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Patrick J. O’Keefe Shares Expectations for December 2012 Jobs Report


On Friday, January 4, the U.S. Department of Labor (DOL) will release data on national employment conditions during December 2012.

Who: Patrick O’Keefe, Director of Economic Research at CohnReznick, former Deputy Assistant Secretary in the U.S. Department of Labor, and a former Deputy Director of the National Commission for Employment Policy, shares his expectations for the DOL report.

For a chartbook displaying the most recent data on key labor market indicators, please click here.

Forecast

  • O’Keefe expects the DOL to report modest jobs growth in December, as well as an increase in unemployment and related measures of labor force underutilization. 
  • Specifically, he anticipates that Friday’s release will show a net gain of 150,000 private sector jobs and little, if any, change in government employment. 
  • He also expects both the number and rate of unemployment to inch up on renewed labor force growth.


Background - Employment:  Although nonfarm employment rose for the 26th consecutive month -- and reached the highest count since the end of 2008 -- November was just another mediocre month in what has been a sluggish and erratic jobs recovery.  [Charts 1-3]

November’s net gain in total employment was 146,000, but the preceding two months’ data were adjusted downward.  As a consequence, the three-month average, which smoothes monthly fluctuations, slipped to 139,000 -- below that of the first and third quarters’ average monthly gains (226,000 and 168,000 respectively), but substantially better than the Spring’s average of 67,000 per month. [Chart 4]

After having increased for 26 consecutive months, total employment in November was 4.6 million (3.6%) higher than when the jobs market hit its recessionary nadir (February 2010); but remained 4.1 million (-3.0%) below where it stood immediately prior to the recession (December 2007).

November’s employment growth was once again unevenly distributed, as has often been the case since jobs recovery began in March 2010.

In November, private employers added jobs for the 33rd consecutive month.  The private sector increase accounted for all of the total month-on-month gain, as government employment was virtually unchanged. [Charts 5-6]

The private jobs rise occurred entirely among private service providers, as goods producers (save the extraction industries) shed jobs. [Charts 7-12]

Three-fourths of the private sector’s net gain of 147,000 jobs in November was concentrated in just four service providing industries, specifically: over one-third (35.8%) was in retail (35.8%); and another two-fifths (41.5%) occurred in (by size of November’s gain):  leisure/hospitality, healthcare, and temporary help.  [Charts 13-19]

In the five years (2003-2007) prior to the recession, these four over-achievers comprised 38.3% of all private jobs.  But in November, they contributed 77.3% of the private sector’s growth.

The growth in these industries is certainly welcome, but can they continue to carry the recovery?  That question is particularly pertinent to retail, which -- despite its largest three-month hiring surge since 1995 -- has 660,000 fewer jobs than pre-recession. 

And, beyond that, can the jobs recovery accelerate if it remains so tightly concentrated?

Background - Labor Force:  The employment data discussed above is collected from a survey of employers; a separate survey of households collects data regarding the labor market status of work-age 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 looked for work during the prior month). 

November produced a mixed picture among the primary measures of labor force conditions.

The number of jobseekers and the rate of unemployment both declined -- because people quit the labor force; and among those who left the labor force, there was a sharp rise in the number who did so because they were discouraged.  [Charts 20-23]

The number of individuals with jobs slipped in November, after robust rises in the prior two months.  Despite the decline there was some improvement among jobholders, as the number of under-employed workers fell for the second month.  [Charts 24-25]

The employment rate (i.e., proportion of work-age individuals with jobs) was down marginally in the most recent month.  It has been bottom bouncing near record lows for three years.  [Chart 26]

During 2007, the year prior to the recession, the employment rate averaged 63.0%.  In the 12 months through November, it averaged 58.6%.  (Prior to the onset of the 2008-2009 contraction, the annual employment rate had not been this low since 1983.)

If the employment rate was at its 2007 average, there would have been 10.6 million more jobholders in November than was actually the case.  [Chart 27]

 

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