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Friday, May 02, 2014

Comments on Employment Report

by Calculated Risk on 5/02/2014 10:30:00 AM

First, as always, we shouldn't read too much into any one report. Also there was probably some weather related bounce back in this report (one of the reasons I took the "over" yesterday).

Through the first four months of 2014, the economy has added 857,000 payroll jobs - slightly better than during the same period in 2013 even with the severe weather early this year. (For comparison, there were 821,000 payroll jobs added during the first four months of 2013).   My expectation at the beginning of the year was the economy would add between 2.4 and 2.7 million payroll jobs this year, and that still looks about right.

Here is a table of the annual change in total nonfarm and private sector payrolls jobs since 1999.  The last three years have been near the best since 1999 (2005 was the best year for total nonfarm, and 2011 the best for private jobs).

It is possible that 2014 will be the best year since 1999 for both total nonfarm and private sector employment.

Change in Payroll Jobs per Year (000s)
 Total, NonfarmPrivate
1 2014 is current pace annualized (through April).

And we are almost to another milestone: total employment is now only 113,000 below the previous peak, and I expect total employment will be at a new high in May.   Of course the labor force has continued to increase over the last 6+ years, and there are still millions of workers unemployed - so the economy still has a long way to go.

Note:  Private payroll employment increased 273 thousand in April and private employment is now 406,000 above the previous peak (the unprecedented large number of government layoffs has held back total employment).

Overall this was a solid employment report.

Earlier: April Employment Report: 288,000 Jobs, 6.3% Unemployment Rate

Employment-Population Ratio, 25 to 54 years old

Employment Population Ratio, 25 to 54Since the overall participation rate declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) 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 25 to 54 participation rate declined in April to 80.8% from 81.2% in March, and the 25 to 54 employment population ratio decreased to 76.5% from 76.7%.  As the recovery continues, I expect the participation rate for this group to increase. 

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 month (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.

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 little changed at 7.5 million in April. These individuals were working part time because their hours had been cut back or because they were unable to find full-time work.
This suggests significantly slack in the labor market.  These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 12.3% in April from 12.7% in March.

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 3.452 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 3.739 in March. This is 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 April 2014, state and local governments added 18,000 jobs.  State and local government employment is now up 104,000 from the bottom, but still 640,000 below the peak.

It appears state and local employment employment has bottomed.  Of course Federal government layoffs are ongoing.