Tag: Employment

Employment Numbers Drive DJIA up by 217 Points

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On August 3rd the Bureau of Labor Statistics reported that the U.S. added 163,000 jobs for the month of July. Employment for May was revised upwards for the second consecutive month to 87,000; however, June was lowered from 80,000 to 64,000. The news drove the Dow Jones Industrial Average up by 217 points.

Through the first seven months of this year, the nation added about 151,000 jobs a month. This compares to a monthly average of 153,000 jobs for the first seven months of 2011. Since the end of the recession the U.S. has added net jobs in 25 months and lost net jobs in 12 months. Employment growth is consistently weak, but since October 2010 it has been consistently positive. About 3.1 million jobs have been added since the end of the recession.

About one-third of the monthly sector employment gains were in the Professional and Business Services, lead by the Temporary Help Services and Computer Systems Design sectors. Jobs were also added in health care, leisure and hospitality, manufacturing, and wholesale trade. Other major sectors were relatively flat.

On an upbeat note, the Conference Board is projecting stronger growth in the second half of 2012. Annual real output growth for the year will be about 1.9%.

Likewise, the USA TODAY/IHS Global Insight Economic Outlook Index calls for Real GDP growth to reach 2% in the latter part of the second half of the year. This index tracks 11 leading and financial indicators. The following four indicators increased – hours worked, real capital goods orders, the real money supply and light-vehicle sales.

On average, Colorado nonfarm employment is about 1.72% of the U.S. total. If Colorado grows at the same pace as the U.S. the upcoming August press release will reflect a gain of about 2,900 jobs.

©Copyright 2011 by CBER.

Goods Producing Sectors Poised to Add Jobs this Year

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Companies are divided into two categories: Goods Producing sectors and Service Producing sectors. In simplistic terms: you make stuff or you do stuff.

One of the reasons the Goods Producing category is important is that many primary jobs are in these sectors. The NAICS categories include the Extractive Industries, Construction, and Manufacturing.

Only twice (1997 and 1998) since 1990 have all three sectors added jobs in the same year. At the midpoint of 2012, the trio are in a position to show gains for this year also. Previously the gains were a result of an economy hitting on all cylinders. This time the gains will occur because of an economy that has misfired and the sectors have nowhere else to go but up. They are playing a small, but extremely important role in the recovery.

For additional details on the Colorado economy click here or go to https://cber.co/.

©Copyright 2011 by CBER.

Did the State Really Lose 6,900 Jobs in June?

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It has been a tough summer for Colorado. There have been budgetary problems, wildfires, and shootings. At a time when state leaders have been touting how the state is recovering from the recession at a faster rate than the nation, The Bureau of Labor Statistics has announced that the state has shed 6,900 jobs (Seasonally Adjusted – SA) in June.

The non-seasonally adjusted (NSA) data for June tells a story that more closely reflects business activity on the street. A review of the second quarter for the past four years is shown below:

• 2009 2,252,500 workers
• 2010 2,226,100 workers, a decrease of 26,400 workers over Q2 in the prior year.
• 2011 2,257,100 workers, an increase of 31,000 workers over Q2 in the prior year.
• 2012 2,289,400 workers, an increase of 32,300 workers over Q2 in the prior year.

Another way to look at the July Colorado data is to think about the national employment data published in early July. It showed the nation added 80,000 jobs in June. On average, Colorado employment is about 1.7% of the nation’s total.

That means that if Colorado was growing at a rate comparable to the U.S. then the state should have added about 1,400 jobs in June. If Colorado was expanding at a faster rate than the U.S. then 2,000 to 3,000 workers would have been added. Either Colorado is in a lot of trouble or the loss of 6,900 jobs doesn’t make sense.

There are several reasons for this apparent disparity. First, the BLS recently reduced their funding to state agencies, they centralized monthly state estimates, and they revised the monthly employment estimation process with the intent of providing a “better product”. While that process may result in cost savings and greater efficiency within BLS, it appears that some of the monthly data may be less reliable and useful.

As well, the seasonal adjustment factors used to take out the effect of seasonality appear to be unreliable. Over the past decade the performance of the economy has been atypical, thus making it virtually impossible for the seasonal adjustment factors to effectively measure seasonal patterns. In other words, the SA data for June most likely does not reflect what is happening in the economy.

So, what does this mean?

The June data is preliminary. Possible updates may be made in the July, March 2013, and March 2014 revisions. Watch for updates and either work with the NSA data or use the preliminary SA data with caution.

Meanwhile, a review of the NSA data for H1 2012, shows that job growth has tapered off, in line with a project drop-off in growth of U.S. output. With marginally stronger output growth on tap for the second half, it appears the state is in line to add 35,000 to 40,000 jobs this year.

For additional details about the Colorado economy go to https://cber.co/

©Copyright 2011 by CBER.

U.S. Employment – After Six Months, is the Glass Half Empty or Half Full?

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On July 6th the Bureau of Labor Statistics reported that the U.S. added 80,000 jobs for the month of June. Employment for May was revised upwards to 77,000.

For the third consecutive year employment started strong, but fizzled. Through the first six months of this year,the nation added about 150,300 jobs a month. This compares to a monthly average of 160,800 jobs in the first half of 2011 and 145,800 jobs during the second half.

Employment increased in manufacturing; professional and business services, health care, and wholesale trade. Other sectors were relatively flat.

If you compare the first half of 2012 to the first half of 2011 (150,300 vs. 160,800), the employment situation is clearly worse this year and fewer jobs will be added this year, i.e. the glass is half empty.

A comparison of the second half of 2012 to the first half of 2011 (145,800 vs. 150,300) shows improvement in 2012.

Given projections for weak, but slightly stronger output growth in the second half, that means the glass is half full.

Nationally, is the glass half-empty or half-full?

On average, Colorado nonfarm employment is about 1.72% of the U.S. total. If Colorado grows at the same pace as the U.S. the July 20th press release will reflect a gain of about 1,400 jobs. At the moment, Colorado is currently recovering from the recession at a slightly faster rate than the U.S. It would not be surprising if Colorado added 2,500 to 3,000 jobs for June.


©Copyright 2011 by CBER.

Gross Firm Openings Flat Since Late 2003

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The Business Employment Dynamics (BED) data set produced by the Bureau of Labor Statistics reports gross changes in employment and firms on a quarterly basis. Several weeks ago, this blog reviewed gross changes in employment and found that job creation declined during the Lost Decade. As a result, the net change in jobs was decided by the level job layoffs or closures rather than job creation at new or existing firms.

This post will provide insight into the recovery from the past two recessions from the perspective of firms. It will look at gross openings and closings, a subset of gross firm gains and losses. Gross openings include new firms, firms that have been inactive, and seasonal firms. As such they include entrepreneurs and others. Gross closings include firms that are ceasing operations permanently, temporarily, or on a seasonal basis.

The following analysis shows Colorado gross opening and closings with averages for the following periods.

• Q1 1993 to Q4 2000 (32 quarters or 96 months).
– In this period of expansion, gross firm openings exceeded gross firm closings in 31 of the 32 quarters.
The 1990s were a period of innovation and growth. There was significant job churn. Gross firm openings and closings increased at similar rates and were highly correlated.

• Q1 2001 to Q2 2003 (10 quarters or 30 months).
– In this period of decline, gross firm openings exceeded gross firm closings in 9 of the 10 quarters.

• Q3 2003 to Q1 2008 (19 quarters or 57 months).
– In this period of recovery, gross firm openings exceeded gross firm closings in 16 of 19 quarters.

• Q2 2008 to Q4 2009 (7 quarters or 21 months).
– In this period of decline, gross firm closings exceeded gross firm openings in 6 of the 7 quarters.

• Q1 2010 to present (7 quarters or 21 months).
– In this period of recovery, gross firm gains exceeded gross firm closings in 4 of the 7 quarters. The average of gross firm openings has been flat since Q3 2003. The deciding factor in net firm change was the decline in the number of gross firms closed.

Since 2003 the average number of gross firms opened has remained flat. The average number of gross firms closed determined whether the net change was positive or negative. This lack of firm openings explains why the job recovery from both recessions has been so weak.

©Copyright 2011 by CBER.

Are Construction Jobs being Added Too Quickly?

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The lack of growth in the Construction sector and problems in the housing market are reasons for the lackluster recovery of the economy. In April, 2012 there were 117,900 Colorado Construction workers, virtually the same as in March 1997.

Over 57,000 construction jobs were lost as a result of the Great Recession and an oversupply of construction workers. The recovery has begun; however, only 9.8% of the lost jobs have been recovered.

By comparison, Healthcare and Higher Education did not experience a downturn. Tourism jobs dropped off slightly but have returned to pre-recession levels. The Extractive Industries; and Professional, Scientific, and Technical Services will reach 2008 peak levels later this year.

When all sectors are considered, about 55% of all lost jobs have been recovered.

It is great news that workers are being added to the payrolls, but does the state still have a surplus of construction workers?. This question is asked because the Construction sector should have a location quotient near 1.0 (the location quotient is a ratio comparing the local concentration of workers to the national concentration).

In January, 2012 the location quotient jumped to 1.23 and has remained near that level since. This means the state’s concentration of construction workers was about 23% greater than the U.S. average.

To put this in a historical perspective, the construction location quotient was less than 1.0 in 1990. It had dropped to this level because the state residential and commercial markets were overbuilt during the 1980s. The state experienced a housing bust and negative net migration for five years.

The strong expansion during the 1990s was supported by the increase in the number of construction workers. By January, 2000 the location quotient reached its peak at 1.46. Over the next 12 years, the number of construction workers declined relative to other sectors and the location quotient gradually dropped to 1.17 in August 2011.

The comparative lack of construction activity will probably prevent an oversupply of construction workers. For example office vacancies remain high enough that there is not demand for significant new construction. There is one major speculative office site being built-in Colorado; it is located in Broomfield.

Current activity appears to be in reaction to demand:
• There has been a greater need for multi-family units than single family housing, resulting in new apartments, condos, and townhouses in certain areas.
• There is demand for infrastructure improvements. Construction continues on FasTracks and improvements to the 36 Corridor are on tap for this summer. (It should be noted that different skills are needed for building houses and infrastructure).
• Finally, the expansion of the extractive industries drives construction activity, in areas such as the Niobrara shale field.

The good news is that jobs are being added. Hopefully they will increase at a rate that doesn’t result in an oversupply.

For a more complete update on the recovery of the Colorado economy, go to https://cber.co/.

 

©Copyright 2011 by CBER.

May Employment Numbers Disappointing, but not Surprising

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Several months after the 2007 recession began, some economists projected the economy would not recover until 2014. Six years sounded like it was much too long, particularly since the country had just gotten back on its feet from the 4 1/2 years of the 2001 recession and recovery. The most recent announcement by the Bureau of Labor Statistics (BLS) illustrates how the ongoing lack of primary job creation has caused the recovery to be so long and painful.

On June 1, the monthly BLS press release stated, “Nonfarm payroll employment changed little in May (+69,000). Employment increased in health care, transportation and warehousing, and wholesale trade but declined in construction. Employment was little changed in most other major industries.”

If Colorado is growing at the same pace as the U.S., the BLS will announce, later in the month, that the state will post a gain of about 1,200 jobs in April. (Colorado nonfarm employment is about 1.72% of the U.S. total.)

When this release hit the newswires, the equity markets tanked. In addition to the weak job gains, investors were worried about Greece’s debt problems, U.S. debt, the recession in parts of Europe, the slowdown in the Chinese and Indian economies, and much more. While these are clearly legitimate concerns, the decline in employment should not have come as a surprise. Past economic forecasts prepared by The Conference Board foretold of the pending dip.

TCB has forecasted that 2012 output will be at its lowest level in Q2. It stands to reason that subpar output will be accompanied by weak employment growth for April, May, and June. On a positive note, output (consumption, housing starts, and capital spending) is projected to improve slightly in Q3 and Q4. The average rate of output growth for the year will be about 2.2%. This suggests that employment will improve along with the increased output. Next year, 2013, will only be slightly better. The good news is that the trends are in a positive direction.

The recovery will continue to be painfully slow for a number of reasons:
• According to the TCB, output in advanced economies is growing at a rate of 1.3% – worse than the U.S. The emerging economies have stronger growth, 5.6%. Colorado companies that export agricultural and manufactured goods may have greater opportunities in emerging countries.
• The number of federal workers continues to decline.
• The intent of the stimulus funding was to create private sector jobs. Those jobs were supposed to kick in when stimulus funding was reduced. Unfortunately, too few private sector jobs have been created and funding is being diminished. This makes the stimulus efforts appear to be ineffective.
• Although revenues have improved for many state and local governments, their budgets remain tight. In Colorado, state employment is flat and local governments have fewer jobs than one year ago.
• Overall inflation has been kept in check; however, energy prices, and the prices of other commodities, are noticeably higher than when the recession started.
• The construction and housing markets have not rebounded as quickly as anticipated. Colorado construction employment is at the same level as it was in the mid-1990s, although it is finally trending upward.
• Companies have been able to meet their sales targets by investing in capital rather than labor. Productivity gains have allowed companies to maintain a competitive position without adding workers. At some point in the next 18-24 months this will change and companies may be forced to add workers.

The latest job numbers are disappointing, but not surprising. There will be slight improvement in the second half of the year, with continued volatility in 2013.

Continued patience is required. At the earliest, 2014 will be the year when stronger growth can be expected.

 

©Copyright 2011 by CBER.

Leisure and Hospitality Leads the Recovery

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The Leisure and Hospitality (L&H) Sector has played a critical role in the recovery of the national and state economies. It is important because of the number of jobs added and because it is part of the economy in every county in the state.

Nationally, seasonally adjusted employment peaked in December 2008 at 13,560,000 workers. The number of workers declined with the Great Recession and in March 2012 employment surpassed that previous peak, reaching 13,587,000. It took 50 months for the sector to go from peak-to-trough-to-peak.

There was a similar pattern for Colorado. L&H employment peaked in May 2009 at 276,000. L&H Employment declined with the recession and in January 2012 it surpassed the prior peak at 277,800. It took 44 months for the state sector to recover.

While 50 and 44 months is a long time, it is possible that the overall state economy may take close to six years before it reaches the 2006 peak.

Nationally, the time from peak to trough was 24 months, or two years. During this time 637,000 jobs were lost. The recovery period was slightly longer, 26 months.

At the state level, the time from peak-to-trough was 20 months. About 16,000 jobs were lost during this period. The recovery period was 24 months.

It is depressing to consider some of these number; however, it is even more unsettling to think that these numbers describe one of the state’s stronger sectors.

For additional information on the overall state economy go to the cber.co website.

©Copyright 2011 by CBER.

U.S. Employment Tapers Off – Another False Start?

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After three months of solid job growth, BLS released what seems to be a bad April Fool’s Day joke in the form of the March jobs report. After adding jobs at an average monthly rate of 246,000 for December 2011 – February 2012, total nonfarm payroll employment rose by only 120,000 in March.

In light of projections by analysts that job gains would exceed 200,000, this report begs the question, “Are we seeing another false start in job growth, as we did in the first half of 2010 and 2011, or was the March report just another bump in the seemingly endless road to full recovery?”

On Monday (April 9), the DJIA lost 130 points, or 1%. Is that a real answer to the question or just a partial answer?

On a positive note, jobs were added in the Leisure and Hospitality (39,000); Private Education and Health Care (37,000); Manufacturing (37,000); Professional and Business Services (31,000), and Financial Services (15,000) sectors.

Many of the jobs in the Manufacturing and PBS sectors are primary jobs, i.e. they bring outside wealth to the community and they create more support jobs than other sectors. It is good news when jobs are added in the Tourism sector because the industry touches most regions. Increased tourism jobs are an indicator that people have greater disposable income – and they are spending it.

Increased jobs in the Financial sector may be a sign that the woes of the industry may be behind us – with an emphasis on “may”. And then there is the Private Education and Health Care sector. Depending on our perspective this sector may be viewed as a perpetual job creation machine or nothing more than a bureaucracy builder.

The losers were Retail Trade (33,800) and Construction (7,500) sectors.

So is the latest report an April Fool’s Day joke? Employment growth is likely to continue, but not likely at the rate of 2250,000 jobs a month that is needed to significantly lower the unemployment rate.

 

©Copyright 2011 by CBER.

Where are all the Startups? – Are they Really a Job Creation Machine?

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Suppose your investment advisor called you and said, “Have I got a deal for you? I will sell you 12,027 shares of a fund at $6.10 per share. The total cost to you is only $72,918. Sound good?”

Your advisor continues, “This is a killer fund. In 17 years, the price per share will rise from $6.10 to $18.30. And, in full disclosure I am required to tell you the fund will buy back a few shares along the way.  Sound good?

You reply, “Sounds great, but could you tell me more about the number of shares that will be bought back along the way?”

The advisor nervously answers, “Well, you see…the price per share increases from $6.10 to $18.10. Sound good?” Very quickly the advisor continues, “And the fund will only buy back 9,348 shares. You will still have about 22%-23% of your original shares. Sound good? Can you sign right here?”

You say, “Let me get out my calculator. That means the value of the fund is only $48,987 after 17 years. Sound good?”

The manner in which jobs are created by startups has a similar rate of return. (For purposes of this discussion, startups will be defined as companies less than one-year old that have employees. The Bureau of Labor Statistics (BLS) has tracked the performance of these companies since 1994.)

From the BLS data it is possible to look at the number of firms, average firm size, total employment, and survival rates for the firms formed in 1994. The BLS data shows:

Number of Firms
• In 1994 there were 12,027 firms.
• In 2011 there were 2,679 firms.
Average Firm Size
• In 1994 the average firm size was 6.1 employees.
• In 2011 the average firm size was 18.3 employees.
Total Employment
• In 1994 the firms had 72,918 employees.
• In 2011 the firms had 48,987 employees.
Survival Rate
• In 1994 the survival rate was 100%.
• In 2011 the survival rate was 22.3%.

Do the numbers look familiar? If not, revisit the opening paragraphs.

Startups are critical to future of our country for a variety of reasons; however, they may not be job creation machine that we have been led to believe. They add jobs in year one, but that base declines in year 2 and erodes further over time. Sound good?

With the decline in the number of startups and survival rates, this is a particularly frightening model for economic growth in the state!

For additional information on startups and job creation go to https://cber.co/ or the report “Where Are All the Startups?”

 

©Copyright 2011 by CBER.