Category: U.S. Economy

2014 U.S. Employment Situation Remains Solid

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The BLS presented the country with a lackluster Labor Day gift with their employment situation announcemnt that total nonfarm payroll employment increased by only 142,000 workers in August. This was the first time since January that the month-over-the-prior-month change was below 200,000.

The sectors adding the greatest number of jobs were:

  • Professional and business services.
  • Health care.
  • Construction
  • Leisure and Hospitality (tourism).

Through eight months, average monthly job growth is 215,400 workers. If this trend continues, the economy is on tap to add more than 2.5 million jobs in 2014.

The August unemployment rate fell to 6.1%, down from 7.2% a year ago. Sadly, the number of unemployed has only declined to about 9.6 million.

Most economists believe the economy remains solid and that there will be positive job growth for the remainder of the year.

Employment situation

Long Term Unemployment Remains Uncomfortably High

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Since the end of the Great Recession in July 2009, the unemployment rate has fallen from 9.5% to 6.2%. In addition, the country has added 8.8 million jobs.

There are two ugly truths about the workforce that are seldom discussed in connection with this good news.

  • The first ugly truth  is that there are about 9.5 million unemployed in the U.S, a decline of about 5.3 million from the end of the recession. That is the good news. The bad news is that there were only about 6.7 million unemployed prior to the Great Recession.
  • The second ugly truth is that almost one-third of the total unemployed have been out of work for 27 weeks or more, a decrease from 45%. By comparison, between 15% and 20% of the total unemployed were out of work between June 2005 and August 2008.

On paper the Great Recession ended five years ago. In reality the number of unemployment and the percentage of long term unemployment are inconvenient truths five years later.

long term unemployme

 

Lackluster Wage Growth Continues

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A lot has been written about the lack of significant U.S. wage growth since the end of the Great Recession. Quite frankly, the abundance of qualified workers looking for jobs has not incented companies to raise wages.

Since the end of the Great Recession in July 2009, the unemployment rate has fallen from 9.5% to 6.3%. In addition, the country has added 8.8 million jobs. This decline in the unemployment rate and the increase in the number of jobs has occurred at a painfully slow rate. As a result there has been minimal pressure to increase wages in many sectors.

Median usual weekly earnings of the nation’s 106.6 million full-time wage and salary workers were $782 in Q2 2014 compared to $776 in Q2 2013. When inflation is accounted for (2.1% CPI), this wage rate represents a slight decline in wages.

Ten of the 22 two-digit occupation codes have unemployment rates below 5.0%, including computer and math (15), architecture and engineering (17), management (11), business and finance (13) and healthcare practitioners (29). Eventually demand for workers in these occupations will drive increases in wages. As well, rapid growth in sectors such as the extractive industries will drive direct and indirect industry wage growth.

This is just another sign of how painful the recovery from the Great Recession has been for some Americans.

There has been a lack of significant wage growth

 

 

 

 

Occupations with High Unemployment Rates

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It is a good sign the overall unemployment rate is trending downward, especially for occupations that have had an unemployment rate above the national average.

There are 22 SOC (Standard Occupational Classification System) codes. Seven of these occupations have had unemployment rates greater than the national rate, 6.3%. The unemployment rate has declined in 6 of the 7 categories.

There are about 3.5 million unemployed workers in occupations with unemployment rates above 6.3%, compared to 4.4 million a year ago. Many of these positions are easier to fill than those with lower unemployment rates because they do not require a college degree. On the job training or certifications are often required for some of these positions.

Having said that, it should be noted the construction industry is facing shortages in specialized areas in certain parts of the country. This is particularly true in Northern Colorado with the rapid growth of the extractive industries.

The overall downward trend in the unemployment rates is expected to continue. As a result the occupations with higher rates are expected to see lower unemployment rates in the months ahead.

unemployment rate

U.S. Occupations with Moderate Unemployment Rates

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There are 3.2 million unemployed workers in occupations with unemployment rates between 5.0% and 6.3% (the U.S. NSA rate for June). A year ago, there were 3.9 million unemployed workers in these occupation categories.

Overall there are 22 two-digit SOC (Standard Occupational Classification System) codes for occupations. The above-mentioned occupations are in 5 categories. Over the past year the number of unemployed workers dropped in 4 of the 5 occupations. At the moment labor shortages are less prevalent in these occupation categories than the SOC codes where the unemployment rate is less than the natural rate of unemployment.

Some of the jobs in these segments (SOC 19 Life Sciences and SOC 25 Education) require higher education degrees. A portion of the Life Sciences and Production occupations are found at primary employers. The Office Support and Sales occupations are common to all industries and typically require on the job training.

The continued decline in the unemployment rate for these occupations is a sign that the economy is faring well.

unemployment rate

Declining Unemployment Rate Not Always a Good Sign

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Generally, it is good news that the unemployment rate is trending downward, however, in some instances labor shortages are on the rise in some occupations.

There are 22 SOC (Standard Occupational Classification System) codes. Ten of these occupations have unemployment rates less than the natural rate of unemployment, which is assumed to be 5.0%. In addition, the unemployment rate has declined in 8 of the 10 categories.

There are about 1.7 million unemployed workers in occupations with unemployment rates below 5.0%, compared to 2.2 million a year ago. It is not possible to fill many of these occupations in a short period of time because they require a college degree.

The escalating labor shortages are often occurring in primary employers and advanced technology companies. At some point, companies will either lose business or be forced to offshore it if there isn’t a sufficient number of trained workers to meet their needs.

occupational unemployment rate less than 5%

 

 

 

Strong U.S. Economy Bodes Well for Colorado

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The U.S. economy got off to a horrendous start with weak employment in January and -2.6% real GDP growth in Q1. There has since been enough improvement in Q2 for the Federal Reserve to announce it will end QE3 in October. As well, interest rate hikes are likely to occur in 2015, which is good news for some and bad news for others.

It appears the Fed has satisfactorily unwound the quantitative easing program, something many economists feared might not happen at the time it was put in place. Today, most members of the Fed are bullish on the economy, at least for the remainder of 2014. Several members have expressed short-term concerns because retail sales, healthcare spending, and residential construction are underperforming.

A strong U.S. economy bodes well for Colorado.

The equity markets have been volatile in 2014, but the Dow has passed 17,000 and continues to establish new record – highs. Improved equity markets have increased the personal wealth of Coloradans and given them reason to remain optimistic about the growth of the economy.

Through the first half of 2014, U.S. wage and salary jobs have been added at a slightly faster pace than 2013. On average 188,000 jobs were added each month during 2013. By comparison, an average of 194,000 jobs have been added for the first six months of 2014 compared to the first half of 2013. (Source: non-seasonally adjusted data).

Nationally, the unemployment rate continues to drop. It has declined from 6.7% at the end of 2013 to 6.1% at the end of June. A year ago it was 7.5%.

In addition, the number of unemployed continues to decline, dropping to 9,474,000 in June. This is down significantly from 11,747,000 a year ago. By comparison, there were 15,333,000 unemployed in April 2010 at the height of the Great Recession. On the other hand there were 6,731,000 in March 2007 just prior to the Great Recession. Despite the improvement, there are still a number of people struggling to find work.

A similar situation exists in Colorado. Unemployment continues to trend downward, but the number of unemployed remains higher than desired. It has decreased from 6.2% at the end of 2013 to 5.5% in June. Unfortunately, about 150,000 workers remain unemployed. While this number is decreasing at a painfully slow rate, it is about 60,000 greater than the low point in April 2007, the low point prior to the recession.

While the decrease in unemployment is a positive sign, some industries such as construction, manufacturing, and segments of high-tech are struggling to find trained workers. In smaller metro areas such as Weld County there will be a domino effect as higher paying jobs in the oil and gas industry may pull workers from local manufacturers, hotels and restaurants, and construction companies.

The situation is slightly different for some rapidly expanding high-tech industries that require specialized talent (software, technicians, machinists, etc.). Talent attraction is a necessary option for supplying trained workers for these rapidly growing companies. This can be a challenge because there are national shortages in key occupations for the high-tech industry. It is important for Colorado to “train their own” but at the same time Colorado must continue to attract workers from other states.

Through the first six months of 2014 Colorado has added 67,000 jobs compared to the same period last year. Looking ahead, Colorado will continue to see strong growth through the remainder of the year. In certain parts of the state, that growth will occur as an indirect result of the extractive industries and agriculture. In the metro areas, it will be driven by broad-based growth across many industries. The leading areas of growth will continue to be tourism, construction, health care and sectors that are related to advanced technology.

 

Strong U.S. Job Growth in First Half of 2014

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After an inauspicious start to the year, there has been strong U.S. job growth for the subsequent five months. The BLS presented the country with the ideal Fourth of July gift by announcing that total nonfarm payroll employment increased by 288,000 workers in June.

The sectors adding the greatest number of jobs were:

  • Professional and business services
  • Retail trade,
  • Food services and drinking places
  • Health care.

More importantly, July represents the fifth consecutive month that the month-over-the-prior-month change was above 200,000. This is the first time that has happened since the end of the Great Recession.

The June unemployment rate fell to 6.1%, down from 7.5% a year ago. Sadly, the number of unemployed has only declined to about 9.5 million.

Many economists believe strong U.S. job growth is on tap for the remainder of the year.

Strong U.S. Job Growth

 

 

U.S. Employment Posts Strong Growth Through Five Months

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On June 6th the Bureau of Labor Statistics reported that U.S. employment increased by 217,000 in May. The sectors adding the highest number of jobs were:
• Professional and business services.
• Health care and social assistance.
• Food services and drinking places.
• Transportation and warehousing.

For the past 12 months, U.S. employment has averaged 197,000 jobs per month. After a weak January, an average of 213,600 jobs has been added in the first five months of 2014. This is well above the average of 194,600 for 2013.

The May unemployment rate was 6.3%, down from 7.5% a year ago. The number of unemployed was 9.8 million. This is 1.9 million lower than a year ago.

After a weak second half in 2013, there is strong growth in U.S. employment through the first five months of 2014.

 

U.S. employment shows strong growth in 2014
U.S. employment shows strong growth in 2014.

JOLTS Data Points to Solid Job Growth in the U.S.

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The most recent JOLTS data points to solid job growth in the U.S. economy.

For those unfamiliarwith JOLTS… The Bureau of Labor Statistics produces the Job Openings and Labor Turnover Survey (JOLTS) that reports the fluctuations of hires and separations during the business cycle of the U.S. economy. The difference is the change in U.S. employment.

The net change between hires (green) and separations (red) turned negative in January 2008 and remained that way for 28 of the next 33 months. Since October 2010, the difference between hires and separations has been positive every month.

The net change has fluctuated between 162,000 and 210,000 for the past two years.

Beginning in December 2007 the number of hires began a freefall that continued for 18 months (June 2009). Ironically, the number of separations began declining at the same time. They declined until May 2010. The reason there was such a severe downturn was that hiring decreased at a faster rate than separations.

The number of hires began increasing in June 2009 and has continued since then.

The number of separations was relatively flat from mid-2010 through April 2012 (almost two years). Separations have since increased along with the number of decreases. This “churn” is normal as workers transition between companies for better jobs.

The current hire and separation patterns are consistent with solid job growth, although the levels of hiring are well below the hiring associated with the recovery from the 2001 recession.

JOLTS data points to solid job growth in U.S.
JOLTS data points to solid job growth in U.S.