Friday, December 06, 2013

Employment Report: Decent Report, Solid Seasonal Retail Hiring

by Bill McBride on 12/06/2013 10:13:00 AM

A few key points:

• Most of the employment impact from the government shutdown was reversed in the November report.

• Earlier I noted four items that the Fed would probably be looking at to taper in December. Here were the two related to employment:

1) "If the unemployment rate declines back to 7.2% or so in November (the September rate), then the FOMC might taper." Since the unemployment rate declined to 7.0%, this was met.

2) "If the year-over-year change in employment is still around 2.2 million for November, the FOMC might taper." Employment was up 2.293 million year-over-year in November.

The other two items for the Fed are inflation (core PCE is only up 1.1% year-over-year), and a budget agreement by next week (seems likely).   At this point, inflation is the question mark for the Fed.

• Seasonal retail hiring remained solid. See the first graph below - this is a good sign for the holiday season ("Watch what they do, not what they say")

Seasonal Retail Hiring

Seasonal Retail HiringClick on graph for larger image.

Typically retail companies start hiring for the holiday season in October, and really increase hiring in November. Here is a graph that shows the historical net retail jobs added for October, November and December by year.

This graph really shows the collapse in retail hiring in 2008. Since then seasonal hiring has increased back close to more normal levels. Note: I expect the long term trend will be down with more and more internet holiday shopping.

Retailers hired 471 thousand workers (NSA) net in November.  This was just below the level in 2012, and suggests that retailers expect decent holiday sales. Note: this is NSA (Not Seasonally Adjusted).

Note: There is a decent correlation between seasonal retail hiring and holiday retail sales.

Employment-Population Ratio, 25 to 54 years old

Employment Population Ratio, 25 to 54Since 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.

These numbers declined sharply in October due to the government shutdown, and bounced back in the November report. 

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) fell by 331,000 to 7.7 million in November. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
This more than reversed the increase in part time workers that happened in October due to the government shutdown.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 13.2% in November from 13.8% in October.

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 4.066 million workers who have been unemployed for more than 26 weeks and still want a job. This was up slightly from 4.063 million in October. 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 November 2013, state and local governments added 14,000 jobs, and state and local employment is up 76 thousand so far in 2013.

I think state and local employment has bottomed.  Of course Federal government layoffs are ongoing.

Overall this was a decent employment report.