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Take a Closer Look Before Cheering the November U.S. Jobs Report

The Department of Labor today (Friday) released the November U.S. jobs report, which showed the U.S. economy added 146,000 jobs last month, handily beating most economists' expectations.

The addition pushed the unemployment rate down from an unhealthy 7.9% to a still elevated 7.7%. That is the lowest level in four years, since December 2008.

Projections for the unemployment level ranged for it hold steady at 7.9% or rise to up to 8.1%.

But the reasons for the drop aren't as encouraging as the lowered rate itself.

The Real Story of the November U.S. Jobs Report

The reason behind the surprising drop was because more dejected workers simply left the labor force. Some 350,000 people, unable to find work and no longer looking for a job, have dropped off the radar and were not counted among the slew of individuals still out of work.

The labor participation rate fell 20 basis points to 63.6%. Without this drop in the labor force, the unemployment rate would have remained at 7.9%.

Three years after the end of the 2007-2009 recession, the labor force participation rate remains extremely weak. If the rate reflected normal levels, the unemployment rate would be considerably higher.

Also contributing to the unexpected uptick was early seasonal retail hiring, instead of long-term sustainable positions. Retail was a key jobs producer in November, adding 53,000 to payrolls.

That's partly due to Thanksgiving being earlier this year than usual. Plus, more stores kicked-off the holiday shopping spree much before the usual Black Friday start.

These factors "suggest an asterisk will have to be put alongside the monthly non-farm report," Bloomberg senior economist Joseph Brusuelas wrote in today's Bloomberg Economics Brief.

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