Tuesday, October 22, 2013

Employment Report Comments

by Bill McBride on 10/22/2013 02:07:00 PM

Overall this was a weak employment report.

The decline in the unemployment rate to 7.2% in September, from 7.3% in August, was a little bit of good news, but the recent decline has been mostly due to declining participation.

If we look at the year-over-year change in employment - to minimize the monthly volatility - total nonfarm employment is up 2.225 million from September 2012, and private employment is up 2.290 million. That is essentially the same year-over-year gain as in August (2.215 million total, 2.282 million private year-over-year in August).

So the story mostly remains the same: slow and steady job growth.

Unfortunately the next employment report will be impacted by the government shutdown (both impacting employment and data gathering).

A few more graphs ...

Employment-Population Ratio, 25 to 54 years old

Employment Population Ratio, 25 to 54Click on graph for larger image.

Since the participation rate 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.

The ratio was unchanged at 75.9% in September.  This ratio should probably move close to 80% as the economy recovers, but that also requires an increase in the 25 to 54 participation rate.

The participation rate for this group declined to 80.9% in September.  The decline in the participation rate for this age group is probably mostly due to economic weakness (as opposed to demographics) and this suggests the labor market is still very weak.

Percent Job Losses During Recessions

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.  At the recent pace of improvement, it appears employment will be back to pre-recession levels next year (Of course this doesn't include population growth).

In the earlier post, the graph showed the job losses aligned at the start of the employment recession.

This financial crisis recession was much deeper than other post WWII recessions, and the recovery has been slower (the recovery from the 2001 recession was slow too). However, if we compare to other financial crisis recoveries, this recovery has actually been better than most.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was unchanged at 7.9 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 slightly in September to 7.926 million.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 13.6% in September from 13.7% in August. This is the lowest level for U-6 since December 2008.

Unemployed over 26 Weeks

Unemployed Over 26 Weeks This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 4.146 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 4.290 million in August. This is generally trending down, but is still very high.  Long term unemployment remains one of the key labor problems in the US.

State and Local Government

State and Local GovernmentThis graph shows total state and government payroll employment since January 2007. State and local governments lost jobs for four straight years. (Note: Scale doesn't start at zero to better show the change.)

In September 2013, state and local governments added 28,000 jobs, and state and local employment is up 82 thousand so far in 2013.

I think most of the state and local government layoffs are over, and state and local employment has probably bottomed.  Of course Federal government layoffs are ongoing - and with many more layoffs expected.

Overall the labor market is still weak and millions of people are unemployed or underemployed.