Economic Insight: Patrick J. O’Keefe Shares Expectations for May Jobs Report
On Friday, June 6, the Bureau of Labor Statistics (BLS) will release data on labor market conditions in the United States through May 2014.
The accompanying chartbook displays the most recent labor market indicators.
Forecast: We expect the BLS to report continued employment growth in May, but at a slower pace than April’s, which was the recovery’s third-largest monthly gain.
We estimate that nonfarm employment increased by 245,000 jobs, thereby eclipsing the peak (138.4 million jobs) reached as the recession began in January 2008.
We also look for the BLS to report that labor force participation rose in May due to increases in the numbers of jobholders and jobseekers and, with the latter partially reversing April’s decline (the largest monthly drop since 1949), an uptick in the unemployment rate.
Background – Employment [Charts 1-29]: In April, for the second consecutive month, private sector employment rose to new record level, most recently 116.4 million jobs.
Over the jobs recovery’s 50-month span, private employers have added 9.2 million jobs.
Private service providers, whose employment in April was 3.3 million (3.6%) above its pre-recession peak, contributed the bulk (7.8 million) of those jobs.
Despite those gains, however, April’s total nonfarm employment was marginally (-0.1%) below its prior peak due to subpar growth in the goods producing sector and absolute losses in government employment.
Goods producers’ payrolls have increased 1.3 million since the jobs recovery began in March 2010, but their jobs count is 2.9 million less than when the 2007-2008 contraction began. Construction employment is 1.5 million less than at the recession’s start; manufacturing employment is 1.6 million less. (Both had been declining prior to the general downturn.)
Government employment in April was 519,000 less than at the downturn’s start. Local government cutbacks account for more than three-quarters (77.6%) of the shortfall.
In sum, the jobs recovery has occurred entirely in the private sector and, within it, has been disproportionately concentrated among service providers.
Between 1948 and 2007, there were 10 post-recession jobs recoveries. On average, total nonfarm employment returned to its pre-recession peak within 11 months; the longest recovery required 20 months.
We expect this week’s BLS data to show that nonfarm employment reached a new peak in May, 51 months after the jobs recovery began.
Background – Labor Force [Charts 30-41] The employment data discussed above are based on a survey of employers. A separate survey of households is the source of data regarding the labor market status of residents. To be counted as a labor force participant, an individual must be a non-institutionalized civilian, 16 years or older, and either a jobholder or jobseeker (i.e., having actively sought work in the prior four weeks).
Labor Force participation: From its historic peak in the first quarter of 2000, the labor force participation rate drifted gradually downward on shifting demographic trends. With the onset of the 2008-2009 contraction, however, participation dropped dramatically. It fell to a 36-year low in October and has hovered that level since.
The decline was most pronounced among youth (16-24 years of age) and those in their prime working years (20-54). Conversely, participation has increased modestly among those approaching retirement (55-64) and is at a 50-year high among those 65 and older.
The number of labor force participants (using a three-month average to smooth monthly gyrations) is 1.1 million (0.7%) larger than the pre-recession peak at the end of 2008. Over that span, as the work-age civilian population increased by 12 million (5.1%), the participation rate fell from 65.7% to April’s 62.8%.
Jobseekers: April’s drop in unemployment (-733,000) was the largest monthly decline since 1949. It was the largest month-on-month percentage decline since April 1998.
The decline in jobseekers reflected a sharp reduction in labor force participation, not an increase in the number of jobholders (which slipped marginally). As has often been the case during this jobs recovery, unemployment fell not because jobseekers found work but because they quit looking for it.
Jobholders: The number of individuals at work slipped a bit (-0.1%) from March, when it was the highest since the Spring of 2008. April’s count of jobholders was 7.7 million greater than when it bottomed at the end of 2009.
Since then, with the growth in jobholders exceeding that of the work-age population, the employment rate (i.e., the proportion of work-age individuals with jobs) has reached the highest since September 2009.
Other indicators of labor force utilization (e.g., discouragement, under-employment, long term unemployment) were relatively flat in April.