Insights and Perspectives

Labor Market Explodes to Start the Year

Fri, 02 Feb 2024 14:44:00 GMT

The Labor Market Report is derived from two monthly surveys from The Bureau of Labor Statistics (BLS) that measure labor market trends: The Current Employment Statistics (CES) survey and The Current Population Survey (CPS).

THE SIGNIFICANCE

What:

The U.S. economy gained 353,000 jobs in January while the labor force and unemployment rate remained unchanged. Job creation far exceeded the Geographic Solutions, Inc. expectations of 255,000 jobs and the WSJ Survey expectations of 185,000 jobs.

Why:

Strong consumer spending has continued to lift the labor market, despite layoff announcements from a handful of prominent companies. The only discouraging sign is that average weekly hours fell to 34.1. Excluding March 2020 when the pandemic began, that is the lowest reading for this indicator since June 2010.

When:

We expect a softening trend to establish itself in the coming months as past Federal Reserve interest rate hikes continue to exert their effects on the economy and household savings dwindle.

THE LANDSCAPE

According to the monthly Bureau of Labor Statistics (BLS) report, employment in the U.S. in January 2024 gained 353,000 additional jobs, while the unemployment rate stayed at 3.7%. It was the largest monthly gain since January 2023. Job additions have accelerated for three consecutive months.

Job creation was strongest in the Private Education & Health Services (+112,000), Professional & Business Services (+74,000), and Trade, Transportation & Utilities (+64,000) sectors, while no major sectors lost jobs.

After posting no net new jobs in December, the Trade, Transportation & Utilities saw one of the largest increases in January.

The labor force participation rate held steady in January after dropping 0.3% to 62.5% in December; the largest one-month decline since January 2021.

The U-6 unemployment rate nudged up to 7.2% in January from 7.1% in December. This is another indication that some part-time workers desire a full-time position.

The 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.

As mentioned earlier, weekly hours are down but wage increases have grown large enough to improve real income (hours x wages adjusted for inflation) for the employed.

Labor Market Defies Expectations in 2023

Fri, 05 Jan 2024 20:28:00 GMT

According to the monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) from The Bureau of Labor Statistics (BLS), employment in the U.S. in December 2023 gained 216,000 additional jobs, while the unemployment rate stayed at 3.7%.

THE LAYOUT:

• Job creation was strongest in the Education & Health Services (+74,000), Government (+52,000), and Leisure & Hospitality (+40,000) sectors, while Trade, Transportation & Utilities was the weakest among the major sectors with no new jobs.

• The labor force participation rate dropped 0.3% to 62.5% in December; the largest one-month decline since January 2021. 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 nudged up to 7.1%.

THE SIGNIFICANCE:

• While the positive December report is somewhat dampened by the decline in the labor force participation rate, the calendar year performance has been much more upbeat than predicted. Employment and real wages expanded, leading to real private-sector workers earning 0.5% more in 2023 than the previous year. However, we expect a softening trend to establish itself in the coming months as past Federal Reserve interest rate hikes continue to exert their effects on the economy and household savings dwindle.

Healthy Job Growth, but Labor Market Still Poised to Soften

Fri, 08 Dec 2023 19:35:00 GMT

According to the monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) from The Bureau of Labor Statistics (BLS), employment in the U.S. in November 2023 picked up to 199,000 additional jobs, while the unemployment rate declined to 3.7%.

THE LAYOUT:

• Job creation was strongest in the Education & Health Services (+99,000) and Government (+49,000) sectors, while Trade, Transportation & Utilities (-35,000) shed the most jobs.

• The labor force participation rate rose slightly to 62.8% in November. 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 to 7.0%.

THE SIGNIFICANCE:

• A jobs report showing wage and employment gains along with a lower unemployment rate and a higher labor force participation rate is usually something to celebrate. However, the overall softening trend is likely to continue as past Federal Reserve interest rate hikes continue to exert their effects on the economy and household savings dwindle.

• Real wage gains improved last month but have moved sideways since the beginning of the year. Job openings data from the Bureau of Labor Statistics and Geographic Solutions, Inc. have been declining for more than 15 months. This suggests the labor market is poised to weaken the next year but may be able to avoid a recession as a majority of economists in the WSJ survey are now predicting.

Yo-Yo Employment Gains Over Previous Six Months

Fri, 03 Nov 2023 18:27:00 GMT

According to the monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) from The Bureau of Labor Statistics (BLS), employment in the U.S. in October 2023 slowed to 150,000 additional jobs, while the unemployment rate ticked up to 3.9%.

THE LAYOUT

Job creation was strongest in the Education & Health Services (+89,000) and Government (+51,000) sectors, while Manufacturing (-35,000) shed the most jobs.

The labor force participation rate fell slightly to 62.7% in October. 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 increased to 7.2%.

Less than half of occupations (SOC Groups) and industry sectors (NAICS) saw an increase in job openings on Geographic Solutions state client sites.

THE SIGNIFICANCE

While some of the weakness in October’s report may be due to major labor strikes, the performance is disappointing across the board: Joblessness is up while the labor force participation rate is down, job gains softened while work hours and real wages declined (assuming the continued inflation trends of the three previous months).

Those looking for a turning point in the overall economy may feel that the evidence in this report is piling up in their favor. However, the last six months show volatile job creation, going back and forth between strong and weak (see 1st chart). Next month could hold this pattern and change attitudes towards the economy once again.

September Jobs and July/August Revisions Show Stronger Job Market

Fri, 06 Oct 2023 14:54:00 GMT

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for September 2023 on Friday, October 6th. 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.

Employment in the U.S. rose steeply by 336,000 jobs. The job results were more than double the expectations of Geographic Solutions, Inc. (153,000) and the Wall Street Journal Economist Survey (170,000). Geographic Solutions derives its employment forecast from internal data on the number of job openings, job applications and job severances, and unemployment applications filed on Geographic Solutions state client sites. The forecast uses unemployment claims data from the U.S. Department of Labor (USDOL).

The unemployment rate stayed at 3.8% in September, matching the Geographic Solutions forecast. The WSJ forecast projected the unemployment rate would tick down to 3.7%. The unemployment rate forecast uses internal data on the number of job openings, job applications, job severances, job searchers, and unemployment applications filed on Geographic Solutions state client sites.

Job creation was strongest in the Leisure & Hospitality (96,000), Government (73,000), and Education & Health Services (70,000) sectors. Other sectors were modestly positive, and none had major job losses.

Leisure & Hospitality and Government are the only major sectors to remain below their pre-pandemic employment levels. However, Government appears ready to surpass that level within the next two months.

The labor force participation rate stayed at its post pandemic high of 62.8% in September. 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 to 7.0%.

Employment was quite a bit stronger over the last three months than originally estimated. Revisions in July and August added 119,000 more jobs than reported last month. Jobs, especially in Leisure & Hospitality have been boosted by persistently strong consumer spending. Also, the month of September has repeatedly seen unexpected job growth in state employment education since the pandemic began, indicating new seasonal patterns that are not yet captured by the BLS’s seasonal adjustments.

Nevertheless, there are some signs that the labor market may not be as tight as it seems at first glance. Wage gains are softening somewhat while the number of part-time jobs has been growing, albeit unevenly, since mid-2022. This may be a sign that employers are nervous about an economic downturn but want to avoid employee shortages once the economy strengthens.

Job Growth Softens over the Summer

Fri, 01 Sep 2023 15:25:00 GMT

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for August 2023 on Friday, September 1st. 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.

Employment in the U.S. rose by 187,000 jobs. The job results were slightly above the Geographic Solutions, Inc. forecast of 180,000 while the WSJ estimate was further away at 170,000. Geographic Solutions, Inc. derives its employment forecast from internal data on the number of job applications and job severances filed on Geographic Solutions state client sites. The forecast uses unemployment claims data from the U.S. Department of Labor (USDOL).

The unemployment rate rose to 3.8% in August. The Geographic Solutions forecast and the WSJ forecast projected the unemployment rate would maintain the 3.5% result from July. The unemployment rate forecast uses internal data on the number of job openings, job applications, job severances, and unemployment applications filed on Geographic Solutions state client sites. The forecast uses unemployment claims data from the U.S. Department of Labor.

Job creation was strongest in the Education & Health Services (102,000) and Leisure & Hospitality (40,000) sector. Other sectors were modestly positive, but the Trade, Transportation, & Utilities and Information sectors lost jobs.

Leisure & Hospitality and Government are the only major sectors to remain below their pre-pandemic employment levels.

The labor force participation rate grew in August for the first time since March 2023, reaching 62.8%. 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 increased to 7.1%.

Employment noticeably softened during the summer, averaging only 150,000 new jobs per month from June through August after averaging 238,000 from March to May of this year. The 3.8% unemployment rate is also signaling some weakening in labor demand. Education & Health Services has led the way in job increases for the third straight month and made up the majority of new jobs in July and August. The Fed’s interest rate policy is having a moderating effect on the labor market. The near term prognosis for the labor market is likely sub-200,000 monthly job growth as the Fed’s interest rate hikes continue to work their way through the economy.