May Jobs Report

Employment in the US hits a new record!  OK, though this is true, the news isn't great (but it's pretty good).  After looking through the report, there was nothing spectacular or gruesome to report.  The number of jobs added (217,000) was solid and was spread among different industries.  The unemployment rate remained at 6.3% while the participation rate remained unchanged at a 35-year low (62.8%), which was disappointing. Rather than get into the details of the monthly changes (April to May), I think it's more interesting to see what has happened from the previous record level of employment (January 2008) to the low in February 2010 to the new record level reached in May 2014.

Here's a table with the winners and losers over the last 6+ years:

	Recession	Recovery	Net Change
Total	-8710	8808	98
Private	-8790	9407	617
Construction	-1968	496	-1472
Manufacturing	-2272	646	-1626
Retail Trade	-1176.1	924.9	-251.2
Profess. & Tech Services	-400.2	892.5	492.3
Management	-46.9	280.4	233.5
Temps	-568.4	884.7	316.3
Education (private)	125.3	288.6	413.9
Health Care	548.3	1015.1	1563.4
Social Assistance	167.7	375.1	542.8
Food/Drinking Places	-367	1326.1	959.1
Fed Govt, not post office	222.3	-85.1	137.2
Post Office	-89.6	-80.3	-169.9
State/Local Education	33.8	-227.8	-194
State/Local Govt (not educ)	-86.4	-205.2	-291.6

You can read it for yourself, but some of the things that stand out to me are:

During the recession (Jan 2008-Feb 2010): the entire net loss of jobs was in the private sector with the federal government (outside the post office) adding more than 200,000 jobs.  The largest job losses took place in manufacturing and construction while health care added more than half a million jobs.

During the recovery (Feb 2010-May 2014): The private sector recovered all the jobs lost and more while the government  incurred the jobs losses.  The biggest winner has been food & drinking places, adding 1.3 million jobs followed by health (+1 million) and retail trade (+925,000).

Net Change (Jan 2008-May 2014): The economy has added nearly 100,000 jobs since the start of 2008 (617,000 in the private sector, loss of half a million government jobs).  The winners were health care (up more than 1.5 million) while food/drinking places added almost 1 million.  though they have recovered somewhat, employment in manufacturing and construction combined has declined by 3.1 million.  Given the weak economy, it's no surprise that social assistance employment has risen by more than 500,000 since the start of the recession.

Given the net employment gains and losses, construction employment has declined from 5.4% of total employment at the start of the recession to 4.3% otday while manufacturing has declined from 9.9% to 8.7%.  Meanwhile, health care has risen from 9.5% to 10.6% while food/drinking places rose from 7% to 7.7%.  Just a few more stats before we finish.  Full-time employment fell from nearly 83% at the start of the recession to 80% in early 2010 before rebounding to 81.3% (so part-time employment rose from 17% to 18.7% over that same period).  The percent of people self-employed declined from 7% to 6.2% with the entire decline taking place during the recovery phase.

What are the key takeaways?  Though overall employment hasn't changed much during the last 76 months, its composition has changed significantly.  The goods sector (manufacturing/construction) has incurred a substantial decline while food/drinking places has experienced a very strong recovery.  Meanwhile, health care continues its long-term growth, though at a slower pace in recent years.

April Jobs Report: Florida and Orlando

The latest report on the state and local economy was released this morning and it continued to indicate that a real recovery is underway.  The headline numbers include a net gain of 34,000 jobs statewide in April (+0.4%) and up nearly 247,000 over the last 12 months (+3.3%) while the unemployment rate fell to 6.2%.  Regular readers of this blog already know what's coming up next - what about the effect of the participation rate?  This is where I'm supposed to say that the participation rate fell and there was no real decline in the unemployment rate.  However ... the participation rate has started to increase recently and is now aapproaching 60.7% (compared to a low of about 60% in late 2013 and 60.4% one year ago.  If the participation rate had remained constant over the last year, the unemployment rate would be even lower.  Of course the recent increase just brings it back to where it was in the second half of 2011.  Prior to the recession (Dec 2007), the participation rate stood at 64.2%.  Given demographics trends, it shouldn't return to that rate.  The recent bounce in the participation rate supports the idea that a significant portion of the decline was cyclical (people not looking for work due to a poor job market; as the job market improves, more people are looking for jobs).

Which industries are leading the rebound?  Food/Accomodation services added thre most jobs in April and have risen 5.6% since April 2013.  Professional/Business services came in second for the month and have increased by 5.1% in the last year, led by employment services, which have risen by 10% and professional/technical services (+4.6%).  Construction continued its recovery, adding nearly 5000 jobs last month and almost 44,000 over thre last year (+12.1%).

Given the strong job growth statewide, which major metropolitan area is posting the strongest gains?  Just under half of the job gains statewide in April were in Metro Orlando, which added 12,000 jobs.  Over the last year, employment in Orlando is up 4.5% (4.9% in the private sector).  Official data for metropolitan areas throughout the US for April won't be released until later this month, but it appears that Orlando may have the fastest rate of job creation of any major metropolitan area in the county.  Which industries have led the surge in employment?  Fortunately, it has been quite diversified including leisure/hospitality (up 14,800 or 6.8%), professional/business services (up 10,300 or 5.9%), retail trade (up 6600 or 5.1%), and construction (up 5200 or 10.5%).  One can question the quality of jobs to some extent, but an increasing proportion of high-paying jobs are being added (particularly in construction and professional/technical services).

What are the key takeaways?  The Florida job market is experiencing significant improvement, with strong employment gains and lower unemployment despite an increase in the number of people seeking work.  Orlando is among the strongest metropolitan areas in the nation in terms of the rate of job creation, with a rising portion of the gains in relatively high-paying industries.

April Job Market

The headline numbers of this morning's job report were very strong: unemployment falling to 6.3% and 288,000 new jobs added.  Earlier this week, economic growth was reported to be near zero in the first quarter, but now the job growth was the highest since January 2012 ... is the economy at a standstill or accelerating?

First, let's dissect the job market report.  Let's start with the good news.  The job gains were quite strong and across the board.  In fact, next month the economy will finishing recouping the job losses suffered during the Great Recession (currently 113,000 below the pre-recession peak).  Construction employment reached 6 million, a gain of 32,000 for the month, 189,000 over the last 12 months and the highest level since June 2009.  Professional and Business services added 75,000 jobs in April and 676,000 in the last year.  Food and Drinking places continues to be strong, adding nearly 33,000 in the month and 1.3 million since hitting bottom in Feb 2010 (an increase of 14%).  Currently, 1 out of every 11 employees in the private sector works in a restaurant or bar.  Further evidence of strenght is shown by the increase in aggregate hours worked which, after declining slightly between November-February, is up sharply the last two months.  This provides support for the temporary effects of the harsh winter followed by a Spring thaw.

OK, are there any reasons for caution?  Why did the unemployment rate fall so much?  Over 800,000 people dropped out of the labor force, reducing the participation rate back to its recent low of 62.8%.  If the participation rate had remained constant, the unemployment rate would have remained at 6.7% (so the entire decline was due to fewer people looking for jobs).  It should be noted that the labor force was reported to increase by over 500,000 in March.  Given this volatility, it confirms the need to look at trends over time as opposed to monthly changes.  One more conern is that hourly earnings were flat in April as were weekly earnings, so the recent economic improvement has had little effect on wages thus far.

Going back to the question at the beginning of the post - is the economy at a standstill as indicated by first quarter GDP report or accelerating as indicated by the job market report?  This morning's report provides support for the idea that the harsh winter resulted in a temporary slowdown, supressing first quarter GDP.  Part of the job gains in recent months is due to a bounceback as the weather has improved, but the underlying trend has improved somewhat in 2014.  This doesn't necessarily mean the economy is ready for takeoff, but it does put to rest the idea that the economy is slowing down.

March Employment Report

The government released its latest snapshot of the job market this morning.  The headline figures showed no change in the unemployment rate (remained at 6.7%) while the economy added 192,000 jobs.  However, once one digs into the details, the report was stronger than the headlines indicate (based on recent standards).

The employment-population ratio rose to 58.9%, the highest rate since August 2009.  The year-over-year increase (0.4%) was the largest since January 2007.  In addition, the labor force participation rose to 63.2%, the highest since September 2013.  The year-over-year decline (-0.1%) was tied for the smallest since October 2008 (the last time it increased over a 12-month period).  OK, this isn't great news, but it suggests that the participation rate may be stabilizing and employment growth is finally outpacing population growth (both are indications of a strengthening job market).

Private employment is at its highest level ever (finally exceeding its pre-recession level), though total employment is still 437,000 below its January 2008 high (due to a decline in government employment).  In addition to the gains in employment, hours worked also increased.  Total hours worked for all employees (not the average work week) is now slightly higher than right before the recession (up 0.1% since November 2007, though slightly lower than early 2008).  New highs for total hours worked were achieved in education/health (up 10% from Nov 2007), professional/business services (up 8.5%) and leisure/hospitality (up 8%).  Lagging industries include construction, which is down 20% since the start of the recession, but reaching the highest level since March 2009, and manufacturing, which is down 10% from the start of the recession but at its highest level since December 2008.

What are the key takeaways?  The labor market is showing signs of real improvement, though still not as much as most would like.  The job market has recovered most of the ground lost during the recession, but population has increased quite a bit since then, so it is still far from being a strong job market.

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.

The Florida & Orlando Job Market

The latest information about the state and local job market was released this morning, showing rising employment and a declining unemployment rate for both Florida and metro Orlando.  Though I normally comment on the data for the month, since this report wrapped up 2013, I think it's helpful to also reflect on the year.

The unemployment rate in Florida declined from 6.4% to 6.2%.  If you've read this blog before, you know the next question - was it due to employment growth or fewer people participating in the job market?  The participation rate was down fractionally, so this time it reflects an improvement in the labor market.  For metro Orlando, the unemployment rate fell to 5.5% from 5.9%.  Some of this was due to seasonal factors, but it also reflects a stronger job market.

Florida added over 14,000 jobs in December, 13,500 in the private sector led by retail trade, which added 9100 jobs (seasonally adjusted).  Orlando added 6500 jobs in the private sector (6000 overall; not seasonally adjusted), with half of the jobs added in retail trade (2100) and food/accommodation places (1000).  Looking at the monthly figures, it's easy to question the quality of jobs added both statewide (70% in retail) and locally (50% in retail & hotels/restaurants).  However ...

For 2013 as a whole, Florida added nearly 195,000 jobs in the private sector (3.1%).  The largest gains were in construction (+8.4%), retail trade (+5.5%), real estate, rental, & leasing (+4.9%).  Digging a little deeper, leading categories included civil engineering construction (+12.9%), building material and supply stores (+10.3%), architectural, engineering and related services (+9.8%), and specialty trade contractors (+8.7%).  In other words, the housing rebound contributed significantly to a rebound in the Florida job market.

Meanwhile, metro Orlando added 32,500 private sector jobs, a gain of 3.4%.  Leading sectors included ambulatory health care services (+7.1%), arts & recreation (+6.5%), food/drinking places (+5.1%), and real estate, rental & leasing (+4.7%).  Though construction was an outperformer, it didn't play as significant role locally as it did statewide.

What about the unemployment rate?  The Florida unemployment rate declined from 7.9% in December 2012 to 6.2% in December 2013.  However, much of the decline was due to a falling labor force participation rate, which fell from 60.5% to 59.6%.  If the participation rate had remained stable, the current unemployment rate would have been 7.57%.  Nationally, the falling participation rate was responsible for the entire decline in the unemployment rate (i.e., the unemployment rate for the US would have remained at 7.9% if the participation rate had remained constant).

What's the key takeaway from the report?  Though retail was largely responsible for the job gains in Florida in December (remember, the data are seasonally adjusted, so that's not due to Christmas), the Florida job market outperformed that of the nation in 2013, both in terms of job gains and falling unemployment.

December Job Market Report

The December job market report was disappointing, falling significantly short of expectations as the economy added just 74,000 jobs.  Meanwhile, the unemployment rate fell to 6.7%, the lowest since 2008.  What comes next is similar to what I've written quite often over the last year, but it has to be said.

Why did the unemployment rate decline from 7% to 6.7%?  The main reason was that more people stopped looking for work, reducing the labor force participation rate to 62.8%, the lowest since early 1978.  If the participation rate had not changed, the unemployment rate would have remained at 7%,  Comparing December 2012 to December 2013, the participation rate declined from 63.6% to 62.8%.  If the participation has remained constant, the unemployment rate would have also remained unchanged at 7.9% (so the entire decline in the unemployment rate in 2013 was due to a lower participation rate).  During the last five years, the noninstitutional adult population has increased by about 11.7 million people while the labor force has increased by 60,000 (December 2008-December 2013, not seasonally adjusted since we're comparing the same month; given new seasonal adjustments, the seasonally-adjusted labor force has increased by 280,000).  As a result, the participation rate has dropped from 65.8% in December 2008 to 62.8% in December 2013.  If the participation rate had not changed, the unemployment rate would currently be 10.9%.  As discussed elsewhere, some of the decline in the participation rate was expected due to the aging of baby boomers, but it is clear, based on the data, that the primary reason for declining unemployment in recent years is a smaller portion of people participating in the job market.

Let me stick with the negative before pointing out some bright spots.  Job gains in December were led by retail trade (+55,000) and temp jobs (+40,000).  Given a net increase of 74,000 jobs (87,000 in the private sector), that means the rest of the economy lost jobs.  In addition, hours worked declined, confirming weakness in employment.  What about the bright spots?  Given that these are estimates, it's helpful to look at three-month trends.  In the fourth quarter (Sep-Dec 2013), the economy added 515,000 jobs (530,000 in the private sector), for an average of 172,000 per month (177,000 in the private sector).  Nearly 200,000 of these jobs were retail trade or temp jobs (nearly 40%); still a high proportion, but not over 100%!.

Here are some more interesting numbers regarding changes in employment by age.  Which age group has experienced the largest employment gains in the last year?  According to the household survey, those 55 and over achieved just over one-third of job gains; almost 30% went to those between 25 and 54; 27% to those between 20 and 24, and just under 10% went to teenagers.

Enough with the numbers.  What are the key takeaways from this report?  Despite the decline in the unemployment rate, the report was quite weak, led by weak job gains, primarily in low-paying sectors, and a decline in the participation rate.  However, looking at the three-month trend and considering other reports about the economy, it's like that the report understates the strength of the job market.  For the fourth quarter as a whole, the labor market continued it's modest healing, though noticeable weaknesses remain.

Job Market: Florida and Orlando

The latest snapshot of the state and local job market was released this morning, showing unemployment declining to 6.4% in Florida (seasonally adjusted) and 5.8% in Metro Orlando (not seasonally adjusted).  In both cases, the rates were the lowest since 2008.  Does that mean that unemployment is no longer much of an issue in Florida?  While the job market has improved, readers of this blog can probably guess what I'm going to say next.  A major reason for the decline in the Florida unemployment rate over the last year has been the decline in the labor force participation rate, which fell from 60.5% in November 2012 to 59.6% in November 2013 (after already falling quite a bit in prior years).  If the participation rate had remained steady over the last 12 months, the unemployment rate would be about 7.7%, a small decline from last November's 8%.  Though employment growth was modest in November (net increase of 6100 jobs, nearly 60% of which were in retail trade), that's coming off of two strong months of job growth in which the state economy added nearly 69,000 jobs.

Metro Orlando's unemployment rate declined as well, but some of it reflects seasonal issues (the local data released today are not seasonally adjusted) and some of it is likely due to a lower participation rate.  That said, there is real improvement in the local job market, but not as much as implied in the official figures.  Employment growth in both Florida and Orlando exceeded the national average over the last 12 months (2.7% in Orlando, 2.5% in Florida, 1.7% in the US).  Leading growth sectors statewide (since Nov 2012) were retail trade and professional/technical services while food/drinking places and ambulatory health care services were the top gainers for Orlando over the last 12 months (though retail trade was responsible for half of the employment gains in November, primarily due to seasonal issues, i.e., Christmas!).

What are the key takeaways from this morning's report about the state and local job market?  Both continue to improve, but the improvement is somewhat overstated due to fewer people participating in the job market (if you're no longer participating in the job market, you're not counted as unemployed).  A relative strengthening of the Florida and Orlando labor markets is evidenced by employment growth statewide and locally exceeding that of the nation (over the last few months as well as the last year).

The Latest Economic Reports: GDP and Employment

The government released two economic reports last week which, on the surface, indicates that the economy was strengthening in the second half of 2013.  Of course there's more to it than that.  Economic growth for the third quarter was revised up to 3.6% (from an initial report of 2.8%).  Does that mean growth and demand were picking up?  Not quite.  About half of the growth for the quarter was due to an increase in inventories; final sales rose by 1.9% (in line with the previous trend).  In fact, both consumer spending and business investment increased at a slower rate in the third quarter compared to the second quarter.  This was offset somewhat by somewhat faster growth in state/local government spending.  Also, another measure of economic growth, gross domestic income, rose by 1.4% in the third quarter (after growing more quickly than GDP in recent quarters).  What does this mean?  More of the same.  The recent trend in economic growth has been about 2%.

The other major economic news was the November Employment report, which showed an increase of 203,000 jobs with the unemployment rate falling to 7%.  Is this good news?  Yes, but not as good as it appears on the surface.  If you have read this blog before, you probably know what's coming next.  The main reason for the decline in the unemployment rate in recent months (and recent years) is the decline in the participation rate (a smaller portion of the population participating in the job market).  The participation rate fell from 63.2% in September to 63% in November (was 62.8% in October).  If it had remained at 63.2%, the unemployment rate would have been 7.3% in November (a slight increase rather than a decline of 0.2%). The quality of the jobs added appeared to improve somewhat in November compared to previous months, with a higher portion of jobs in relatively high-paying industries such as construction and manufacturing and a smaller share in relatively low-paying industries compared to previous months.

Together, the two reports suggest that the economy continues to grow at a modest pace: an underlying growth rate of 2% with about 200,000 jobs per month.

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.

August Employment Report

The headline numbers from today's report on the job market are that the unemployment rate declined to 7.3% and the economy added 169,000 jobs.  Beneath the surface, the report shows some weakness.  Job growth for June and July were revised down by more than 70,000; employment growth has averaged 148,000 per months over the last 3 months (just under 158,000 in the private sector).  Nearly one-third of net jobs created over the last 3 months have been in retail trade and 2/3 have been in retail trade, food/drinking places, temp jobs, and home health services (relatively low paying jobs).

Why did the unemployment rate decline?  The labor force participation rate fell to 63.2%, the lowest since the summer of 1978.  A major reason for the decline is that, for men over the age of 20, the participation rate declined by 0.3% to 72.3%, the lowest since records started being kept in 1948 (the participation rate didn't change for adult women).  The employment-population ratio declined slightly to 58.6%, which is where it began 2013 (and 2012).  As with the participation rate, the employment-population ratio declined significantly while it rose slightly for adult women.  What about part-time vs. full-time jobs?  There was a shift from part-time to full-time employment last month (modest increase in full-time jobs, noticeable decline in those working part time for economic reasons), but 60% of net jobs created in 2013 are still estimated to be part time.

Add it up and the job market is improving modestly (not as strong as some were thinking).  On a positive note, the ISM service index for August was very strong and auto sales have risen to the highest level since 2007.  On the flip side, it remains to be seen how much a drag the recent spike in interest rates will have on the economy.  So how's the economy doing?  Modest growth in terms of output (GDP) and jobs with some preliminary signs of a possible pickup in the coming months.

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%.

February Employment Report

The headlines from the February Employment Report contained some better than expected news about the job market: the unemployment rate fell to 7.7% (from 7.9%) and the economy added 236,000 jobs (246,000 in the private sector.  Let's look at some of the details.  The February numbers look quite good, but should be interpreted along with somewhat weaker numbers for January to assess the trend.  For example, though the private sector added 246,000 jobs in February, it added 140,000 in January, which averages 193,000 per month so far in 2013.  Looking at particular sectors, construction has added 140,000 jobs over the past year, a majority of those in the last 2 months (+73,000 in 2013).  To empahsize the significance of the pickup in construction, it added about 8,000 jobs per month, on average, in 2012, but is averaging more than 36,000 per month so far in 2013.  Other sectors and industries showing significant gains include retail trade, food accomodations, and health care.  One industry that you may not have expected to make a significant contribution, motion picture and sound recording industries, added nearly 21,000 jobs in February.

Why  did the unemployment rate fall?  A combination of more people employed and fewer people in the labor force.  The participation rate declined back to a 30-year low of 63.5% (the last time it was lower was in 1979).  Meanwhile, the employment-population ratio remained at 58.6%, unchanged so far in 2013 as well as from February 2012, but up from the post-recession low of 58.2% in November 2010 and still considerably below it's pre-recession high of 62.9% in November 2007.

What are the key takeaways from the report?  The job market has gotten off to a pretty good start in 2013, led by the rebound in construction.  That said, the employment gains in February were across the board, not concentrated in one sector.  Given the weakness in January, the job market is not signaling a robust economy, but an economy that continues to move forward.  In the coming months, there will be a battle between the rebounding housing market as seen in rising employment in construction and the fiscal drag due to the increase in the payroll tax and sequestration.

The Impact of a Decline in the Participation Rate on the Uenmployment Rate

Recently, I was interviewed for a story in the Orlando Sentinel regarding the impact of a decline in the pariticpation rate on the unemployment rate.  Since it's hard for reporters to include all relevant information in an article, I decided to fill in some of the details that were missing.  As has been reported in many places, the labor force participation rate has declined significantly since the start of the Great Recession, falling from 66% in December 2007 to 63.6% recently.  If the participation rate was still 66%, the current unemployment rate would be more than 11% (simple math requiring no assumptions).  Should the participation rate be 66%?  A study by the Kansas City Federal Reserve explores it in some detail.  Estimates are that about half of the decline in the participation rate was due to the aging of baby boomers, which was not a result of the recession (though it did cause many to age prematurely!).  Taking that into account, a participation rate of 64.8% would result in the unemployment rate being about 9.6% (down from a peak of 10% in October 2009).  Someone was quoted in the Sentinel making the point that one can't assume that if more people were participating in the labor force, that they would be unemployed.  While this may be true, it's hard to imagine that more people participating in the job market would result in a noticeable increase in the number of jobs (some participants who dropped out of the labor force would have obtained jobs that others ended up getting) ; thus the primary result would still be a significantly higher unemployment rate.  Does that mean there has been little improvement in the job market?  The economy has added over 5 million jobs in recent years, so the job market has definitely improved, but the significant decline in the unemployment rate is due in a large part to the declining participation rate.  That's why a recent consensus forecast from a survey of economists for the Wall Street Journal predicts employment rising by 2 million in 2013 while the unemployment rate only declines to 7.4% by the end of the year.  According to the forecast, the rate of job creation is expected to increase, but the unemployment rate is not expected to decline as quickly as in recent years due to stabilization of the participation rate (and a possible minor rebound).

January Employment Report

The January employment report was released this morning and it contained pretty good news about the job market.  The headline numbers showed that employment rose by 157,000 in January (private employment rose by 166,000) while the unemployment rate rose to 7.9%.  Once one digs into the details, the news is mixed but generally positive.  First, employment for November and December was revised up by 127,000.  Given the revisions, the economy added 181,000 jobs per month, on average, for 2012.  The strength of the job market is reassuring given the weak GDP report.

The household survey was not quite as positive as the establishment survey (the establishment survey is generally regarded as superior when assessing the growth in employment).  Not only did the unemployment rate increase slightly (back to where it stood in October 2012, but down from 8.3% in January 2012) while the employment-population ratio remained at 58.6% (up 0.1% from a year ago).  This continues the pattern of moderate employment growth, enough to accomodate growth in the labor force, but not much more (note: the participation rate didn't change and is down by 0.1% over the last 12 months).  On a related note, the broad measure of unemployment (U6) was unchanged at 14.4% (down from 15.1% one year ago and from the peak of 17.1% in late 2009/early 2010).

Though employment rose in terms of the number of job holders, hours worked was flat to negative in many sectors, with the exception of education and health services.  Average hourly earnings were up slightly in January and now have risen 2.1% over the last 12 months, slightly ahead of inflation (which is about 1.5% according to the latest figures).

What are the takeaways?  Despite the weakness of the GDP report (even after removing the effect of inventories), employment growth remains moderate, countering fears of a possible recession.  The recent trend in employment suggests an economy growing closer to 2% than 0%.  Optimists will point to the upward revisions in employment for late 2012 while pessimists will point to sluggish employment gains that are not strong enough to make a dent in the unemployment rate.  For further analysis, though I haven't looked at it yet, I'm counting on Bill McBride of calculated risk to provide solid analysis of the job report.

September Job Report

The government released the September job report this morning and there were some surprises.  The headline numbers show that the unemployment rate fell to 7.8% (lowest since January 2009) while 114,000 jobs were added.  How did the unemployment rate fall from 8.1% to 7.8%?  Unlike the last year or two, the labor force participation rate actually rose slightly to 63.6%.  So what happened?  The household survery showed an increase of over 800,000 jobs in September.  However 582,000 of those jobs are due to more people working part-time for economic reasons (which rose from 8 million to 8.6 million people).  That's why that, even though the unemployment declined, the broader measure of unemployment (U6) was unchanged at 14.7%.  On a related note, some have suggested that the household survey may be capturing an increase in self-employed workers which are not fully captured by the establishment survey.  However, using nonseasonally-adjusted numbers, self-employed workers declined by 19,000 (including both incorporated and unincorporated) while total jobs added was 775,000 (based on the household survey).  Thus, a surge in self-employed workers doesn't seem to explain the surge in employment based on the household survey.

Moving over to the establishment survey, the private sector added 104,000 jobs while the government added 10,000.  Leading industries include ambulatory and health services (+29,800), food and accomodation service (+15,700), and state government education (+13,600).  It should be noted that revisions show about 40,000 more jobs created than previously reported in both July and August.

Given the different pictures of the job market presented by the two surveys, let's take a look at charts of employment growth according to each.  The following is a chart of the number of jobs created according to the household survey each month over the last decade.  It should be noted than some of the January numbers are misleading due to adjustments in population control.

An here's the monthly employment gains in private sector payrolls (establishment survey).

As is evident, the establishment survey is much more stable.  Most economists consider the establishment survey to be a more reliable measure of the job market.  So what's my takeaway from this morning's report?  A continuation of modest employment growth (private employment rose by 104,000 in September and 97,000 in August).  The household survey tends to be volatile and seems to be misleading this month.  After accounting for population controls, it showed the most rapid growth in employment since 1983.  One other piece of trivia.  this was the third larvest positive gap between the household and establishment survey (after adjusting for population controls) in the last 50 years.  Did the economy creat anywhere near 873,000 jobs resulting in a significant decline in the unemployment rate?  Not likely.  The payroll number is much more align with most economic data which indicate a sluggish economy which is still experiencing a a slow recovery.