Patrick J. O'Keefe Shares Expectations for June Jobs Report
by Patrick J. O'Keefe, Director of Economic Research
On Thursday, July 3, the Bureau of Labor Statistics (BLS) will release data on labor market conditions in the United States through June 2014.
- We expect the BLS to report that total nonfarm employment rose by 200,000 jobs in June, with all of the gain occurring in the private sector.
- We also look for the BLS to report that labor force participation rose in June, due to increases in both the number of jobholders and jobseekers. The Bureau is also expected to report that the unemployment rate rose to 6.4 percent as previously discouraged jobseekers increasingly returned to the labor force.
The accompanying chartbook displays the most recent labor market indicators.
Background – Employment [Charts 1-29]: In May, total nonfarm employment rose to a record 138.3 million jobs, having fully recovered the 8.7 million jobs lost between the recession’s start in January 2008 and the beginning of the jobs recovery in March 2010.
The month-on-month gain (217,000) outstripped the averages of the recovery (172,000) and the previous 12 months (198,300). For the first time since early 2012, the 3-month average exceeded 230,000 for two consecutive months.
Year-to-date through May, total employment is 4.7% above 2013’s comparable period. The acceleration is attributable to the public sector’s shift from shedding jobs (-36,000 last year) to adding jobs (+15,000 this year). Private jobs growth in 2014’s first five months was equivalent (-0.3%) to last year’s comparable period.
The jobs recovery, which began in March 2010, has been both slow – over four times longer than average – and uneven – occurring wholly within the private sector and concentrated almost entirely among service providers.
In May, private employment was 617,000 (0.5%) above the pre-recession peak; public sector employment was 519,000 (-2.3%) below.
Within the private sector, employment among goods producers – despite their regaining 1.4 million jobs during the recovery – remains 2.9 million less than at the start of the recession (January 2008).
Manufacturers have 1.6 million fewer jobs; construction payrolls are down 1.5 million. Both had been declining prior to the general downturn.
Payrolls in the extraction industries (i.e., logging, mining, and drilling) are up 21.4% – to a 28-year high – but the sector provides only 0.7% (0.9 million) of all U.S. jobs.
Service providers, on the other hand, added 8.0 million jobs during the jobs recovery and, consequently, their payrolls are 3.6 million greater than at the pre-recession peak.
The service sector’s gains have been unevenly distributed, however.
Three industries (Food Services, Professional/Technical Services, and Temporary Help) account for almost two-fifths (38.6%) of the sector’s gains during the recovery. This is more than double the five years before the recession when they provided one-fifth (20.8%) of the sector’s jobs.
Among the sector’s under-performers are three that have yet to regain their pre-recession levels: Information Services (-371,000), Financial Services (-358,000), and Retail Trade (-259,000).
Government employment in May was 519,000 less than at the downturn’s start. Local government reductions 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 a sub-set of the 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. The recently concluded recovery ran 51 months.
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 early in 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 reached a 36-year low (62.9%) in 2013’s final quarter and has remained near there for the first five months of 2014 (averaging 63.0%).
Participation has declined among youth and those in their prime working years, but has increased among the more senior cohorts.
Compared to the historic peak (2000 Q-1), the rate for youth (16-24 years of age) was 54.9% (versus 65.8% at the peak); participation among those in their prime working years (20-54) was 81.1% (3.1% below the peak). Conversely, the participation rate among those nearing retirement (55-64) is 63.8% (up 4.3%). And for the past year, participation among those 65-and-over has averaged 18.7%, a 50-year high.
Since the recession started in early 2008, the work-age civilian population has grown by 14.5 million, but the number of labor force participants increased by 3.0 million (about one-fifth of the population’s net increase). Concurrently, the total participation rate fell from 66.3% to 63.1%.
Jobseekers: May’s unemployment count was little changed from April when it fell by the largest monthly total since 1949. April’s month-on-month percentage decline was the largest since 1998.
Despite May’s small uptick (0.5%) in the number of jobseekers, the unemployment rate (at 6.3%) was unchanged because the labor force expanded on a larger increase in the number of jobholders.
Jobholders: Although the number of jobholders rose only modestly (0.1%) in May, the number of individuals with jobs is higher than in any month since 2008. May’s count of jobholders was 7.8 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 August 2009.
Other indicators of labor force utilization (e.g., discouragement, under-employment, long term unemployment) were somewhat improved in May.
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.