thank you

Hartmut FischerJanuary 8th, 2013 at 7:01 am

Thank you Ed for these vet clear charts . Looks to me that we are still very slowly improving. Any thoughts on the impact of the tax changes?

Ed Dolan EdDolanJanuary 8th, 2013 at 9:26 am

I think I share the consensus view that the tax increases, by themselves, will increase the fiscal drag on the economy, perhaps to the extent of a half a percentage point of growth or so. However, much depends on how much short-term austerity on the spending side comes out of the next rounds of negotiations connected with the debt limit and the sequester.

Writing servicesApril 19th, 2013 at 12:09 pm

There are, of course, many people, especially in times of high joblessness, who are very good workers and are unemployed through no fault of their own. Those with the best backgrounds, the best skills and the best connections will, however, tend to get jobs the fastest, concentrating long-term unemployment among the workers whose work is merely average or less.