Lower Unemployment in Nov.? Yes, But....

The U.S. economy continues to add jobs, but not at a pace that signals a strong recovery.

We expect this year's pace of job creation -- 130,000 a month through November -– to accelerate to only 150,000 a month next year, adding up to 1.8 million new jobs. That should move the unemployment rate, which has averaged 9% this year, down to about 8.5% at end of next year.

Job growth in November of 120,000 was enough to cast out thoughts of another recession. But almost half the increase came in retailing with some strength in hiring at bars and restaurants, temp agencies and health care. Manufacturing added only 2,000 jobs while construction shed 12,000.

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November's drop in the jobless rate, to 8.6% from 9%, is a gift that looks nice under the tree but is a little disappointing when the wrapping comes off. Half the drop is due to a shrinking labor force. Ordinarily, a big share of those who choose not to look for work are those who want jobs but are discouraged. One bright spot is that the number of these discouraged workers didn't increase in November. The jobless rate that includes discouraged workers and part-timers who want full-time work fell to 15.6%, from 16.2% in October.

A concern is an increase in those unemployed for 27 weeks or more, 43% of all the jobless, up from 42.4% the previous month. Expect the unemployment rate to move up a bit in early 2012, then decline again but ending the year above 8%.

A key number to watch is private employment because it represents the lion's share of jobs and points to the overall direction of the economy. State and local governments, which typically add jobs during recovery from recession, instead are paring back

Health care jobs will continue to increase next year though the pace is slowing. There's still uncertainty about the scope and pace of Obama's health care reform measures.

There will be only a modest rise for construction. After shedding 2 million jobs during the recession, there's little room to fall further. But gains will be moderate, especially on the residential side, where the inventory of unsold homes remains high. Manufacturing will post a very small gain, too. Firms are putting their money into equipment, and productivity gains enable most to produce more with fewer workers.

Idaszak, now retired, worked on The Kiplinger Letter as its economics writer for 21 years. Before joining Kiplinger in 1992, he worked for 15 years with the Chicago Sun-Times, including five years as a columnist and economic correspondent in the Washington, D.C., bureau, covering five international economic summit meetings. He holds bachelor's and master's degrees in journalism from Northwestern University.