US jobless rate falls to 9-year low; payrolls rise

Departing occupants of the White House rarely hand off an improving economy to a successor from the opposing party.

When Barack Obama was waiting in the wings after the 2008 presidential election, for example, the economy was in a severe downward spiral: Employers reported cutting 533,000 jobs that November, the biggest monthly loss in a generation.

But according to the government's report Friday, Donald Trump can expect to inherit an economy that is still on the upswing. An additional 178,000 people were added to payrolls last month, bringing the total increase in private sector jobs to 15.6 million since early 2010. The unemployment rate fell to 4.6 percent from 4.9 percent the previous month. Wage growth, though slower, is still running ahead of inflation, and while the loss of manufacturing jobs clouds the outlook for some, consumers are expressing the highest levels of confidence in nearly a decade.

The Federal Reserve is optimistic enough about the economy's underlying strength that it is set to raise the benchmark interest rate when it meets later this month.

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The jobless rate for November, the lowest since August 2007, "is a testimony to how strong employment growth has been," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics.

Jason Furman, chairman of President Barack Obama's Council of Economic Advisers, remembers the transition eight years ago, when he was crammed into his office with a circle of top officials as the latest jobs numbers from the Labor Department landed.

"It was an utterly terrifying time, the likes of which none of us had ever seen in our lifetimes," Furman recalled. Fearing that "the economy was following the same trajectory that it did at the beginning of the Great Depression," everyone was focused on how to "rapidly slow the bleeding and figure out how to get the economy growing again."

By contrast, Furman said, "the economy today is healthy and it's improving."

For all the progress, however, tens of millions of Americans feel that the recovery has passed them by. Those with few marketable skills are relegated to low-paying positions without steady schedules, security and benefits. Breadwinners who once held well-compensated work in the industrial sector are angry about being forced to settle for lower-wage service jobs — or no jobs at all.

Profound anxiety about the ability to reach or comfortably remain in the middle class, particularly among the white working class, is one of the factors that helped send Trump to the White House.

Such pockets of weakness could be glimpsed in this latest report, which showed that more people, including those in their prime working ages, dropped out of the labor force last month than joined it.

That dip helped drive the "shocking decline in the unemployment rate," said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and now president of the American Action Forum, a conservative economic advocacy group.

Peter Navarro, the economic adviser to Trump's presidential transition team, also homed in on the decrease in the participation rate to 62.7 percent, from 62.8 percent in October, saying it "further demonstrates an urgent need for President-elect Trump's America First economic plan."

"We have not seen levels this low since 1978," Navarro said.

There are also plenty of part-time workers who would rather work full time. And while the official jobless rate for high school graduates fell to 4.9 percent, it is more than twice the rate for college graduates. For those without a high school diploma, the unemployment rate jumped to 7.9 percent from 7.3 percent in October.

"There is a bifurcation of the workforce," Jonas Prising, chairman and chief executive of the ManpowerGroup, one of the largest recruiters in the United States. People who are able to take advantage of advances in technology, globalization and other shifts that favor those with the right skills for the nation's advanced services are thriving.

For others, the prospects do not look good. "There used to be part of the workforce that had well-paying jobs that were low or unskilled," Prising said. "Those kinds of jobs are very difficult to find today."

The deal Trump made this week with the heating and cooling company Carrier to keep 1,000 manufacturing jobs from moving to Mexico from Indiana is emblematic of the kind of actions Trump said he would take as president to help blue-collar workers.

"Protecting and creating jobs will be among his highest priorities as president," Navarro said.

But there are limits to the power of persuasion.

Betsey Stevenson, an economist at the University of Michigan and a former economic adviser to Obama, said that manufacturing, while still a driving force in the economy, employed fewer and fewer people. More than 80 percent of jobs are now in the service industry, Stevenson said, and Trump should be thinking more about how to match workers with those jobs.

"The economy is in a great place, and his biggest challenge is continuing that," she said.

Some economists, worried that the Federal Reserve is too focused on fears of future inflation, argue that the central bank should hold off on any increase in rates until conditions have improved further. "There's no reason to pre-emptively slow the economy down, given that we're starting from less than full employment," said Elise Gould, an economist at the left-leaning Economic Policy Institute in Washington. "Right now, the priority should be keeping the economy on track and moving it forward."

Such pleas are unlikely to win the day. At last month's meeting of the Federal Reserve, members concluded that the case for an increase in the benchmark rate had been "strengthened" and that they would be ready to move "so long as incoming data provided some further evidence of continued progress."

That evidence exists. Recruiting in skilled and semiskilled industries is already tough, said Robert A. Funk, chairman and chief executive of Express Employment Professionals, a staffing agency based in Oklahoma City. He said he has noticed a demand for workers in accounting, information technology, call centers, warehousing and office and professional services.

Funk said employers often complained about being unable to find employees with a strong work ethic who met the minimum requirements. "Drug screening is a real challenge in many parts of the country," he said. "Only 30 percent can pass a drug screen in the state of Washington," where marijuana is legal.

At the same time, employers have been resisting raising wages to a level that might lure back sidelined workers. The result has been that the country has 5.5 million job openings, a near-record level, but still relatively anemic labor force participation rates.

"The challenge out there now is finding workers and keeping the workers you have," said Steve Rick, chief economist at CUNA Mutual Group. Those shortages, whatever the cause, are likely to push wages higher next year, he said. "People are feeling good not only about their current income but their future income."

Whatever the economy's current failings, Mark J. Rozell, a political scientist at George Mason University in Virginia, said it was nonetheless better than the ones most incoming presidents have faced in the last half-century.

Presidents-elect John F. Kennedy, Jimmy Carter, Ronald Reagan, Bill Clinton and Vice President George H.W. Bush, not to mention Barack Obama, were greeted with rising unemployment rates after their victories.

There are only a couple of exceptions: The jobless rate in November 2000, after George W. Bush, a Republican, was elected, was just 3.9 percent, but most forward indicators suggested that the extended boom during Clinton's tenure was ending. As early as January 2001, the Federal Reserve abruptly cut the benchmark rate to counter the slowdown.

And in 1968, when the election flipped control of the White House, the unemployment rate was a mere 3.4 percent. But turmoil in the streets over the Vietnam War and the racial divide had more to do with Richard Nixon's victory over the incumbent Democratic Vice President Hubert Humphrey than the economy.

"Trump can be thankful that his predecessor is handing him a fairly strong situation," Rozell said, "especially when compared to many past party transfers of power."