February Employment Report

The February Employment report showed an increase of 175,000 jobs (162,000 in the private sector) while the unemployment rate rose slightly to 6.7%.  The initial response of many was that this was a good report. Though the report was pretty good, that's relative to expectations and recent trends (we used to want gains in excess of 200,000 for a report to be considered good).  Over the last 3 months, the economy has added an average of about 129,000 jobs.  Let's look at some of the details.

The leading growth sector was professional/business services, which added 79,000 jobs (121,000 so far in 2014, about 40% of all job gains).  Healthcare bounced back somewhat, adding 9500 jobs in February (averaging just under 6000 per month in the last 3 months - more on the health care sector later in this post).  While payrolls increased, aggregate hours worked declined in February and is down slightly in 2014.  So far this year, hours worked is down in construction, manufacturing, retail trade, information services, and education/health while it has risen in professional/business services, mining, financial activities, and leisure/hospitality.

The increase in the unemployment rate was slight, but still reflects a decline of 0.3% over the last three months while the participation rate remained stable over that period (so the recent decline in the unemployment rate was due to employment gains as opposed to fewer people looking for work).  Meanwhile, the employment-population rate remained at 58.8%, above it's cycle low of 58.2% (down from 63% before the recession).  Interestingly, the increase from the low was due to higher employment-population ratios for less educated workers.

• the ratio for those that did not finish high school has risen 3.2% from it's low (currently 41.7%; near the highest since Spring 2008) 
• high school grads rose to 54.7%, up 1.1% from it's low  
• those with some college declined to 62.8%
• college grads declined to 72.6%

The figures for those with some college as well as college grads are both near the lowest since records began in 1992 (October 2013 was lower in both cases).  still, the more education the better, as reflected by the higher employment-population ratio for those with more education.

What explains the slowdown in employment in health services?  The three-month gain in healthcare employment (17,700) is the lowest since records started being kept in 1990 while the 12-month gain fell to below 200,000 for the first time since 2000.  Which components of healthcare are responsible for the slowdown?  Hospitals have reduced employment by 2800 over the last year, the first year-over-year decline since early 1995 while nursing care facilities have shed nearly 10,000 jobs over the last 12 months, continuing a pattern begun in late 2011 after decades of adding a significant number of jobs.

What are the key takeaway from the report?  The economy remains on a modest-to-moderate growth track - not too hot and not too cold.  Some of the recent slowdown in employment growth may reflect structural changes taking place in health care, particularly among hospitals.

January Employment Report

The January job market report showed that the unemployment rate declined to 6.6% (down from 6.7%) and the economy added 113,000 jobs (142,000 in the private sector).  As usual, there were mixed messages in the report, but it was somewhat disappointing.  One question that keeps coming up is how much weather is affecting the data (though the data is seasonally adjusted, this has not been a normal winter).  However, one would expect that construction is more sensitive to the weather than most other industries and it added 48,000 jobs in January (accounting for more than one-third of the job gains in the private sector).  If weather was a major issue in January, you would think construction would have lost jobs.  What I think happened is that weather affected construction in December and there was a rebound in January; construction added 26,000 jobs over the last two months (13,000 per month), which is probably a more accurate gauge of construction employment.

While gains in construction employment was artificially high in January, retail trade employment was artificially low.  Why do I say that?  Employment in retail trade - sporting goods, hobby, book, and music stores fell by 22,300 in January after rising 21,500 in the previous quarter (resulting in little change since the late summer).

Which sector is responsible for slower employment growth in recent months?  The private sector averaged about 200,000 new jobs per month from Nov 2012-Nov 2013, but only 115,000/month in the last two months.  Professional & Businesses services had average gains of 58,000 jobs per month from Nov 2012-Nov 2013, but only 20,000 per month in the last two months; health care added 20,000/month from Nov 2012-Nov 2013, but only 1,000/month in the last 2 months.  Together, they account for 57,000 out of the 85,000 fewer jobs per month (about two-thirds of the slowdown in employment gains).  It'll be interesting to watch this trend in the coming months (hard to explain this slowdown on the weather).

The household survey showed a decline in the unemployment rate accompanied by a increase in the participation rate, which is a good combination.  The household survey tends to be more volatile than the establishment survey (used to estimate employment gains).  For example, the survey showed an increase in the labor force of more than half a million people in January after a similar decline in the fourth quarter, resulting in little change since September.  Over the last year (Jan 13-Jan 14), the labor force declined by about 240,000 people, resulting in a decline in the participation rate from 63.6% to 63%.  Yes, here it comes...  If the participation rate had remained constant (at 63.6%), the unemployment rate would be 7.5% instead of 6.6% (note: it was 7.9% in Jan 2013).

What are the key takeaways from the report?  The labor market continues to struggle, with employment gains slowing in recent months, independent of the weather.  Two months do not make a trend, but possibly a start of a trend.  It will be interesting to see if next month's report confirms the slowdown in employment in health care and professional/business services.

October Job Market Report and More

So much has happened since the last time I was able to post.  The latest job market report was released this morning and it indicated that 204,000 jobs were added last month while the unemployment rate ticked up to 7.3%.  What impact did the government shutdown have?  It had little direct effect on the number of jobs created (based on the establishment survey) since government workers were either back on the job or counted as on the payroll since they were promised back pay.  However, government workers on furlough were counted as unemployed based on the household survey (those who were contacted said either that they were on temporary layoff or absent from work).  Beneath the surface, there was quite a few interesting details (interesting by economic standards!).

The labor force participation rate plummeted to 62.8% (from 63.2%); that's the lowest since March 1978 and tied for the largest one-month decline in the last 30 years.  Similarly, the employment-population ratio fell from 58.6% to 58.3%, now just 0.1% above the post-recession low.  Some of the decline in the employment-population ratio was due to furloughed government workers, but this should not have affect the labor force participation rate.  A person is considered to be in the labor force if they have a job or if they are unemployed, including on temporary layoff or absent from work.  It'll be interesting to see if there was some fluke in the data or if this actually does represent a decline in the true participation rate.  As noted in the past, a lower participation rate results in a lower unemployment rate without any real improvement in the job market (a person is not considered to be unemployed if they are not participating in the job market; i.e., they don't have a job and are not looking for one).  I tend to think that the participation rate was underestimated this month, causing it to bounce back somewhat next time.

What industries contributed to the employment gains?  Nearly half the job gains in October were due to retail trade and leisure/hospitality.  Over the last 3 months (July-October), nearly 40% of job gains in the private sector were in those two industries.

Add it up and it was a pretty good report by today's standards (definitely not a strong report, but reflective of modest  to moderate growth).  The most puzzling aspect is the huge decline in the participation rate, which is hard to explain at first glance.

July Job Market

Way too much going on recently to post to the blog, but now there's too many things to discuss.  Yesterday, the government released the July employment report and though it showed a decline in the unemployment rate to 7.4%, the underlying details were quite weak.  The headline number indicated that only 162,000 were added, which was less than expected (and gains from previous months were revised downward).  What type of jobs were created?  Retail trade added 46,800 while food and drinkings place added 38,400 (together accounting for a majority of the net jobs created).  That's just for July; what about for 2013 as a whole? Thus far, the economy has added 1.347 million jobs this year, 187,000 of which were in retail trade and 246,500 in food and drinking places.  While these two sectors accounted for 18.5% of all jobs at the start of the year, they account for about one-third of net job creation in 2013 (food and drinking places in particular represented 7.5% of jobs at the beginning of the year, yet was the source of nearly one-in-five new jobs so far in 2013).

According to the household survey, part-time employment accounted for about two-thirds of the jobs created in July.  So far in 2013, part-time employment accounts for 77% of net job creation (note: 20% of all jobs were part time at the beginning of the year).  Since the start of the recession in December 2007, the economy has lost 5.5 million full-time jobs while adding about 3.5 million part-time jobs.  The relative importance of part-time employment helps to explain why total hours worked declined in July even though employment increased (note: this isn't the average work week, but an estimate of total hours worked throughout the economy).

Many economists have been trying to reconcile the relatively weak estimates for economic growth with the comparably stronger numbers for employment.  The underlying details of the employment report suggest that both measures of the state of the economy reveal an economy growing modestly (to use the Fed's latest description).

June Employment Report

The headlines of the June employment report are that the economy added 195,000 jobs and the unemployment report remained at 7.6%.  Beneath the surface, the report is generally good (by today's standards!).  Revisions show an extra 70,000 jobs created in April and May than previously estimated (employment is now up 2.3 million over the last 12 months).  Also, the participation rate rose slightly to 63.5%.  Average weekly wages rose by 0.4% (strong for one month) and is up 2.2% over the last year (not as strong, but OK).  Which industry added the most jobs?  Food services and drinking places added nearly 52,000 in June and almost 100,000 over the last two months.  Other industries adding jobs include "amusement, gambling, and recreation," which added about 19,000 jobs in June and over 40,000 in the last two months.  Housing and auto-related industries (construction, auto manufacturing, retailers related to housing and autos, ...) added just over 35,000 jobs.  Local government employment (other than education) rose by 15,000 and is now up by more than 25,000 since June 2012.

What are the negatives in the report?  The broad measure of unemployment (U6) rose from 13.8% to 14.3% (the largest increase since Spring 2009) due to a surge in the number of people working part time for economic reasons.  Both figures reversed declines from earlier this year.  The number of people working part time for economic reasons are now higher than a year ago while U6 is close to where it was at the beginning of the year (and last Fall).  Also, as noted earlier, a disproportionate number of jobs are in relatively low paying industries, such as food services and drinking places, though less than in prior months.

What are the key takeaways?  The job market is relatively strong (OK by historical standards, but strong compared to recent history), adding just under 200,000 jobs a month for the last 3 months (many in low-paying industries).  This contrasts with economic growth, which has been quite weak in the last 9 months (0.4% in 2012Q4, 1.8% in 2013Q1, and forecasted to be around 1.5% in 2013Q2).  How are financial markets reacting to the new data?  As of 9am Friday morning, ten-year bond yields are now about 2.7%, the highest since July 2011, reflecting in part concerns as to how a strengthening job market will affect the Fed's timetable in tapering QE3.

May Employment Report

The headlines from the May employment report are that the unemployment rate rose to 7.6% while the economy added 175,000 jobs (178,000 in the private sector).  But what about the underlying details?  Nothing that dramatic.  The broad measure of unemployment (U6) declined to 13.8% while the labor force participation rate rose to 63.4% (from a 34-year low of 63.3%).  Aggregate hours worked, which had declined in April, rose in May.  All of these numbers are mildly positive.  Where was the job growth?  Food services and drinking places added 38,100 jobs, retail trade added 27,700 and temp agencies added 25,600.  Together, these three sectors represent about 20% of all jobs, but more than half of net job creation in May (and April); they are also relatively low-paying sectors of the economy.  That is one reason why average hourly earnings were flat this month.

What else can we learn from this report?  Since May 2012, the unemployment rate has declined from 8.2% to 7.6%.  However, the unemployment rate rose for teenagers as well as those in their early 20s while the largest declines occurred for those above the age of 55 and those between 25 and 34.  As can be seen in the chart below, the unemployment rate is inversely related to age:

Age	Unemployment Rate
16-19	24.5%
20-24	13.2%
25-34	7.2%
35-44	6.2%
45-54	5.9%
55+	5.3%

What's the key takeaway from the report?  The job market continues to heal at a modest rate, with disproportionate employment growth in relatively low-paying occupations. 

April Employment Report

The government released the April employment report this morning and the big news was upward revisions to job growth in February and March.  Employment in February rose more than any non-Census month since November 2005 (up 332,000) while March employment now is reported to have increased by 138,000 instead of 88,000.  Instead of last month's story about weakness in the job market, it now appears that employment continues to grow at a moderate pace (138,000 in March, 165,000 in April).  Those aren't great numbers, but in line with an economy growing modestly.  The other headline number is that the unemployment rate declined to 7.5%, down from 7.6% in March and the participation rate remained stable, so this was due to a real improvement in the job market (though the participation rate is still at a 34-year low).
What industries contributed most to the gains in employment?  Food and drinking places (restaurants) added about 38,000 in April, temp agencies added 31,000 and retail trade added 29,000.  Add it up and about 60% of the gains were in relatively low-paying industries.  The biggest concern in the report was a decline in the aggregate hours worked, which indicates that many of the jobs created were part time (i.e., fewer total hours worked but more employees means that each employee is working less time).  Two of the industries showing the largest gain in employment, retail trade and leisure/hospitality, are known to have a large proportion of part-time workers.  Using data on average weekly earnings and average hourly earnings (table B-3 of the release), the average worker in retail trade now works about 31.4 hours a week while the average in leisure and hospitality is about 26 hours (both of which declined between March and April).

Even though the economy is adding more jobs than previously estimated (which is definitely good news), the April job report raises questions about the quality of jobs, both in terms of an overabundance of jobs in relatively low-paying industries and a disproportionate number of part-time jobs.

What are the key takeaways?  The economy is adding more jobs than previously thought, but employment is still growing at a modest rate.  Also, the aggregate hours worked has not kept pace with employment growth.  So far this year, employment has increased at a 2.2% annualized rate while aggregate hours worked has risen by only 1.2%.

November Employment Report

The headlines from the November employment report were a decline in the unemployment rate to 7.7% along with an increase of 146,000 jobs.  You know what's next; there's more to it as one delves into the details.  Why did the unemployment rate decline?  We're back to the story that has played out in recent years - there were fewer people participating in the job market.  For people to be considered unemployed, they need to be actively seeking a job.  In November, 350,000 people dropped out of the labor force.  If the labor force had remain unchanged, the unemployment rate would have ticked up to 8% (technically, 7.95%, but rounded up to 8%).  The decline in the participation rate reversed the gain in October and put us close to a 30-year low (it was 63.6% in November, slightly above the recent low of 63.5% in August 2012, which was the lowest since 1981).

On the job front, the surprise was that Sandy had little impact (the report explains that the impact nationally was minimal, but there may have been some impact in the region; it should be noted that the data for employment was collected about 2 weeks after Sandy hit the northeast).

What stood out in terms of job creation?  Retail trade added 52,600 jobs (and over 100,000 in the last 2 months), led by an increase of 33,300 in clothing stores.  Most of the other gains were spread out across the service sector.

What's the takeaway?  The economy continues to add jobs at a modest pace (averaging about 150,000 per month).  Though this seems OK, it mainly reflects our lowered expectations.  The decline in the unemployment rate is welcome, but still mainly reflects fewer people participating in the job market.  The unemployment rate peaked at 10% in October 2009.  Since then the participation rate has declined from 65% to 63.6%.  If it had remained unchanged, the unemployment rate would currently be 9.7%.  Some of the decline is due to demographic factors (i.e., baby boomers retiring, etc.), but some of it is due to people giving up looking for work due to the weak economy.

September Employment Report: Florida & Orlando

This morning, the government released the latest employments report for states and local areas (link to Florida report).  The unemployment rate for Florida dipped slightly to 8.7%.  As with the national numbers, the household survey (used to estimate the unemployment rate) was more positive than the establishment survey (used to estimate the change in payrolls).  For the month, Florida added 800 jobs (though it should be noted that it added 23,900 jobs in August).  The sectors posting the largest gains were Arts, Entertainment & Recreation (up 5000 jobs or 2.7%) and construction, which added 4200 jobs (+1.3%).  This was offset by losses in administrative and waste services, which shed 9400 jobs (state data is seasonally adjusted).

For the second straight month, metro Orlando had a standout sector.  Last month, professional and business services added 6100 jobs.  This month, construction added 3500 jobs (up more than 10%), its largest monthly gain since at least 1990 (that's how far back the BLS data goes for metropolitan areas).  Florida as a whole added 3000 construction jobs in September (not seasonally adjusted), so that entire gain and more was due to Orlando.  Given these recent gains, Orlando now leads the state in employment growth over the last 12 months.  The unemployment rate in Orlando declined to 8.4% (not seasonally adjusted).  When the seasonally adjusted data comes out later this month, it will probably be 8.2 to 8.3%, the lowest since December 2008 (down from a peak of 11.5% in January 2010).  It appears that the Orlando economy may be coming back to life.  Time will tell if these gains continue.

August Employment Report: Florida & Orlando

This morning, the government released the latest report on the job market for Florida and its counties/cities.  First, the headlines.  The unemployment rate in Florida remained at 8.8% while the state added 23,200 jobs in August (seasonally adjusted).  For Metro Orlando, the unemployment rate declined from 9.1% to 8.7% and the metro area added 17,100 jobs (not seasonally adjusted).

The numbers for Florida are OK.  Employment growth was more rapid than in previous months, but the leading industries were administrative and waste service (which includes temp jobs), accommodation & food services, and construction.  In addition, there was a rebound in private education jobs (remember that the data is seasonally adjusted).  The labor force participation rate declined below 60%, falling from 60.7% in August 2011 to 59.9% in August 2012.  If the participation rate had remained constant over the last year, the unemployment rate would be 10% instead of 8.8%.  Thus, Florida has added jobs in the last year, but most of the decline in the unemployment rate has been due to fewer people participating in the labor force.

Most of the decline in the unemployment rate for metro Orlando is due to seasonal factors, but the seasonally adjust rate will probably show a small decline when reported later this month (the seasonally-adjusted rate was 8.6% in July while the unadjusted rate was 9.1%; the seasonally-adjusted rate will probably be 8.4 or 8.5% in August).  The employment gain of 17,100 was the second largest for the month of August since 1988 (the first year that comparable data was available; only exceeded in 2006).  The gain moved Orlando from year-over-year employment growth of 1% in July to 2.6% in August (making it the fastest growing metro area in Florida).  Of course local government added jobs as public schools reopened (and local data is not seasonally adjusted).  The other sector that stands out is professional and business services, which added 6500 jobs and now is the fastest growing sector over the last year, showing a gain of 4.4% since August 2012.