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Patrick J. O’Keefe Shares Expectations for February 2013 Labor Report

On Friday, March 8, the U.S. Department of Labor (DOL) will release data on national labor market conditions during February 2013.

Patrick J. O’Keefe, CohnReznick’s Director of Economic Research, expects the report to show that in February the U.S. added jobs while unemployment and other measures of labor force utilization were little changed.

Specifically, we anticipate that Friday’s release will show a net gain of 130,000 nonfarm jobs, as an increase of 150,000 in private sector employment was partially offset by a public sector decline of 20,000. Despite a higher jobs count, we look for a reported rise in unemployment because the labor force grew more than the number of jobholders.

View an accompanying chartbook displaying the most recent data on key indicators.

Background - Employment:  In January, total nonfarm employment reached the highest level since November 2008. 

Although January was the 28th consecutive month of nonfarm jobs growth, the recovery decelerated as 2013 began. The month-on-month rise (157,000 net new jobs), was one-half that of January 2012 and below 2012’s average monthly gain of 168,000.  In the fourth quarter of 2012, jobs gains had averaged 201,000. 

Total employment has recovered almost two-thirds of all jobs lost during the recession; January’s jobs count is 5.5 million more than at the nadir (February 2010). Despite that improvement, however, there were 3.2 million (-2.3%) fewer jobs in January than immediately prior to the recession (December 2007).  [Charts 1-4]

For the fourth consecutive month, the employment increase occurred entirely in the private sector, which recorded its 35th consecutive month-on-month increase.  Government employment fell by 9,000 in January.  [Charts 5-7]

About one-fifth (21.7%) of January’s private sector increase (166,000 net new jobs) occurred in the goods producing sector, with construction accounting for most of that gain. [Charts 8-13]

Private service providers generally increased employment, led by Retail, Leisure/Hospitality (predominantly eating and drinking establishments), Healthcare, and Professional/Technical services. Those four industries accounted for 57.5% of the private sector jobs gains in January.

Notable exceptions to the private service providers’ overall gains were declines in Transportation/Warehousing (post-holiday cuts by delivery services) and Temporary Help, which has expanded fairly steadily throughout the jobs recovery. [Charts 14-25]

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). 

Labor force conditions were mixed in January, with the labor force growing faster than the number of jobholders. 

As a result, the number of unemployed increased and the unemployment rate rose marginally to 7.9% (from 7.8%) -- the average of the prior six months. But the duration of unemployment declined and the number of discouraged jobseekers contracted.   [Charts 26-30]

In January, the number of individuals with jobs (143.3 million) was virtually unchanged for the third consecutive month.  There were 1.2% more jobholders than a year ago. 

Among those with jobs, under-employment  (i.e., those working part-time involuntarily) was little changed, after having declined during the prior three months. 

The employment rate -- that is jobholders as a percent of the work-age population -- remained below 59% for the 41st consecutive month, the longest string since 1978 when the rate first pierced that threshold.

During 2007, the year prior to the recession, the employment rate averaged 63.0%.  Since falling below 59% in September 2008, it has averaged 58.5%.(Prior to the onset of the 2008-2009 contraction, the annual employment rate had not been that low since 1983.)

If the employment rate was at its 2007 average, there would have been 10.8 million more jobholders in January than was actually the case.  [Charts 31-34]

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