Despite a stronger-than-expected headline gain in November, the monthly change in office-using employment fell short of recent increases. Office employment rose by 31,000, roughly half the October gain of 59,000 (Table 1). Employment in the Information and Financial Activity sectors both fell (1,000 and 3,000, respectively) while payrolls in the Professional/Business Services sectors rose by 35,000, slightly below the 40,000-plus average gains observed over the prior three months. On a combined basis, the figures for September and October were revised slightly higher (+8,000 for total payrolls and +14,000 for office-using payrolls); nonetheless, even with these upward revisions, the three-month moving average in monthly changes in office employment (+45,000) is still below the average level of office-job creation observed in 2012 (+56,600) and the average pace over January through October of this year (+65,200).
One category of job growth that experienced strength was in temporary help services. While October’s initial estimate was revised to show an increase in temporary help workers from 3,300 to 9,100, November saw an even larger gain, with temporary help employment rising by 16,400. Away from administrative services, other categories of professional employment showed trivial changes, however: payrolls in legal services fell by 1,100, employment in architecture and engineering services rose by just 1,000 jobs, computer systems design employment rose by 2,700 and management and technical consulting payrolls rose by just 600.
Unemployment rate at five-year low
The unemployment rate fell to a five-year low in November (Chart 2) and likely marks a turning point for the Federal Reserve. In the statements that have followed the Federal Open Market Committee’s policy meetings this year, the Committee has repeatedly maintained its benchmark target for the Federal Funds rate at 0-25 bps, “currently anticipat[ing] that this exceptionally low range… will be appropriate at least as long as the unemployment rate remains above 6.5% [seasonally adjusted], inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2% longer-run goal, and longer-term inflation expectations continue to be well anchored.”
A likely precursor to an eventual increase in the Federal Funds rate will be a tapering in the monthly pace of asset purchases, which currently total $85 billion. Against the backdrop of a slow but steady decline in the unemployment rate and inflation that has remained remarkably tepid, it is difficult to imagine that the first reduction in asset purchases wouldn’t begin at the last FOMC meeting of 2013 (held on December 18th) or at the first meeting in 2014 (January 29th). By then, the Committee would have an extra month of employment data as well as more complete historical information, with five years of revisions to unemployment rate data.
While the large swing in Friday’s unemployment rate partially reflects the 377,000 decline in the number of persons on temporary layoff (as workers furloughed in October due to the partial government shutdown returned to work), it is hard to argue that the recent trend does not represent an improvement in the labor market as a whole, even if the gains merely reflect an increase in the quantity, rather than the quality of jobs.