by Bill McBride on 10/05/2012 11:15:00 AM
Friday, October 05, 2012
The payroll job growth was still weak, but there was some encouraging news in the employment report. This is just one report, but it was great to see the employment-population ratio increase for the key working age demographic of 25 to 54 years old (first graph below).
Also the unemployment rate is now at the lowest level since January 2009 (when the economy was collapsing), and it was encouraging to see the number of long term unemployed drop below 5 million for the first time since early 2009.
In a recent post, I highlighted Two Reasons to expect Economic Growth to Increase. The first reason was that we are nearing the end of the state and local government layoffs. This report suggests we may be near the bottom (last graph).
The second reason was a pickup in residential investment. This report showed an increase of just 5 thousand construction jobs, however I think the BLS is under counting construction jobs at the turn. The preliminary benchmark revision showed an upward revision of 386,000 payroll jobs as of March (this is an annual revision bench marked to state tax records). A fairly large portion of the upward revision was for construction workers (85,000 more jobs added), and I suspect that the BLS statistical model that estimates new company formation (the Birth/Death model) is currently underestimating the formation of small construction companies.
All that said, the economy has only added 1.3 million payroll jobs over the first nine months of the year. At this pace, the economy would only add around 1.8 million private sector jobs in 2012; less than the 2.1 million added in 2011.
Also U-6, an alternate measure of labor underutilization that includes part time workers and marginally attached workers, was unchanged at 14.7%. A key reason this didn't decline in September was because of an increase in part time workers (see 3rd graph below).
More positive news: The change in payroll employment for July was revised up from +141,000 to +181,000, and the August was revised up from +96,000 to +142,000.
The average workweek and average hourly earnings both increased. "The average workweek for all employees on private nonfarm payrolls edged up by 0.1 hour to 34.5 hours in September. ... In September, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $23.58. Over the past 12 months, average hourly earnings have risen by 1.8 percent." This is sluggish earnings growth, but it appears to be picking up.
Even though payroll growth was sluggish, this employment report was an improvement over recent reports, especially with the upward revisions, the increase in hourly earnings, and the increase in the 25 to 54 employment-population ratio. Here are a few more graphs...
Employment-Population Ratio, 25 to 54 years old
Click on graph for larger image.
Since the participation rate has declined recently due to cyclical (recession) and demographic (aging population) reasons, an important graph is the employment-population ratio for the key working age group: 25 to 54 years old.
In the earlier period the employment-population ratio for this group was trending up as women joined the labor force. The ratio has been mostly moving sideways since the early '90s, with ups and downs related to the business cycle.
This ratio should probably move back to or above 80% as the economy recovers. The ratio increased in September to 76.0%, the highest level since early 2009 - but there is still a long ways to go.
Percent Job Losses During Recessions
This graph shows the job losses from the start of the employment recession, in percentage terms - this time aligned at maximum job losses.
In the earlier post, the graph showed the job losses aligned at the start of the employment recession.
Part Time for Economic Reasons
From the BLS report:
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) rose from 8.0 million in August to 8.6 million in September. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.The number of part time workers increased in September to 8.6 millon from 8.03 million in August.
These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged in September at 14.7%.
Unemployed over 26 Weeks
This graph shows the number of workers unemployed for 27 weeks or more.
According to the BLS, there are 4.84 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 5.03 million in August. This is generally trending down and is at the lowest level since early 2009. Long term unemployment remains one of the key labor problems in the US.
State and Local Government
This graph shows total state and government payroll employment since January 2007. State and local governments lost 129,000 jobs in 2009, 262,000 in 2010, and 230,000 in 2011.
Note: The dashed line shows an estimate including the benchmark revision.
It appears most of the state and local government layoffs are over.
Overall this was a somewhat more encouraging report.