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The U.S. unemployment level dropped to 4.6 percent, while the number of people entering the job market increased.

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PHIL PONCE: Job growth was unexpectedly strong in November. New numbers show the U.S. unemployment level dropped to 4.6 percent. The number of people entering the job market grew while employers added 404,000 workers to their payrolls last month. To tell us more about it we're joined by labor economist Audrey Freedman; her firm consults with manufacturing and service-oriented companies. Welcome, Ms. Freedman. First of all, just looking at the big picture, where are these jobs coming from?

AUDREY FREEDMAN, Labor Economist: Well, that's the interesting thing. The growth is really throughout the economy. There are only small sectors that are shrinking, apparel manufacturing, for example. But the growth is in manufacturing. It's in construction, and it's especially in services, and particularly in business services. Now, those business service employees are obviously working for other businesses, and they may be working for a manufacturing company, providing bookkeeping and accounting work, or providing office backup, or even working on production lines. So the growth is really extensive throughout the economy and much more than was expected.

PHIL PONCE: We just saw a report on the growth of high-tech industries. Is that fielding a big part of it, in your opinion?

AUDREY FREEDMAN: Oh, that's part of it, but it's much more widespread than that. Yes the high-tech growth has been notable for some time, but this is really throughout the entire economy. The only place where I would say it won't continue would be in automobile manufacturing because the world really has seen a great deal of over-production there, and I don't think that growth, which did take place last month, will continue.

PHIL PONCE: Four hundred and four thousand new jobs. What had conventional wisdom been predicting?

AUDREY FREEDMAN: About 200,000. And I think one of the reasons why that it wasn't so high and that it turned out to be double or a little bit more than double what was expected is because really many economists didn't think that you could find employees; that we were really tapped out. But what happened was the labor force grew in response to opportunity. The labor force grew over for 450,000 and filled those jobs as they came on-stream. Opportunity brings people out and brings people into the labor force and also offers second jobs to people who want two jobs if they can make it.

PHIL PONCE: Ms. Freedman, what kinds of jobs are people talking about, low level mainly, mid level, upper level jobs?

AUDREY FREEDMAN: All over the scale, all over the scale. The jobs in business services are professional and technical work, but they're also clerical work, and some of them are even production worker jobs, and they're materials handling and materials moving and trucking. The economy is just buzzing along and buzzing along in such a way that the job growth is widespread not only throughout all occupations and industries but also geographically. We don't have the great pockets of unemployment or the extremes of some places being strong growth areas and others being very weak or shrinking. It's really spreading throughout the country now. Opportunity is really everywhere. Yes, of course, we have the tightest labor markets in the Midwest, and a lot of that's manufacturing work, or attached to manufacturing. But generally throughout the whole economy there's growth and strength.

PHIL PONCE: And what can you tell us about the quality of the jobs in terms of wages and benefits, things like that?

AUDREY FREEDMAN: Well, really, what's been happening is employers have raised wages somewhat in order to attract workers, but what they're being is very, very careful about how they raise wages and very, very inventive in the way that they attract employees into the work force. They try to find a niche where they can appeal to people who aren't working, or people who have one job but would take another, given the right hours and the right opportunities, or students who might come in for second jobs, not being students but working at night, working on weekends, or older people who may have retired. Employers are trying to devise ways to get these people to come into their work force without raising wages because they can't raise wages too much, or they won't be able to compete.

PHIL PONCE: And what about the concerns that happen when unemployment is so low that it's going to trigger wage inflation, which, in turn, will have an impact on inflation in general? Do you see any evidence of wage inflation?

AUDREY FREEDMAN: No, it has not happened. For years now we have been threatened, oh, we're going to have terrible wage inflation as the unemployment rate comes down. It really hasn't happened. And it isn't happening now. The hourly wage figures that come out every month, of course, do show about a 4 percent increase there, but that's affected by the amount of overtime in the economy, and overtime, of course, is at time and a half or even more time--more than time and a half. And so the figures are somewhat biased. Those are monthly figures. And, yes, they're quoted and yes, there was a 4.1 percent increase this month annualized in hourly wage rates. But, again, it's not the best figure, and we do not have wage inflation generally. What we have is high levels of employment, high levels of overtime, high levels of factory hours, in fact, some of the highest we've ever had, and we have the highest labor force participation we've ever had.

PHIL PONCE: How about in the inner city, are the numbers in the inner city where unemployment among young people particularly tends to be so high, are the numbers there improving?

AUDREY FREEDMAN: Yes, somewhat, but not as much, and among black workers, for example, the unemployment rate remains about twice to two and a half times as high as it is among white workers. That's been true historically, and it remains in that situation. I think we're pushing some people from the inner city into the work force by cutting off welfare, or at least threatening to cut off welfare. Whether that continues and whether it's a very strong trend I can't say at this point.

PHIL PONCE: And speaking of trends, is there any way to know whether this big increase that we saw in November is a glitch, or is it part of something that's more akin to a trend?

AUDREY FREEDMAN: Well, I don't think it's going to continue at this pace. One month doesn't make a new trend. We still have a growing economy. The threats to the economy are not internal. I think there is certainly a threat of overproduction in the rest of the world, and there's certainly a threat coming out of the Far East because if those economies collapse, as they might do, we could not be immune to the effects of the after effects. That's a long way off for us. And so we still have growth ahead of us, perhaps not growth at this pace. This is a wonderful pace, but it can't be sustained.

PHIL PONCE: So do you think unemployment could go down even further?

AUDREY FREEDMAN: It might. It might, and without wage inflation. That's the great message of this recovery; that we have not had wage inflation and we have had falling unemployment rates and a great deal of opportunity, and the labor force has responded. You know, we are the most adaptive economy in the world, and we work harder than other people in the world because we come into the labor force when we want to work, and that's what's happened this month. That's why numbers are so surprising.

PHIL PONCE: One of the things you alluded to was the number of new workers entering the job market, including retirees and homemakers. What does that tell you?

AUDREY FREEDMAN: Well, it really tells you that employers are trying to be inventive and flexible in the way they attract workers, and workers respond to the flexibility, saying, yes, I would like a part-time job, or I would like a job if the hours can be arranged in such a way that I can do the other things that I need to do in my life. And that's really why the labor force grew. We are adaptive. Americans like to work, but they would like to work on their own terms, and they aren't necessarily demanding more money. They're asking for good working conditions, good management, and flexible hours. And they're getting it.

PHIL PONCE: Audrey Freedman, thank you for joining us.

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