Insights and Perspectives

April 2021 Job Growth Unexpectedly Sluggish

Fri, 07 May 2021 19:23:00 GMT

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for April 2021 on Friday, May 7^th. The monthly change in employment given by the CES and the unemployment rate from the CPS are seen as the standard gauges for assessing the health of the U.S. labor market. The results mark 14 months since the Covid-19 economic lockdown and surprised most forecasters with its interruption of anticipated strong job growth of at least one million. While strong job growth is still expected over the next year, April demonstrates that month-to-month figures will be uneven as the labor market reestablishes itself post-pandemic.

Employment in the U.S. rose by 266,000 jobs, only a fraction of the 1.6 million jobs expected in the Geographic Solutions, Inc. forecast. The WSJ Economist Survey forecast at 1.0 million jobs was closer but still nearly four times actual employment. The overestimation of jobs was partially due to excessive weight placed on full vaccination rates which went from 10.7% on March 12^th to 22.6% on April 12^th, the date the labor market survey is conducted. March job growth fell from 916,000 to 770,000. January was originally reported at 379,000 new jobs but finalized at 536,000, underscoring the elevated volatility and unpredictability of employment. The Geographic Solutions forecast was derived from internal data on the number of job openings, job severances, and job searchers. The forecast used unemployment claims data from the U.S. Department of Labor (USDOL) as an external indicator in the forecast.

The unemployment ticked up to 6.1%, above the Geographic Solutions and WSJ forecasts of 5.7% and 5.8%, respectively. The unemployment rate forecast used internal data on job openings, job severances, job searchers, and the number of applications for unemployment benefits filed on Geographic Solutions state client sites. The forecast uses unemployment claims data from the USDOL.

Explosive job growth was expected in the service-providing sector but subdued increases in the goods-producing sector. Instead, the goods-producing sector lost jobs (-16,000) and service-providing job growth was soft (+282,000).

Job declines were most pronounced in Trade, Transportation, & Utilities (-81,000), most likely the consequence of static goods-sector employment activity which is closely linked to employment in transportation and logistics. Professional & Business Services (-79,000) had similar losses, mostly dragged down by a severe drop in temporary administrative jobs (-111,000). The positive interpretation is that many of these temporary workers are encouraged by their chances of getting a permanent job, and are quitting temp positions to focus on that.

The Leisure & Hospitality sector in April was the only one with job increases in line with the explosive job growth expected as the vaccines are distributed. It totaled 311,000 new jobs. Leisure & Hospitality employment continues its climb, but it has a long way to go before completing its recovery. Its employment remains 16.8% below February 2020. No other major industry has employment more than 10% below its February 2020 total.

The U-3 unemployment rate is the standard form of measuring unemployment in the U.S. labor market and includes those that are actively seeking a job but unable to find one. The U-3 unemployment rate increased slightly to 6.1% from the previous month.

The labor force participation rate increased to 61.7% from the previous month. The more expansive U-6 unemployment rate counts discouraged workers who are no longer actively seeking work (and therefore no longer in the labor force) and those that have settled for part-time employment but desire a full-time job. This measure of unemployment fell 0.3% to 10.4%. The increasing U-3 rate along with a declining U-6 rate demonstrates that previously discouraged job-seekers are jumping back into the labor market.

Bluntly stated, the April labor market report was a shocker. Despite news of shortages in semiconductors slowing manufacturing, lumber prices as a dragging force on construction, and supply chain issues, overall demand for labor is high. U.S. job openings in February 2021 were 7.4 million plus hourly earnings and average weekly earnings jumped in April. It appears that going forward that employment changes will mostly depend on the labor supply, and its ability and willingness to meet the robust demand in the labor market.

May 2021 Job Growth Continues Sluggish Pattern

Sun, 04 Apr 2021 19:16:00 GMT

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for May 2021 on Friday, June 4^th. The monthly change in employment given by the CES and the unemployment rate from the CPS are seen as the standard gauges for assessing the health of the U.S. labor market. The results mark 15 months since the Covid-19 economic lockdown and signal reluctance among many of the jobless to return to the labor force. While strong job growth in March indicated the job market was about to take off, the last two months have had disappointing outcomes.

Employment in the U.S. rose by 559,000 jobs, only a fraction of the 2.7 million jobs expected in the Geographic Solutions, Inc. forecast. The WSJ Economist Survey forecast at 671 thousand jobs was closer. The overestimation of jobs was partially due to a surge in job applications on Geographic Solutions websites that indicated greater enthusiasm to find employment. Job applications data had its highest monthly percent increase since May 2020 when the U.S. created 2.8 million jobs. The Geographic Solutions forecast was derived from internal data on the number of job openings, job severances, job searchers, and job applications.

The unemployment rate declined to 5.8%, above the Geographic Solutions forecast of 5.6% and below the WSJ forecast of 5.9%. The unemployment rate forecast used internal data on job applications, job severances, and the number of applications for unemployment benefits filed on Geographic Solutions state client sites. The forecast uses unemployment claims data from the USDOL.

Explosive job growth was expected in the service-providing sector but subdued increases in the goods-producing sector. Instead, the goods-producing jobs were flat (+3,000) and service-providing job growth was soft (+556,000).

Job declines were most pronounced in Construction (-20,000), most likely the consequence of rising costs of supplies such as lumber. Job market gains came from a strong performance in the Leisure & Hospitality sector in May that totaled 292,000 new jobs, an encouraging sign for the most beleaguered sector since the onset of the pandemic.

The Leisure & Hospitality sector in May was the only one with job increases in line with the explosive job growth expected as the vaccines are distributed. Leisure & Hospitality employment continues its climb, but it has a long way to go before completing its recovery. Its employment remains 15% below February 2020. No other major industry has employment more than 10% below its February 2020 total.

The labor force participation rate declined slightly to 61.6% from the previous month. The more expansive U-6 unemployment rate counts discouraged workers who are no longer actively seeking work (and therefore no longer in the labor force) and those that have settled for part-time employment but desire a full-time job. This measure of unemployment fell 0.2% to 10.2%. Declining unemployment rates without robust job growth demonstrates that job-seekers are becoming discouraged and leaving the labor force.

The May labor market report was a disappointment and is likely to reignite debate on whether extended unemployment benefits are preventing some from re-entering the workforce. When state employment numbers for May are released later this month, it will be interesting to see if there are noticeable differences among the states who are limiting unemployment benefits and those that are not. The labor market remains 8.2 million jobs below its February 2020 level. The pace of hiring will need to pick up to avoid the recovery taking years to complete.

Leisure & Hospitality Continues to Struggle, but Vaccines Offer Hope for 2021

Fri, 08 Jan 2021 16:01:00 GMT

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for December 2020 on Friday, January 8th. The monthly change in employment given by the CES and the unemployment rate from the CPS are seen as the standard gauges for assessing the health of the U.S. labor market. The results mark 10 months since the Covid-19 economic lockdown and signal a stall in the labor market recovery, which began in May 2020. The December jobs report caps a year that experienced the worst job loss on record (-9.4 million). The good news is that as more Covid-19 vaccinations are administered, we should see a jump start in the recovery take place later in 2021.

Employment in the U.S. declined as expected in the Geographic Solutions, Inc. (GSI) forecast. The contraction was a bit more than estimated with the GSI prediction of 23,000 and the 140,000 actual job loss in December. The forecast outperformed the WSJ Economist Survey which predicted an increase of 50,000. The GSI forecast was derived by using its internal raw numbers on job openings, complete and incomplete UI applications, and job severance dates listed on the UI applications. Covid-19 case counts and UI claims from the Department of Labor were the two external indicators inserted into the forecast.

The unemployment rate remained at 6.7%, just under the GSI and WSJ forecast of 6.8%. This GSI forecast pulled UI claims series from two client states and relied on Covid-19 case counts.

December jobs in goods-producing industries finished the year strong, increasing by 93,000. While impressive, the addition was not enough to compensate for even half of the 188,000 jobs lost in service-providing industries.

The job market losses were chiefly driven by a severe contraction in the Leisure & Hospitality sector in December that totaled a 498,000 jobs loss. Leisure & Hospitality employment is the most sensitive industry to Covid-19 cases and government response measures. Therefore, its poor performance was somewhat anticipated from the spike in cases throughout some parts of the country. Trade, Transportation, & Utilities employment grew the most of any other sector, and unlike November, its growth was spread among all its subsectors.

The graph below illustrates just how much Leisure & Hospitality continues to struggle compared to other industries. Its employment remains 23.2% below February, more than twice the remaining percentage of any other major sector.

The labor force participation rate also maintained its 61.5% rate from the previous month. It is somewhat unusual to see a month with both a job loss and a steady unemployment rate also have a labor force participation rate that remains the same. Job loss combined with a steady or falling unemployment rate typically signals that the unemployed are becoming discouraged and dropping out of the labor force altogether. This would have the expected effect of reducing the labor force participation rate. However, the CPS survey gathers its own employment data and includes those who are self-employed or work in the “gig economy” (ex: Uber drivers). The CPS calculates that employment stayed roughly the same under this method.

The more expansive U-6 unemployment rate counts discouraged workers who are no longer actively seeking work (and therefore no longer in the labor force) and those that have settled for part-time employment but desire a full-time job. This measure of unemployment ticked down last month by 0.3% to 11.7%. December’s labor market churn resulted in a lower share of the unemployed who are discouraged and not actively seeking work.

While December’s labor market report is disappointing, there are signs that economic conditions will improve within the next few months. The $900 billion in Federal aid signed into law at the end of 2020 and possible further assistance after the new administration is in office will provide relief for the unemployed and businesses and will serve as a modest stimulus during this trailing off period in the job market. However, the real bounce-back will happen when Covid-19 vaccines are widely available and restrictions on activity are lifted.