The Employment Situation for December – Gaining Strength? Not Really.

January 7, 2013

The Bureau of Labor Statistics (BLS) released the Employment Situation report for December on Friday. The establishment survey indicated payroll employment increased by 155,000 with private sector payrolls increasing by 168,000 and a loss of 13,000 in the government sector. Estimates for the prior two months were revised upward by a net of 14,000.

The household survey indicated the unemployment rate held steady at 7.8% in December after revising the November figure up to 7.8% from 7.7%, based on updated seasonal adjustment factors. The updated factors had little effect on the overall pattern in the unemployment rate for 2008 forward, the period covered by the revisions.

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However, the stability in December’s unemployment rate did benefit from some favorable rounding. November’s unrounded rate was 7.753%, rounding up to 7.8%. December’s rate was 7.849%, rounding down to 7.8%. The labor force expanded by 192,000 persons in December, 28,000 of them employed, 164,000 of them unemployed. A swing of 2,000 from employed to unemployed would have pushed the unemployment rate to 7.9%.

December’s payroll gain of 155,000 was in line with the monthly average of 153,000 in 2012 and helped expand payrolls by just over 1.8 million for the year, only marginally lower than in 2011. So last month, last year and 2012 have come in consistently at a level too low to make rapid progress lowering the unemployment rate. In all of 2011 and 2012 the rate has come down just over one percentage point, from 9.0% to 7.8%. At this rate it will take the better part of 4 years to lower the unemployment rate to 6.0%, the high end of the range economists consider “normal.”

Unfortunately, this math is consistent with the Federal Reserve’s economic projections, which anticipate the unemployment rate will be between 6.0% and 6.6% by the end of 2015. A more robust (and not unrealistic) recovery would have job creation at twice this pace. With monetary policy arguably nearing the limits of its effectiveness and the tax rates part of the fiscal cliff behind us, let’s hope the remaining fiscal policy issues can be resolved in a way that adds to rather than subtracts from growth. The labor market, a broader economic recovery and the housing market all would benefit.

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The Employment Situation for November – Still Positive, Still Weak

December 7, 2012

The Bureau of Labor Statistics (BLS) released the Employment Situation report for November noting that Hurricane Sandy did not affect the national employment and unemployment figures in today’s release. The establishment survey indicated payroll employment increased by 146,000 with private sector payrolls increasing by 147,000 and a loss of 1,000 in the government sector. Estimates for both September and October were revised downward by a total of 49,000. The household survey indicated the unemployment rate moved down to 7.7% from 7.9% in October.

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The payroll numbers are indicative of a labor market treading water. They’ve been weaker in plenty of months over the last two years, but they are well below levels necessary to bring the unemployment rate down.

In a reversal of last month’s report, the decline in the unemployment rate is not as good as it looks. Last month the unemployment rate moved up based on an increase in the labor force that outpaced the increase in the number of employed persons. Adding jobs and an expanding labor force were positive gains, the increase in the unemployment rate was less important.

This month the decline in the unemployment rate is based on a decline in the labor force. The labor force shrank by the combined effect of 122,000 fewer persons employed and a decline of 229,000 in the number of persons previously classified as unemployed. Persons who want work, have looked for work in the prior 12 months, but not in the 4 weeks preceding the household survey are classified as marginally attached to the labor force and not included in counts of the unemployed or labor force. The decline in the unemployment rate wasn’t based on any real improvement in conditions.

Overall, the economy continues to add to payrolls but at a slower than robust pace. The unemployment rate is trending down since peaking in 2009, but the labor force has only recently regained the losses since the recession. We’re seeing signs of improvement but there is still plenty of ground to make up.

 


The Employment Situation for August – Wrong Again

September 7, 2012

The Bureau of Labor Statistics (BLS) released the Employment Situation report for August today. Nonfarm payroll employment extended its troublingly lackluster streak adding a meager 96 thousand jobs, down from a revised 141 thousand last month. The private sector added 103 thousand while the government sector shed another 7 thousand. Figures for the prior two months were revised downward by a total of 41 thousand.

Despite this weak performance in payroll employment the unemployment rate moved down to 8.1 percent from 8.3 in July. This would be positive news except that it happened for the wrong reason: a shrinking labor force. According to the household survey, the number of persons employed actually declined by 119 thousand. But the unemployment rate declined because an equal number plus an additional 250 thousand workers, previously counted as unemployed, left the labor force. This is the third time this year that the unemployment rate declined while the number of employed persons declined, but the labor force shrank faster. A shrinking labor force is the wrong way to bring the unemployment rate down.

 


The Employment Situation for July – Mixed

August 4, 2012

The Bureau of Labor Statistics (BLS) released the Employment Situation report for July. The top line numbers show total nonfarm payrolls increased by 163 thousand, with private payrolls adding 172 thousand and government subtracting 9 thousand. Revisions to the prior two months lowered employment by 6 thousand for those months. The unemployment rate ticked up a tenth to 8.3 percent, which the BLS characterized as essentially unchanged.

The report is mixed because while job growth in July was better, it’s still not good. Growth in payrolls more than doubled from June but the pace remains too low and has been inconsistent. And while the unemployment rate increased, it’s more technical than substantive. It comes from a household survey which tracks people employed, unemployed and in the labor force. The uptick this month is based on a swing of 0.04 percentage points. Last month it rounded down, this month is rounded up. So the move is less than it appears. What’s more important is that the unemployment rate is stuck above 8 percent with no appreciable change in recent months.

Whether job growth continues to improve or falls back again will be related to the pace of broader economic recovery, but some insight can be gained by examining how the different sectors of the economy were affected by and are recovering from the recession. Constructing indexes of the level of employment in different sectors of the economy since the recession began at the end of 2007 illuminates where labor market recovery is strongest and weakest.

Disaggregating total nonfarm employment into the private and government sectors shows the private sector took a big hit early in the recession and has been recovering since early 2010. In contrast, employment in the government sector was relatively stable until mid-2010 but has declined steadily since then.

Separating the government sector into component parts reveals that federal hiring for the decennial census is what kept total government employment steady until mid-2010. After the census, the unabated decline in state and local government employment dominates that sector.

Separating the private sector into goods producing and services components shows employment in goods producing industries plunged by nearly 20 percent while employment in service industries declined by 5 percent.

Disaggregating the goods producing sector into natural resource and mining industries, construction, and manufacturing shows large differences in conditions. Employment in natural resource and mining industries is currently 13 percent higher than the pre-recession peak. The construction sector remains depressed at 74 percent of previous employment levels. Employment in manufacturing has regained 4 percentage points of its initial 17 point decline.

The services sector can be divided into above average and below average employment recoveries. The leading industries include education and health services which avoided any decline in employment and is currently 9 percent above its pre-recession peak, professional and business services which have recovered most of the initial 9 percent decline in employment, and leisure and hospitality services which have recovered from a 5 percent decline in employment.

Employment growth in the remaining service industries has been below the sector average. Among these, employment in information services has only recently stopped declining.

Payroll employment declined by 8.8 million in 2008 and 2009. Almost half of that, 4.2 million, was in the goods producing sector. Employment in the goods producing sector has increased by only 624 thousand since then. Construction employment is stagnant. Manufacturing employment is recovering but has a long way to go, and the boom in natural resources and mining industries has peaked. These industries previously accounted for 16 percent of payroll employment (natural resources and mining industries accounted for 1 percent).

In the services sector, of the 4.6 million jobs lost, the three leading industries have added 3.1 million back. Employment in the education and health services continues to grow. But employment in the business and professional services industries and the leisure and hospitality industries has returned to roughly pre-recession levels and growth has slowed.

The service sector industries that are lagging in employment growth previously accounted for roughly one third of payrolls. Employment in the government sector continues to decline and this sector represents another 16 percent of payroll employment.

With a little more than half of the sectors of the economy experiencing such sluggish employment growth the outlook for the top line numbers is uncertain, and the July employment situation is mixed at best.


The Employment Situation for May – More Bad News

June 5, 2012

The Bureau of Labor Statistics (BLS) released the Employment Situation report for May. Total nonfarm payrolls increased by 69 thousand in May with private payrolls adding 82 thousand and government taking away 13 thousand. The March and April estimates were revised downward by 49 thousand for those months, and the unemployment rate ticked up a tenth to 8.2 percent, based on a surge of 642 thousand in the labor force.

The recent weakness has drawn comparisons to the last two years when early strength gave way to mid-year deterioration. In 2010 the initial threat of a Greek default rattled global markets and began the now long simmering Euro zone crisis. In 2011 the Arab spring oil price spike and Japanese tsunami and nuclear accident disrupted economic activity and trade. Now, with another slowdown in US economic growth, limited room for additional monetary stimulus and even lower prospects for fiscal stimulus, recessions and deepening turmoil in the Euro zone, and slowing global economic growth, maybe there is no smoking gun explanation for the weakening labor market, just a hail of bullets.

Blaming the weather is just getting harder to do.

 


The Employment Situation for April – More Disappointing

May 4, 2012

Last month’s employment report included a preliminary estimate of total non-farm payroll growth of 120 thousand in March – disappointing. Today’s report includes a preliminary estimate of 115 thousand added jobs in April – more disappointing.

The Bureau of Labor Statistics (BLS) released the Employment Situation report for April today. Payrolls increased by 115 thousand in April, the February and March estimates were revised upward adding 53 thousand for those months, and the unemployment rate ticked down a tenth to 8.1 percent, based on 342 thousand people leaving the labor force, rather than employment growth. The average workweek for most workers was unchanged, but up slightly in manufacturing.

Not exactly encouraging. But it’s still possible that the slowdown in job growth is payback for a warm winter, making the distribution over the months misleading. And with the current average monthly gain hovering around 200 thousand, labor market conditions are not great, but not awful either. Growth in GDP appears to have slowed in the first quarter (probably, but we won’t know for certain until the revisions), but the expectation is that it will pick up again as the year progresses, and that should contribute to a strengthening in the labor market. It’s a little early to call the momentum lost.

Overall, today’s report is disappointing, but it’s not the last word.

 


The Employment Situation for March – Disappointing

April 6, 2012

The Bureau of Labor Statistics (BLS) released the Employment Situation report for March today. Payrolls increased by 120 thousand in March, an unexpected deceleration after strong gains in January and February that averaged 258 thousand. Some of the slowdown could be payback for a warm weather surge that boosted January and February. Even with the deceleration the first quarter average of 212 thousand is an improvement over the 164 thousand average in the fourth quarter, but a slightly shorter average workweek suggests a strong bounce back in April is not a given.

The unemployment rate edged down to 8.2 from 8.3 percent, based on a decline in the labor force (164 thousand), rather than strong employment growth.

Overall, today’s report is disappointing. A quick return to the strong growth in payrolls and the labor force in recent months would be welcome, but is not a foregone conclusion.