Let's start with the positives: The U.S. economy added 146,000 jobs in November, more than expected. And the unemployment rate dipped to 7.7 percent, the lowest level since Lehman Brothers went bankrupt back in 2008.
Yet the Bureau of Labor Statistics' November jobs report isn't all unalloyed good news. Let's take a look at a few of the caveats:
1) Hurricane Sandy may have slightly skewed the labor market last month. The BLS report says that the hurricane didn't affect its ability to collect data in November, as many forecasters had worried. "Our survey response rates in the affected states were within normal range."
Yet the storm could have still affected actual employment levels. About a million workers said they were working part time rather than full time because of "bad weather." And the economy lost 20,000 construction jobs. In theory, those jobs should come back as post-hurricane rebuilding gets underway. But it makes the underlying trend more difficult to pick out.
2) Bad news: jobs numbers from previous months got revised downward. Last month's jobs report suggested that the economy had added 148,000 jobs in September and 171,000 jobs in October. That's now been revised downward to 132,000 and 138,000, respectively.
That means there were 49,000 fewer jobs in the past two months than we thought — which should temper some of the optimism about the headline number.
3) Last month's increase in the participation rate has been erased. Slightly more Americans dropped out of the labor force in November, although the numbers were too tiny to draw hard conclusions. The participation rate dropped from 63.8 percent to 63.6 percent, essentially erasing last month's small gains. That caused the unemployment rate to drop — since the official unemployment rate only looks at those who are actively seeking work — but it's never a good sign. (For years, America's labor force has been shrinking due to a combination of demographics and the bad economy, as explained here.)
That said, as economist Justin Wolfers points out, the broader trends on this front have been encouraging — unemployment has fallen since January mainly because the economy has added jobs, not because people are giving up looking for work. So this month may just be a blip.
4) The United States is still on a sluggish path to recovery. For the past three months, the U.S. economy has added an average of 139,000 jobs per month. At this rate, we won't get back to full employment until.... well, at least a decade. Maybe more. And it will be a long time before we start seeing improvements for the 4.8 million long-term unemployed — those Americans who have been out of work for at least half a year and who typically have the toughest time finding jobs.
5) As always, this jobs report is probably wrong. These monthly payroll numbers always come with a margin of error of +/- 100,000. September and October's numbers have been revised heavily. Keep that in mind.