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


12/1/14

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

Forecast:

  • We expect the BLS to report that total nonfarm employment rose by 260,000 jobs in November, making 2014’s year-to-date gain the largest since 1999. 
  • We anticipate jobs gains during November and December that are bolstered by larger-than-usual seasonal hiring as the sales sector (i.e., retail and its logistical network) responds more aggressively to rapidly shifting shopping patterns. 
  • We look for the BLS to report that labor force participation rose for the second consecutive month as the number of jobholders reached a new record. Coincidentally, the number of jobseekers declined to the lowest level since mid-2008 and the unemployment rate reached 5.7%.
     

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

Background - Employment [Charts 1-29]: Total nonfarm employment has increased by 2.3 million jobs since the start of the year. Although 2014’s growth has been concentrated in the private sector, those gains – unlike earlier in the jobs recovery – have been supplemented by steady (albeit modest) growth in government employment.

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 8.7 million jobs lost between the January 2008 employment peak and its nadir in February 2010.

Since May, total employment has exceeded the prior peak, but the cumulative difference is still slight (+1.0%).

In the past 12 months, employment gains have averaged 220,000 net new jobs.

Year-to-date through October, 2014’s employment gains have exceeded 2013’s comparable period by 15.8%. The acceleration is attributable to a faster pace of private sector growth (10.9% ahead of 2013’s comparable period) and the public sector’s shift from shedding jobs (-34,000) in 2013 to adding them (+60,000) in 2014. 

Although the economy has reached record levels of employment, the gains have been uneven.  The private jobs count in October was 1.8 million (1.5%) above its prior peak;  government employment was 474,000 (-2.1%) below.

Within the private sector, the recovery has proceeded unevenly: 

  • Goods producers’ payrolls have regained 1.6 million jobs since the start of the jobs recovery, but those gains have been slow and fitful; manufacturing and construction jobs combined are 2.9 million below their January 2008 total. 
  • Private service providers’ payrolls, on the other hand, had 4.5 million (4.8%) more jobs in October than at the start of the downturn.
     

Public sector employment in October was, as noted above, 474,000 less than in January 2008. Cuts by localities, which pre-recession provided almost two-thirds (64.4%) of all government jobs, account for three-quarters (77.0%) of the ullage.

Background - Labor Force [Charts 30-41] The employment data discussed above are based on a survey of employers.  A separate survey of households generates data on 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). 

As discussed in more detail below, the national labor force expanded in October by 416,000 individuals as the number of jobholders rose by 683,000 and the count of jobseekers declined by 267,000.

Labor force participation: After reaching a historic peak in 2000, the labor force participation rate (i.e., jobholders and jobseekers as a percent of the work-age population) drifted gradually downward on shifting demographic trends. 

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

The declining labor force participation rate (LFPR) masks the underlying weakness in the nation’s labor markets. If October’s LFPR had been equivalent to the pre-recession average (e.g., 66.0% in 2007), the number of unemployed would have been almost double October’s count (16.8 million versus 9.0 million) and the unemployment rate 10.3% rather than the reported 5.8%.

Participation rates have declined differently by both age and gender.  In broad summary: The LFPRs of youth (16-24 years) and those in their prime earning years (25-54) have declined, while participation among those 55 and older rose. Within categories, female LFPRs declined less than males’ in the youth and prime-age cohorts, but from lower peaks; while among the above-55 cohorts, female rates rose more than males.

In this year’s third quarter (Q-3), the LFPR of youth (16-24 years of age) was 54.9%; it had peaked at 65.9% in Y2K. In Q-3, participation within the prime earnings cohort (25-54) was 80.9%; it peaked at 84.2% in Y2K.

At 64.2%, participation in Q-3 among those nearing retirement (55-64) exceeded that cohort’s Y2K peak rate (59.5%). And for those 65-and-over, the Q-3 LFPR was 18.5%; that was below last year’s 50-year high, but more than two-fifths higher than the Y2K peak.

Jobseekers: The number of individuals actively seeking work declined in October for the second consecutive month and reached the lowest count since July 2008. The unemployment rate slipped to 5.8%, also the lowest since mid-2008.

Jobholders: October’s increase in the number individuals at work (a monthly gain of 683,000) was the sixth consecutive monthly rise.  Over the past 12 months, the count of workers has increased by 3.0 million.

In October, the total number of Americans with jobs exceeded the pre-recession peak by 688,000 (+0.5%). 

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

In October, the employment rate rose to 59.2%, the best since July 2009. If October’s rate had been equivalent to that of 2007 (the year prior to the downturn when it was 63.0%), an additional 9.2 million individuals would have been at work.

Other indicators of labor force utilization were generally positive in October: under-employment fell for the sixth straight month and long-term unemployment is 1.1 million less than a year ago. The number of discouraged jobseekers rose in October, in part due to a rise in re-entrants (i.e., individuals resuming their search for work).

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