U.S. Employment Continues Growth at a Slower Rate

On December 4th, the Bureau of Labor Statistics released its monthly update for U.S. nonfarm payroll employment for November. The number of non-seasonally adjusted jobs increased by 2,650,000 in November compared to a year ago.

Based on current trends, the U.S. is on track to add 2,959,455 jobs in 2015.That equates to about 269,000 workers per month.

The November unemployment rate remained at 5.0% down from 5.8% a year ago. There were 7.9 million unemployed compared to 9.0 million last November.

A look at the seasonally adjusted data shows that job growth occurred in construction, professional and technical services, and health care. Losses occurred only in the mining and information sectors.

• Construction employment posted a gain of 46,000 in November. About 26,000 of those jobs were in the residential specialty trade contracting subsector. Year-over year construction employment is about 259,000 workers greater than last November.

• Professional and technical services added 28,000 jobs in November. About 11,000 jobs were in accounting and bookkeeping services and 5,000 were in computer systems design services. Compared to a year ago, the PST sector is about 298,000 jobs greater than the same period in 2015.

• Health care employment for November was 24,000 greater than October. About 13,000 workers were added in the hospital subsector. On a YOY basis health care employment is about 470,000 greater in 2015.

• Employment in food services and drinking places increase by about 32,000 jobs in November and it is up by 374,000 greater than a year ago.

• Combined, the four sectors mentioned above show job gains of about 1.4 million compared to a year ago.

• Compared to the prior month there was little change in the following sectors: manufacturing, wholesale trade, transportation and warehousing, financial activities, and government.

All eyes will continue to be on the Fed and their meeting later this month. Although U.S. employment has increased at a decreasing rate through 2015, the latest BLS report is probably strong enough for them to finally announce a hike in short term interest rates.

Moving forward the $64 question is, “Will job growth continue at the rate experienced in the second half of the year or will we move forward at the more robust rate shown in the first half of the year?”

U.S. Employment

U.S. Employment Shows Strong Gain in October

On November 6th, the Bureau of Labor Statistics released its monthly update for U.S. nonfarm payroll employment. The number of seasonally adjusted jobs increased by 271,000 in October. Over the previous 12 months, employment has increased by an average of 230,000 workers per month. That equates to 2.8 million per year.

The unemployment rate was down from 5.7% to 5.0% a year ago and 5.1% in the previous month. The number of unemployed persons was down from million a year ago to 7.9 million in October.

The areas with the largest increases were professional and business services (PBS), health care, retail trade, food services and drinking places, and construction.
• Employment in the PBS Sector increased by 78,000 in October, compared with an average gain of 52,000 per month over the prior 12 months.
• Health care employment increased by 45,000 jobs in October. Over the past year, health care has added about 41,200 jobs per month, or slightly less than a half million jobs for the year. About 27,000 jobs were added in ambulatory health care services and 18,000 in hospitals.
• The number of retail trade jobs increased by 44,000 in October. This is well above the average monthly gain of 25,000 jobs for the past 12 months. In October about 20,000 were added in clothing and accessories stores, 11,000 were added in general merchandise stores and 6,000 were added in automobile dealerships.
• About 42,000 workers were added in food services and drinking places in October. For the past year the monthly average has been about 31,000.
• Finally, construction employment rose by 31,000 in October. This is slightly higher than previous months. About two-thirds of the October growth was in nonresidential specialty trade contractors.

On the down side, mining employment fell by 5000 workers. The sector peaked in December 2014 and has since shed 109,000 jobs.

Employment in other major industries was similar to the prior month.
It was encouraging to see this level of job gains. Next month, we will learn whether the level of October employment was a “one hit wonder” or a reversal of the downward trend that has been taking place since the second quarter.

If the Economy is Doing so Well, Why Doesn’t it Feel More Robust? -Take II

In the previous blog post, the topic of the economic recovery was discussed. Although it has been a solid recovery, why doesn’t it feel more robust?

The 2007 recovery was atypical in that it occurred over a period of years, as opposed to months. As a result Colorado posted accelerating job growth for four consecutive years. Essentially, the recovery from the recession was weak and gradual. At no point has the state reached a point where public and private leaders could really say, “We have arrived.”

At the national level, the U.S. will add 3.0 million jobs in 2015. Yet, the focus is on the slowdown of the global economy, not the fact that 2015 will be the fifth consecutive year of solid job growth.

Nationally, GDP growth has been subpar. It is hard to get excited when the rate of Real GDP growth is 2.0% to 2.5%. Consumer spending has increased at a similar anemic rate. In other words consumers have remained cautious, as if they are always looking over their shoulder.

The construction industry is “booming” and there is a shortage of trained workers. At the same time, the growth of the industry pales when compared to the 2000s. The good news is that housing has been built on an “as needed basis” and the chance of being overbuilt is slim.

During the recovery period, the state has suffered natural tragedies. There were multiple severe forest fires in several parts of the state, as well as flooding and drought. That was taxing on the state – fiscally and psychologically. Fortunately, Coloradans have remained resilient.

Lower oil prices have dampened growth in parts of the state that had previously experienced strong growth. It is easy to forget the risk associated with the extractive industries until the price of the commodities (oil, molybdenum, coal) drops precipitously or regulations are established that eliminate demand for these commodities.

Then there is the state government… The legislature has focused on social issues for the past couple of sessions – and that is not bad. Some feel insufficient time and resources were spent addressing issues that could improve the state’s ability to conduct business.

At one point, there was sufficient discourse to cause several counties to threaten secession from the state. At times, state government seemed dysfunctional over the past five years.

State government faces a new problem – the state economy is on solid footing and the state will generate record levels of revenue, yet the legislature will be forced to make cuts to key service areas. This conundrum is caused by the combination of Amendment 23, the Gallagher Amendment, TABOR, the initiative process, and Medicare obligations. It is difficult for legislators to govern the state in a way they feel is appropriate.

Despite the challenges and angst created by the items mentioned above, the growth of Colorado’s economy has exceeded the growth of the U.S. economy in many key areas (rate of job growth, rate of population growth, growth of Gross Domestic Product).

Unfortunately, the picture hasn’t always been rosy for the past five years, despite the many great things that have happened.

If the Economy is Doing so Well, Why Doesn’t it Feel More Robust?

The Great Recession has been over for five years, but in many ways the economy still feels like we are still in the recovery stages.

In 2001 the business cycle was coming to an end when 9/11 exacerbated the situation. Workers in most sectors were touched by the recession. Fortunately, we could blame the downturn on the terrorists.

The country rallied, and with fiscal policies such as zero percent financing we recovered – some would say it was a false recovery because we stole sales from the future. By 2007 we were confident that all would be well, but that didn’t turn out to be the case.

In both recessions many families were hit hard, regardless of race, job title, or income level. In some cases one or both spouses lost their job, establishments went out of business, people had their houses foreclosed on, and there was no place to hide. Both recessions touched nearly everyone and the fact they were back-to-back doubled the pain.

In 2007 most economists did not see the 2007 recession coming and when they realized something was wrong, they failed to acknowledge that it was for real. In fact some of the state’s leading economists were in denial. (It is almost funny to re-read newspaper articles and emails from that era talking about the economy.)

In retrospect there were some small signs pointing to the 2007 recession, such as declines in financial employment. These signs weren’t sufficient to make anyone believe a major downturn was impending. For the most part, the public did not have access to the data and information that caused the problem. Many of those who had access to the information may not have understood the ramifications of what was actually happening. In some cases those who had access to the information conveniently ignored it. As business leaders and the public learned about the cause of the recession some felt betrayed by what happened. They had a right to be upset because the 2007 recession was not part of a normal business cycle. It was self-inflicted.

Psychologically the “back-to-back” recessions changed the structure of the way companies do business. Companies had to find ways to be successful with fewer employees. As a result they became more efficient and hired fewer workers during the recovery.

It was difficult for some of the laid off workers to come to terms with the realization they wouldn’t have a job waiting for them when things got better. It was tough for older workers to be ungraciously kicked off the payrolls. At the same time, several graduating classes of college students, with hefty student loans, were passed over because there were no jobs for them.

Many of the workers who held onto their jobs felt both blessed and cursed. They were fortunate to have a job, yet at times they were taken advantage of (minimal or no pay increases, reduced benefits, longer hours, more responsibilities). Work became a necessary burden for many.

As a result of the “back-to-back” recessions consumers changed spending patterns, particularly in retail. Many people have been more discrete with their spending, they may not spent as much they once spent, and they tend to wait for items to be on sale before they purchase them. Adults with family members who had experienced the Great Depression may have benefitted from their experiences. As the Rolling Stones said, “You can’t always get what you want, but if you try sometime you find you get what you need.”

Economists are partially to blame for the feeling the economy does not feel more robust. They continually refer back to the recession in their charts and their discussions. By continuing to refer to the recession, economists are continually reminding people how bad the economy was just a few years ago. It is difficult to feel the economy is robust when you are always looking over your shoulder.

Colorado Economy On Track to Add At Least 68,600 Jobs in 2015

At the midpoint of the year the U.S. economy is on solid footing and the second half of the year will be much stronger than the first half. The Colorado economy continues to outperform the U.S. in its rate of growth for population, employment, and GDP.

Key Data Points for the U.S.
Real GDP – Q2 will be stronger. Annual growth will be 2.5% to 2.9% in 2015.
Retail Sales – Up 1.3% for 6 months, projected to be up 3.0% for 2015.
U.S. Employment – The U.S. is on track to add 3.1 million jobs this year.
Unemployment Rate – 5.3%, down from 6.1% a year ago, 8.3 million unemployed, trending down.
ISM Indices –Manufacturing is sluggish and expected to remain that way; Non-Manufacturing is steady and well above 50.
Price of a Barrel of Oil (WTI) – Since mid-March it has varied from $43 to $61. Currently in the low 50s, but trending down.
Construction – For 6 months, employment up 4.2%, weekly earnings up 3.0%.
Case Shiller Housing Prices – U.S. prices up 4.2% from a year ago.
Dow Jones Industrial Average – On July 17rd the DJIA was 18,086, up 1.5% from 17,823 at the end of the year.

Average Colorado employment is 68,600 greater than the same period last year, with the potential of being revised upward at a later date.

Colorado Economy

As has been the case in the past, the sectors with the top job growth are: Health Care; Accommodations and Food Services (part of the Tourism Industry); Construction; Professional, Scientific, and Technical Services; and Manufacturing. These sectors accounted for about 72% of total job growth in the first half of 2015.

The Bureau of Economic Analysis has released the 2014 Gross Domestic Product for Colorado. The state’s Real GDP expanded at a rate of 4.7% compared to 2.2% for the U.S.

Key Data Points for Colorado
QCEW Revisions – Recent revisions to Q4 2014 could cause 2014 employment to be revised upward in the March 2016 benchmark revisions. There was stronger momentum coming into 2015 than originally anticipated.
Population – Colorado’s population will increase by 88,800 people this year.
Unemployment Rate – 4.4%, down from 5.0% a year ago.
MSA Unemployment Rate – Boulder and Ft. Collins have the lowest rates at 3.5% and 3.6% respectively.
2014 Colorado GDP – The state Real GDP grew by 4.7% in 2014 compared to 2.2% for the U.S.
2014 Contribution to GDP Growth – The Mining sector accounted for 6.2% of GDP and 18.2% of GDP growth in 2014.
Wage and Salary Employment – On average Colorado has added 68,600 jobs this year based on current data. This is not adjusted for the projected revisions.
Leading Sectors for Growth – About 72.2% of the jobs have been added in the Health Care; Construction; Accommodations and Food Services; Professional, Scientific, and Technical Services; and Manufacturing.

For details or more information about the Colorado economy, check out the 2015 cber.co forecast and economic updates on this website, https://cber.co.

BLS August Jobs Numbers Revised Upward

Last month the Bureau of Labor Statistics delivered a Labor Day surprise when its monthly employment situation press release stated the U.S. had only added 142,000 jobs in August. This month the BLS reversed their bombshell announcement; they revised the August jobs numbers from +142,000 to +180,000 and July was revised from +212,000 to +243,000. In other words, their previous estimates for these two months missed their mark by 69,000.

Total nonfarm payroll employment increased by 248,000 in September. For the month job growth was led by professional and business services, retail trade, and health care.

These increases in wage and salary employment were accompanied by a decline in unemployment to 5.9%. The number of unemployed persons decreased to 9.3 million (That is still a lot of people). Compared to a year ago, the unemployment rate and the number of unemployed persons were down by 1.3 percentage points and 1.9 million, respectively.

In addition, the number of long-term unemployed (LTE) was remained at 3,000,000 people. The LTE are those jobless for 27 weeks or more and they account for 31.9% of the unemployed.

The outlook remains positive for the U.S. and Colorado through the end of the year.

August Jobs numbers

U.S. and Colorado Economy Remain Solid

National Economy
The U.S. economy remains strong, with solid employment and output growth.

• Nationally, employment remains strong, despite slower than expected job growth in August. The non-seasonally adjusted data shows that an average of 215,000 jobs has been added each month through eight months. This means the U.S. will add about 2.5 million jobs this year.
• Output remains solid. The first Q2 estimate showed real GDP growth of 4.0%. That was revised upwards to 4.2%. It is possible the third estimate, due later this month, could be revised even higher to 5.0%.
• At the most recent FOMC meeting the Federal Reserve provided no surprises. Their stance on the economy indicates:
o The rate of inflation remains below target.
o Quantitative easing will come to an end.
o There is slack in the labor market.
o Interest rates will remain low in the near term; however, once rate increases begin they will accelerate faster than previously anticipated. It is likely rates will begin increasing in mid-2015.
• The outlook for construction is positive.  Single family building permits have been flat; however the NAHB index shows that homebuilder sentiment is much stronger than the permits data. This suggests greater activity, and stronger data, will occur in the future.
• The unemployment rate, number of unemployed, and the number of Americans filing new claims for unemployment benefits continue on a downward trend. The economy should remain healthy as long as fewer people are unemployed and an increasing number of Americans are working.

Colorado Economy

The performance of the Colorado economy is closely tied to changes in U.S. job and output growth. Since the end of the recession Colorado job growth has outperformed the U.S. because of its mix of industries. The state is on track to add jobs at an accelerated rate for the fourth consecutive year.  Job growth this year will be about 3.0%.

• The extractive industries have been a major direct and indirect contributor to the job growth. As well, the extractive industries were responsible for about one-third of the state’s GDP growth in 2013. The extractive industries are important to the economies of about half the counties in the state. From a jobs perspective, the sector is small, but the number of workers will increase by at least 9% this year compared to 2013.
• So far this year, between 10% and 12% of the jobs added in Colorado are construction jobs. The number of jobs will increase by at least 6.5% compared to the same period last year. Growth in the sector might be constrained by a lack of trained workers in specialized construction occupations such as plumbers, HVAC workers, and electricians. The home and infrastructure subsectors also include distinct specialized occupations.
• Tourism has enjoyed a banner year in Colorado. It began with good snow and a strong ski season. The good snow season also meant plenty of water for mountain rafting and summer tourism activities. Special events, such as the USA Pro Challenge, and the lack of fires and flooding provided the foundation for a strong summer season. Leisure and hospitality job growth is poised to be at least 4.6% greater in 2014 than last year. The sector will be responsible for adding about 19% of the jobs in the state this year.  The sector plays a significant part of the economy in all 64 counties.
• The healthcare sector will add more than 10,000 workers in 2014 and expand at a rate of more than 4.3%. The sector continues to face challenges finding workers in many occupations and in rural areas.
• The growth of the professional, scientific, and technical sector is important to the state because a portion of these companies are directly or indirectly a part of the state’s advanced technology sector. The lifestyle of Downtown Denver and Colorado is attracting millennials to jobs in these sectors. The growth of in the sector will be at a rate of about 4.5% in 2014. It is important to note that many of these occupations pay higher than average wages and the sector is adding jobs at an increasing rate.

 

2014 U.S. Employment Situation Remains Solid

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

Colorado Economy Remains Strong

National Economy

The Colorado economy is outperforming the U.S. economy. Recent strength in the U.S. economy is a positive sign for Colorado.

Nationally, employment remains strong. The non-seasonally adjusted data shows that an average of 230,000 jobs have been added each month through seven months. Most likely the U.S. will add about 2.5 million jobs this year.

On a positive note, the labor force participation rate appears to have bottomed out.

Real GDP increased by 4.0% in Q2. The reasons for the increase in the real GDP were:

  • Stronger personal consumption.
  • Greater private inventory investment.
  • Increased residential fixed investment.
  • Stronger non-residential fixed investment.
  • Improved state and local government spending.
  • Greater demand for exports

Factors that offset the growth were:

  • Increased demand for imports.
  • Decreased federal government spending.

An area of potential concern is construction. Hopefully the industry is taking a breather after its recovery from the Great Recession. The number of building permits issued over the past year has been flat.

In addition, the housing market is cooling off. The rapid appreciation in housing prices is tapering off.

Both manufacturing and services have been solid since the second half of 2009. At least this is being reflected in the growth of the GDP.

Implications of the National Economy on Colorado

These indicators have several implications for Colorado. The short-term outlook points to stronger personal consumption, which bodes well for retailers and tourism, particularly if Mother Nature cooperates by bringing early and frequent snow for the ski season.

Stronger retail sales will add to the coffers of the state and local governments, which should point to continued increases in government spending. This would benefit everything from schools to infrastructure.

On the downside, lower or constrained government spending could impact the military and federal facilities and laboratories. This has the potential to impact the universities and federal facilities in Colorado Springs, Denver, Boulder, and the Northern Colorado metro areas.

The unemployment rate and the number of unemployed continue to trend downward; however, critical labor shortages are developing in many occupations. This is particularly critical to high-tech industries.

Labor shortages are impacting all industries in Northern Colorado which is experiencing rapid growth as a result of the extractive industries boom. Workers are being raided from other companies and industries, which will ultimately drive wages up.

The Colorado construction market still appears to be solid and the value of residential housing is growing, albeit at a slower rate than last year. At the same time the Dow Jones Industrial Average is about where it was at the end of 2013.

Appreciation in the housing and equity markets play into consumer confidence. If consumers feel their house and investments have appreciated, their wealth on paper is greater, and they are more likely to purchases goods and services.

Colorado Economy

The following five sectors account for about 45% of total jobs in the state, yet they are responsible for almost 75% of the jobs added this year.

  • Accommodations and Food Services
  • Health Care
  • Construction
  • Professional and Scientific Services
  • Retail Trade.

All of these jobs are important to the state for various reasons.

  • About 10% of all jobs are in the Accommodations and Food Services sector. AFS has accounted for about 20% of the jobs added this year. As a major component of the tourism sector, AFS is an important part of the economy in all 64 counties.
  • Just under 11% of the state’s s jobs are in the Health Care sector. This category has accounted for about 15% of total jobs added this year. The Health Care sector affects our quality of life and plays a key role in the economy in all 64 counties.
  • The Construction industry is small by comparison, with about 5.0% of total state jobs. Approximately 12% of the job growth is in this category. A segment of the Construction jobs are tied to the growth of the extractive industries.
  • A portion of the Professional, Scientific, and Technical jobs are a key part of the state’s advance technology industries. They account for about 8% of the jobs and 11% of the job growth.
  • Finally, Retail Trade jobs account for almost 11% of total jobs and 11% of total job growth. The retail sector is critical to most local governments because a majority of their revenue is derived from retail sales taxes.

Through seven months of 2014, the average job growth is about 67,300 greater than the same period in 2013.

Long Term Unemployment Remains Uncomfortably High

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