Country / Language

Patrick J. O'Keefe Shares Expectations for August Jobs Report


9/2/14

by Patrick J. O'Keefe, Director of Economic Research

On Friday, September 5, the Bureau of Labor Statistics (BLS) will release data on labor market conditions in the United States through August 2014.

Forecast:

  • We expect the BLS to report that total nonfarm employment rose by 250,000 jobs in August, with all of that gain in the private sector. 
  • We  look for the BLS data to show an increase in labor force participation as the number of jobholders returned to its pre-recession peak and the number of unemployed (including returning discouraged jobseekers) rose modestly.
  • We note that the Bureau is expected to report that the unemployment rate remained at 6.2%.
     

View a chartbook displaying the most recent labor market indicators.

Background – Employment [Charts 1-29]: In the first seven months of 2014, total nonfarm payrolls rose 1.6 million as growth in private sector jobs (up 1.5 million) was bolstered by a slow, but sustained, expansion of public sector employment. 

Government jobs have increased for six straight months for the first time since 2008.

The jobs recovery, which ran from March 2010 through May 2014, required 51 months  ̶  more than four times the post-1948 average  ̶  to recover the downturn’s losses.

Total employment has exceeded the pre-recession peak for three consecutive months, but the cumulative gain is slight (+0.5%), its distribution uneven. 

July was the sixth consecutive month in which total employment rose by more than 200,000 jobs – a string last recorded in 1997. Moreover, July’s gain handily outstripped the average of the 53 months from the start of the jobs recovery through June (176,400). 

Year-to-date through July, 2014’s employment gains are 17.4% larger than 2013’s comparable period. Virtually all of the acceleration (96.7%) reflects the public sector’s shift from shedding jobs (-22,000) in 2013 to adding them (+125,000) this year. 

In July, private employment was 1.1 million (1.0%) above the pre-recession peak but public sector employment was 466,000 (-2.1%) below.

Within the private sector, employment among goods producers – despite their regaining 1.5 million jobs during the recovery – remains 2.8 million less than in January 2008.

Manufacturers have 1.6 million fewer jobs; construction firms 1.4 million less.  Both had been declining prior to the recession. Conversely, extraction employment (i.e., logging, mining, and drilling) is at a 28-year high, but it comprises only 0.8% of all private jobs.

Private service providers have added 8.4 million jobs since the jobs recovery began; as a result, their payrolls exceed the pre-recession peak by 3.9 million.

The gains among private service providers have been unevenly distributed, however. 

Two industries (Food Services and Temporary Help) account for more than one-quarter (27.2%) of service providers’ gains during the recovery.  This is more than double their share (12.8%) during the five years (2003-2007) prior to the recession. 

Several service providers have yet to regain their pre-recession levels, including: Information Services (-360,000), Financial Activities (-326,000), Retail Trade (-183,900) and Wholesale Trade (-159,300). 

Government employment in July was 466,000 below the downturn’s start. Reductions among local governments, which provide almost two-thirds of all public sector jobs, account for more than three-quarters of the shortfall.

Background – Labor Force [Charts 30-41] The employment data discussed above are based on a survey of employers. A separate survey of households acquires 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: After reaching a historic peak in 2000 (Y2K), the labor force participation rate drifted gradually downward on shifting demographic trends. 

The decline accelerated with the onset of the 2008-2009 contraction and the rate fell to a 36-year low (62.8%) at the end of 2013. It has hovered near that level since.

While participation declined among youth (16-24 years of age) and those in their prime earning years (25-54), it increased among those 55 and older.

In this year’s second quarter (Q-2), the participation rate of youth (16-24 years of age) was 54.7%; it had peaked at 65.9% in Q-2 of Y2K.  At mid-year, participation within the prime earnings cohort (25-54) was 80.9%; it had peaked in Q-1 of Y2K at 84.2%.

At 64.2%, participation among those nearing retirement (55-64) exceeded that cohort’s Y2K Q-1 peak rate (59.5%). For those 65-and-over, the rate was 18.6%, a tad below last year’s 50-year high, but more than two-fifths higher than the Y2K Q-1 peak.

From the recession’s start through July, the work-age population rose by 14.9 million, while the labor force rose by 3.9 million – an incremental participation rate of 26.0%. 

Coincidentally, the total participation rate fell from 66.6% to 62.9%.

Jobseekers: July’s unemployment count rose by 2.1% (an increase of 197,000 jobseekers), partially reversing June’s 3.3% increase. Except for June, unemployment in July was the lowest since August 2008.

For much of the recovery, the decline in the unemployment rate reflected a shrinking labor force rather than an increasing number of jobholders.

In July, however, it rose marginally as the labor force expanded on increases in the numbers of both jobholders and jobseekers. 

Almost three-fourths (71.2%) of the month-on-month increase in unemployment was attributable to reentrants (i.e., previously employed individuals who had been out of the labor force).  The acceleration of returnees to the labor force suggests an increasingly optimistic outlook on the availability of jobs.

Jobholders: The number of jobholders rose for the third consecutive month and brought the count to within a whisker (0.2%) of its November 2007 peak. 

During the jobs recovery, the number of jobholders grew somewhat faster than the work-age population and, therefore, the employment rate (i.e., the proportion of work-age individuals with jobs) rose gradually. 

In July, the employment rate was 59.0%, the highest in five years.

Other indicators of labor force utilization were mixed in July: discouragement and long-term unemployment rose while under-employment declined.

Search Our People

Search Our People

Look ahead. Gain insight. Imagine more. Is your business ready to break through?

View our new TV commercial..

Industry Outlooks

Industry Outlooks

Gain insight into what is ahead for the Commercial Real Estate, Technology and Middle Market Private Equity industries.

READ MORE

Learn about our upcoming events.

READ MORE

Working With Us

Working With Us

What makes CohnReznick different from others in our profession? And what should our clients come to expect when working with us? The answer is The CohnReznick Advantage. Contact us to learn how we can out the CohnReznick Advantage to work for your business.


People

The value of an organization is determined by the skills and qualities of its leaders. With more than 280 partners serving clients nationwide, CohnReznick is renowned for the diverse experiences, knowledge and backgrounds of its leadership.

Learn More

Services

We align our services in three segments: Accounting and Assurance, Tax, and Advisory. This approach allows us to provide holistic solutions to complex business problems and to seize upon opportunities requiring an integrated approach.

Learn More

Industries

Accounting and tax issues different significantly based on an organization's industry. We provide clients with expertise in nearly two dozen industries – we know the opportunities, the obstacles, the competitive landscape.

Learn more

Insights

CohnReznick professionals are thought leaders in their industries. Clients benefit from relevant and timely economic, legislative and industry insights that can keep them a step ahead of competition.

Learn More

Global Reach

Our involvement in the Nexia International network of firms enables us assist our clients wherever they do business-providing local expertise and connections wherever they needed. Nexia is comprised of 20,000 professionals operating in over 100 countries.

Learn More