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Friday, August 01, 2014

Comments on Employment Report

by Calculated Risk on 8/01/2014 11:04:00 AM

Earlier: July Employment Report: 209,000 Jobs, 6.2% Unemployment Rate

A few key points:
• At the current pace (through July), the economy will add 2.75 million jobs this year (2.64 million private sector jobs). Right now 2014 is on pace to be the best year for both total and private job growth since 1999.

• Wage growth is still subdued, from the BLS: "In July, average hourly earnings for all employees on private nonfarm payrolls edged up by 1 cent to $24.45. Over the past 12 months, average hourly earnings have risen by 2.0 percent."

• Inflation is not a concern this year. The BEA reported this morning that the PCE price index is up 1.6% year-over-year, and core PCE prices are up 1.5%.

• With the unemployment rate at 6.2%, there is still little upward pressure on wages. Wages should pick up as the unemployment rate falls over the next couple of years, but currently with low inflation and little wage pressure, the Fed can and will be patient.

A few numbers:

Total employment increased 209,000 from June to July, and is now 639,000 above the previous peak.  Total employment is up 9.349 million from the employment recession low.

Private payroll employment increased 198,000 from June to July, and private employment is now 1,105,000 above the previous peak (the unprecedented large number of government layoffs has held back total employment). Private employment is up 9.895 million from the low.

Through the first seven months of 2014, the economy has added 1,609,000 payroll jobs - up from 1,370,000 added during the same period in 2013 - even with the severe weather early this year.   My expectation at the beginning of the year was the economy would add between 2.4 and 2.7 million payroll jobs this year.  I might have been too low!

Overall this was another solid employment report.

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 participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate has mostly moved sideways (with a downward drift started around '00) - and with ups and downs related to the business cycle.

The 25 to 54 participation rate decreased in July to 80.8%, and the 25 to 54 employment population ratio decreased to 76.6% from 76.7%.  As the recovery continues, I expect the participation rate for this group to increase - although the participation rate has been trending down for this group since the '90s.

Year-over-year Change in Employment

Year-over-year change employmentThis graph shows the year-over-year change in total non-farm employment since 1968.

In July, the year-over-year change was 2.570 million jobs, and it generally appears the pace of hiring is increasing.

Right now it looks possible that 2014 will be the best year since 1999 for both total nonfarm and private sector employment growth.

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), at 7.5 million, was unchanged in July. 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 persons working part time for economic reasons decreased slightly in July to 7.511 million from 7.544 million in June.  This suggests significantly slack still in the labor market.  These workers are included in the alternate measure of labor underutilization (U-6) that increased to 12.2% in July from 12.1% in June.

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 3.155 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 3.081 in June. 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 July 2014, state and local governments added 11,000 jobs.  State and local government employment is now up 151,000 from the bottom, but still 593,000 below the peak.

It is pretty clear that state and local employment is now increasing.  Federal government layoffs have slowed (unchanged in July), but Federal employment is still down 22,000 for the year.