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


2/3/14

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

On Friday, February 7, the Bureau of Labor Statistics (BLS) will release data on labor market conditions in the United States during January 2014.

Forecast: 

  • We expect Friday’s data to show that jobs increased nationally in January, while measures of labor force utilization were little changed.
  • We think BLS will report that nonfarm employment rose by 180,000, with gains of 175,000 private jobs and 5,000 government positions. We also anticipate that the previously published estimate for employment in December will be revised upward to a net gain of 105,000 jobs (31,000 more than initially estimated.)
  • We expect BLS to report little change in labor force participation as the numbers of jobholders and jobseekers were relatively stable over the month.

View the accompanying chartbook displaying the most recent labor market indicators.

Background - Employment [Charts 1-28]: Since the jobs recovery began in March 2010, the U.S. economy has added 7.6 million jobs, more than four-fifths (86.6%) of the 8.7 million jobs lost during the 2008-2009 recession. 

Total nonfarm employment has increased an average of 164,300 jobs per month during the jobs recovery’s 46 months. Nevertheless, December’s jobs count was 1.2 million (0.9%) below the January 2008 peak. 

Between 1948 and 2007, there were ten jobs recoveries. On average, employment returned to its pre-recession peak in about 11 months; the longest recovery required 20 months. On its pace through December, the current recovery will take 53 months (i.e., through July).

December’s jobs gain, the smallest monthly increment since January 2011, was less than one-third (30.7%) of the prior month’s increase. The month-on-month deceleration was spread broadly.

The three-month average gain (which smoothes monthly fluctuations) fell to 172,000 in December, down from 205,000 in November. 

Jobs Growth Slowed in 2013: On preliminary data, the net increase in employment in 2013 was 2.3% less than in 2012. That deceleration reflected slower gains in the private sector where payrolls grew, on net, 6.7% less than in 2012. However, the primary sector’s loss of momentum was partially offset by slower retrenchment in the public sector; government cutbacks declined 65.8% in 2013.

As noted above, we anticipate upward revisions of the preliminary December data.  But even if our estimate of the adjustment is correct, 2013’s net increase in employment would still be less than 2012’s.

Background - Labor Force [Charts 29-40]: 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 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., actively looked for work in the prior four weeks). 

For forty consecutive months through mid-2000, the participation rate (i.e., the proportion of work-age civilians who have, or are looking for, jobs) exceeded 67.0%, peaking at 67.3% between January and April 2000. 

In December, labor force participation slipped to 62.8%, reversing the prior month’s uptick and, in doing so, returning to its lowest level since March 1978.

The number of jobholders rose in December (+0.1%) to the highest it has been since October 2008. It was, however, 1.3% below the November 2007 pre-recession peak.

The number of jobseekers fell for the sixth straight month, down most recently by 490,000 (-4.5%). The unemployment rate fell to 6.7%, the lowest since October 2008. 

The decline in unemployment owes mostly to dwindling labor force participation. If participation were equivalent to 2007, the year prior to the recession when it was 66.0%, December’s unemployment rate would have been 11.2%.

Unemployment fell not because jobseekers succeeded but because they succumbed.

Surveys suggest growing optimism regarding jobs prospects. If that entices some discouraged jobseekers back into the labor market, the unemployment rate might rise, at least temporarily.


The statements, opinions, and conclusions contained herein are based solely upon the author’s own studies, research, and personal experience. Neither CohnReznick nor the author make any representation or warranty as to the accuracy or completeness of this information. CohnReznick and the author expressly disclaim any liability for any loss or damage which may be incurred, of any kind whatsoever, as a result of or arising from the use of any of the information contained herein or reliance on the accuracy or completeness of it.

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