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Why The Jobs Report Was Better Than You Think

NEW YORK (TheStreet) -- There were a lot of positives to take from the November jobs report apart from the headline that the U.S. unemployment rate dropped to 7%, a five-year low.

Chief among them was that the labor force expanded, meaning that the decline in the unemployment rate wasn't due simply to fewer people looking for work. The labor force actually grew by 450,000 in November, while household employment increased by 818,000. Those are big numbers. Additionally, the number of people working part-time declined by 330,000. 

"A lot more people are working and more of the people who are working are working full-time that had been working part-time before-- and that's another positive sign," James Parrott, chief economist at New York-based Fiscal Policy Institute, said in a phone interview.

Goldman Sachs liked the current view of the U.S. economic recovery enough to project an acceleration of growth from the current 2.25% pace, to be as much as 3.5% next year. That's a serious bump. Nonetheless, Goldman analyst Jan Hatzius, in a report published Friday, cautioned that higher growth rates won't necessarily translate into more jobs.

That's a theme we've heard throughout this slow recovery, as equities have surged in line with higher profits while non-financial U.S. corporations sit on approximately $1.48 trillion in cash, Moody's reported following a review of the more than 1,000 companies it rates as of June 30. 

Yet the variety of the jobs added in November marks a change from recent monthly increased which were heavily concentrated in lower-paying service sectors. November's jobs gains in retail, trade and food services actually rose at a slower pace last month than the monthly average over the past year, Parrott points out. 

Instead, job growth could be found in transportation and warehousing, manufacturing and professional business services and construction all of which compensated for slight declines in financial services and information technology. Manufacturing jobs have been increasing for three months, an encouraging trend.

The job numbers are even more impressive given the October shutdown of the federal government, a hit to business confidence that prevented thousands of people from being paid and services from being maintained. Importantly, average weekly earnings grew 2.3% in November, slightly faster than consumer inflation though hardly a catalyst to compensate for the larger and more troubling national trend of income inequality.

"Apparently, the shutdown didn't hurt so much that it offset the positive movements in the economy," Parrot said. 

To quicken the pace of the recovery, Parrott suggests that Congress agree to do no harm. Though he recognizes this Congress isn't about to follow his prescription for a return to 2009 government spending as stimulus, Parrott says the country's recovery from the Great Recession might benefit from a peace agreement over the federal budget coupled with a commitment to avoid another round of sequestration.

"If we obtain within reach solutions on the budget that could certainly help shore up both business and consumer confidence," he said. "There's enough underlying momentum in the economy if Washington doesn't send negative signals that could help reinforce the positives from the November jobs report."

Heading into the holiday season, we should all be so lucky.

--Written by Leon Lazaroff in New York.

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