Category: U.S. Economy

U.S. Job Recovery Slower than Colorado

horvath

Coloradans breathed a sigh of relief when the BLS released June data showing the state’s wage and salary employment finally returned to the 2008 peak. (For more information about the Colorado situation, click here.)

Nationally, it is a much different story. The U.S. is still about a year away from returning to the 2008 job peak.

U.S. employment topped out at 138.1 million in January 2008. By February 2010, the number of wage and salary jobs had plunged to 129.3 million, a decrease of 8.8 million workers.

At the end of July 2013, 6.7 million jobs had been added since the trough and employment had reached 136.0 million. Slightly more than 2.0 million jobs are needed to reach the pre-recession peak, or about 77% of the jobs have been recovered.

Over the past year, jobs have been added at a rate of about 190,000 per month. If they continue to be added at that rate, it will take another 10 months (May 2014) before the pre-recession peak is reached.

As a result of the Great Recession, the number of unemployed workers jumped from 7.7 million in January 2008 to 15.4 million in October 2010, i.e. the number of unemployed workers doubled. Since October 2010, the number of unemployed has declined to 11.5 million, a decrease of only 3.9 million.

For many Americans, the recovery from the Great Recession has been painful. For another group, the recovery will never happen.

©Copyright 2011 by CBER.

Policy and Prices Impact Output for Extractive Industries – Is Colorado Closed for Business?

horvath

The extractive industries are an important and visible part of Colorado’s economy. In 2012, Colorado’s GDP was 1.76% of the U.S. GDP and Colorado’s Mining sector output was 3.58% of the U.S. Mining sector output.  In other words, Colorado’s extractive industries critical components of both the state and the national economy.

Between 1997 and 2012, there were stark differences in the state and national output for the extractive industries and the private sector.

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.3% and the extractive industries were -0.6%.
  • The compound growth rate for Colorado Private Sector Real GDP was 3.1% and the extractive industries grew at a rate of 3.6%.

Nationally sector output trended downward from 1997 to 2005 and trended upward from 2005 to 2009. Between 2009 and 2012, sector output trended downward again.

In Colorado sector output  trended upward from 1997 to 2009; however, it has trended downward since 2009.

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.5% and extractive industry output was -2.0%.
  • The compound growth rate for Colorado Private Sector Real GDP was 2.2% and extractive industry output was -4.0%.

The variance in output has been caused by changes in prices, supply and demand, and policy. Recently, the latter has had the most detrimental impact on the industry in Colorado.  Policy and anti-fracking efforts are likely to further suppress output in the months ahead. In addition to reducing output, this will create the perception that Colorado is not a business-friendly state.


©Copyright 2011 by CBER.

Will Colorado Output Continue to Expand as Slower Rate than U.S.?

horvath

Between 1997 and 2012, the Private Sector Real GDP and job growth for Colorado outpaced the nation.  For this period, data released by the Bureau of Economic Analysis and the Bureau of Labor Statistics shows:

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.3% and private sector wage and salary employment expanded at a rate of 0.5%.
  • The compound growth rate for Colorado Private Sector Real GDP was 3.1% and private sector nonfarm jobs grew at a rate of 0.9%.

More recently, the data tells a different story.  Colorado did not fare as well as the nation between 2009 and 2012.  While the rate of job growth was similar, U.S. output expanded at a faster rate.

  • The annualized rate of growth for U.S. Private Sector Real GDP (sum of all states) was 2.5% and private sector wage and salary employment expanded at a rate of 1.1%.
  • The compound growth rate for Colorado Private Sector Real GDP was 2.2% and private sector nonfarm jobs grew at a rate of 1.1%.

Time will tell whether the Colorado output will continue to grow at a slower rate than the U.S. or if this is a short-term variance that will reverse itself in 2013 or 2014.

Private Sector Real GDP
©Copyright 2011 by CBER.

State Per Capita Real GDP Increased by 1.1% Since 1997

horvath

There are many data sets that can be used to evaluate the performance of the state and national economy. One of those metrics is Per Capita Real GDP. This measure is derived by dividing real output by the population.

For the period 1997 to 2012, Per Capita Real GDP for Colorado and the U.S. grew at essentially the same rate, 1.11% and 1.13% respectively.

Within that period there were some differences:

  •  Between 1997 and 2001 the Per Capita Real GDP for Colorado increased at an annualized rate of  3.88% compared to 2.49% for the U.S.
  •  Between 2001 and 2012 the Per Capita Real GDP for Colorado increased at an annualized rate of  0.13% compared to 0.64% for the U.S.
  • Between 2009 and 2012 the Per Capita Real GDP for Colorado grew at an annualized rate of 0.58% compared to 1.39% for the U.S.

During the final years of the go-go 90s, Per Capita Real GDP for the state increased at a faster rate than the nation.  Since the 2001 recession, the nation has outpaced the state.

©Copyright 2011 by CBER.

Tepid Job Growth Continues

horvath

When the Bureau of Labor Statistics announced (June 7th) that 175,000 jobs were added in May the stock market rose by 200+ points.  While the number of jobs added in May exceeded expectations, a significant downward revision in April offset those gains.

Said differently, the number of jobs added in May was comparable to the monthly average for 2011.  It is difficult to explain how that level of job growth could drive the market up.

The good news is that jobs are being added at a steady, albeit tepid pace.

On average, the U.S. has added 189,200 jobs per month in 2013. This compares to +185,000 workers in 2012 and +175,000 workers in 2011.  In other words, job growth continues to be lackluster, but well above the average for 2010 (+85,000) and 2009 (-421,000).

At this rate, U.S. employment will return to the 2008 peak some time in 2014.

©Copyright 2011 by CBER.

Recovery from Recession Led by Large Companies

horvath

Large and small companies have had different employment patterns over the past 7-8 years.

According to employment data produced by ADP, about 17.6% of total private sector workers were employed at small companies, those with 1 to 19 workers, in January 2005. Companies with 500+ workers accounted for 17.1% of private sector employment.

Between 2005 and April 2013 the small companies expanded at a faster rate. The most recent ADP data shows the smaller companies currently account for 18.3% of private sector workers and the larger companies account for 15.9%.

The small companies had the least number of workers in January 2005. Jobs were added until July 2008, when they peaked. Employment tapered off slowly until December 2010. The number of jobs has been on the rise since.

Employment at larger companies increased slowly from January 2005 until March 2006. At that time employment began to taper off and declined for six years. Steady increases have occurred since March 2010.

The Great Recession officially ended in June 2009. Since then the small companies have added about 1.03 million workers and the large companies have added about 1.58 million.  In other words, large companies have played a greater role in the recovery than the small companies.

©Copyright 2011 by CBER.

U.S. Unemployment is on the Decline, but not for all Occupations

horvath

There is good news on the unemployment front – the rate and number of unemployed workers continues to decline.

There are 2.0 million unemployed workers in occupations with unemployment rates below the natural rate (4.5% to 5.0%). Many of these occupations require a college degree.  The two-digit Standard Occupational Code (SOC) precedes each category
33 Protective service                       4.1%
19 Life sciences                               4.0%
11 Management                               4.0%
25 Education                                     3.8%
17 Architecture & engineering       3.8%
13 Business & finance                   3.7%
15 Computer & math                       3.5%
21 Community & social services  3.5%
23 Legal                                             3.1%
29 Healthcare practitioners            2.5%

There are 2.4 million unemployed workers in occupations with unemployment rates between the natural rate and the U.S. average (7.8%).  Some of these occupations require some form of higher education.
27 Arts & design                                7.8%
43 Office support                               7.6%
31 Healthcare support                      7.3%
49 Installation & maintenance        6.0%

There are 6.9 million unemployed workers in occupations with unemployment rates above the U.S. average.  Most of these occupations don’t require higher education.
45 Farming, fishing, & forestry       16.1%
47 Construction & extraction          15.8%
37 Building maintenance                13.3%
35 Food preparation                         11.0%
53 Transportation                             10.9%
39 Personal care & service               9.2%
51 Production                                       9.1%
41 Sales & related                              8.2%

In many cases, there is a clear mismatch of worker skills and company needs. In part, this has exacerbated the length of the recovery.

©Copyright 2011 by CBER.

Where is the Automobile Industry Really Headed?

horvath

American voters should be required to read the 1954 best seller by Darrell Huff, How to Lie with Statistics. The book illustrates how data used by political leaders, economists, and business leaders represent their viewpoints. At times, a single set of data may tell different, but accurate stories about the subject matter.

This was the case in President Obama’s State of the Union speech on February 12 when he stated “We buy more American cars than we have in five years”.  A review of the data tells at least three different  stories (you may find additional interpretations of the data).

1. In February 2008, light truck and auto sales were 15,459,000 and interest rates were 7.27%. Total sales for December 2012 were 15,325,000 and January was slightly lower 15,200,000.  After plummeting, light truck and auto sales have returned to levels of five years ago.

2. In February 2009, sales had plummeted to 9,021,000 with interest rates of 6.92%.  For the period 1980 to 2012, this is the lowest level of sales since December 1981. That month sales were 8,849,000 and interest rates were 17.36%. Since late 2001, there has been heavy stimulation in the market causing sales to be “stolen from the future.” This includes zero percent and other creative financing programs as well as Cash for Clunkers. Given the level of past stimulation, a case can be made that the recent increased growth in auto sales is partly a function of altered consumption patterns and may not be sustainable.

3. Current light truck and auto sales are comparable to December of 1985, when 15,387,000 vehicles were sold and interest rates were 12.39%. Interest rates have dropped steadily since the high in December 1981 to 4.82% at the end of 2012. Given the current level of interest rates and the likelihood  they will increase, a case can be made that additional stimulation is unlikely to occur from low interest rates.

The President was correct in his statement (#1 above). While his positive interpretation of the data was appropriate for the occasion, it is possible that the growth of the auto industry will not be the topic of future State of the Union speeches.

Note: monthly light truck and auto sales are seasonally adjusted and annualized.


Copyright 2011 by CBER.

“Our Businesses Have Created Over Six Million Jobs” – True, But…

horvath

In his State of the Union speech, President Obama stated, “After years of grueling recession, our businesses have created over six million new jobs.”

The jobs data produced by BLS tells at least four accurate, but different stories about the state of U.S. private sector employment.

1. The trough of the recession occurred in February 2010. About 6,111,000 private sector jobs were added between February 2010 and January 2013.

2. When President Obama took office in January 2009, private sector employment was 111,048,000. In January 2013, it was only 113,111,000. During the first four years of President Obama’s presidency, private sector employment increased by about 2 million workers.

3.  In December of 2000 private sector employment peaked at 111,776,000. The recovery from the 2001 recession took 54 months, or until June 2005, to return to its 2000 peak. The rebound continued until January 2008 when private sector employment peaked at 115,668,000. Just over 8.8 million jobs were lost between then and February 2010 when private sector employment bottomed out at 106,850,000, well below the peak in 2000. Specifically, in January 2009, employment dropped below the 2000 peak. Forty three months later, mid-2012, the number of jobs again exceeded the 2000 peak. At the time President Obama gave his 2013 State of the Union speech private sector employment was only about 1.2 million jobs greater than the peak in 2000.

4.  Private sector employment will not reach 2008 peak employment until mid-2014. In other words it will take about 72 months, or 6 six years for full recovery of the private sector from the 2008 recession.

The wisdom of Darrell Huff, author of How to Lie with Statistics, should be heeded when reviewing data produced by political leaders, economists, and business leaders.  Statistics can tell many stories.

©Copyright 2011 by CBER.

Dow Jones Posts Solid Gains in 2012

horvath

During recessions many investors wonder whether or not investing in the stock market is a solid investment. They have reason to feel this way. The market peaked on October 9, 2007 at 14,164 and bottomed out at 6,547 on March 9, 2009.

Some investors haven’t forgotten. When polled they believe the market has continued to perform poorly. Actually, the market has come back nicely.

At the end of 2012 it had returned to 12,938 – about 19% of its 2007 peak value. A look at the annual performance of the Dow Jones Industrial Average follows:

• 2007 6.4%
• 2008 -33.8%
• 2009 18.8%
• 2010 11.0%
• 2011 5.5%
• 2012 5.8%.

Improvement in the equity markets is an important part of the recovery. With four years of gains, consumers more confident about their perceived wealth and are more likely to purchase goods and services. As long as consumers are staying within their means, the spending spurs growth in the economy.

©Copyright 2011 by CBER.