unemployment report

[11/6/12] The economy added 171,000 jobs last month, and the previous two months were revised higher by a combined 84,000 jobs. This was better than nearly any analyst expected, supporting the view that the economy is in a slow recovery. 2012 is shaping up to be the best year for jobs growth since 2005 and the fourth-best since 2000.

That's the good news.

The bad news is that the hole left by the financial crisis makes decent employment numbers woefully inadequate. Assuming jobs growth continues at the current pace, it will be almost 2016 before we see a 6% unemployment rate. If we get lucky and jobs growth jumps to 200,000 a month, unemployment won't drop below 6% until 2015. It is just ugly: Only five years after the recession began, there are few reasonable scenarios in which we will see a normal, healthy unemployment rate within the next two years. And the longer people remain out of work, the harder it is for them to re-enter the labor market, making this mess all the more dire.

A few other trends stick out:

• A lot of the new jobs created over the last three years have been in low-wage industries like food service (which is at an all-time high) and temporary help. Millions of Americans are out of work. Millions more are working part-time. And millions upon millions more are working for a paycheck that barely gets them by.

• Private payrolls have risen by 4.7 million since 2010, while government employment has declined by 480,000. This is the opposite of the last recession: From 2002 to 2004, government employment increased by 201,000, and private employment declined by 316,000. Falling government employment, most of which has occurred at the state and local level, explains a lot about why the labor market is slower to rebound than in past recessions.

• New housing construction is beginning to rebound in a big way, up 34% in the last year. Pay close attention to that; it could be the biggest driver of employment growth over the next few years. As Warren Buffett said last year: "We will come back big-time on employment when residential construction comes back. You will be surprised, in my view, how fast employment changes when that happens."