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


11/3/14

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

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

Forecast:

  • We expect the BLS to report that total nonfarm employment rose by 255,000 jobs in October. If so, the year-to-date jobs increase will be the largest since 1999.
  • We look for the BLS data to show that, with labor force participation rising for the first time in three months and the count of jobholders growing even more rapidly, the number of jobseekers fell to the lowest level since July 2008. The unemployment rate is expected to slip to 5.8%.
     

View a chartbook displaying the most recent labor market indicators.

Background - Employment [Charts 1-29]: Total nonfarm employment increased by more than 2.0 million jobs in the first nine months of 2014.  The bulk of this year’s gains have been in the private sector; but unlike the first four years of the jobs recovery, 2014’s increases have been supplemented by modest increases in public sector jobs for eight consecutive months.

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 since May, but the cumulative difference is slight (+0.8%). 

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

Year-to-date through September, 2014’s employment gains have exceeded 2013’s comparable period by 17.5%. The acceleration is attributable to a faster pace of private sector growth (12.7% ahead of 2013’s comparable period) and the  public sector’s shift from shedding jobs (-24,000) in 2013 to adding them (+57,000) in 2014. 

The jobs recovery remains uneven and partially incomplete. In September, private employment was 1.5 million (1.3%) above the pre-recession peak; but government employment was 477,000 (-2.1%) below.

Within the private sector, the recovery is also uneven and partially incomplete: 

  • Goods producers payrolls – despite having regained 1.5 million jobs from the start of the jobs recovery – remain 2.8 million below their January 2008 peak; 
  • Private service provider payrolls, on the other hand, are 4.3 million (4.6%) larger.
     

Among goods producers, manufacturers had 1.6 million fewer jobs in September than in January 2008; construction firms 1.4 million less. Both had been declining prior to the recession. Growth within the extraction industries (i.e., logging, mining, and drilling) – a mere sliver (0.8%) of all private jobs – partially offset the other producers’ losses by adding 182,000 jobs.

Private service providers, on the other hand, have added 8.8 million jobs since the jobs recovery began in March 2010. September’s service sector payrolls were 4.3 million larger than their pre-recession zenith.

But even among service providers, the recovery has been uneven and remains incomplete:

  • Uneven: Among private service providers whose employment levels exceed their pre-recession peaks, two (Food/Drink and Temporary Help) account for one-quarter (26.9%) of the sector’s gains, more than double their share (12.9%) of the sector’s jobs in the five years (2003-2007) prior to the recession. 
  • Incomplete: Among the private service providers with employment levels below their pre-recession tops are: information services, financial activities, and both retail and wholesale trade. Their collective ullage exceeds 940,000 jobs.
     

Public sector employment in September was 477,000 below the downturn’s start. Cuts by localities, which pre-recession provided almost two-thirds (64.4%) of all government jobs, account for three-quarters (78.4%) 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 below, the labor force declined marginally (-97,000) in September as an increase in jobholders (+232,000) was exceeded by a decline in jobseekers (-329,000).

Labor force participation: After reaching a historic peak in 2000 (Y2K), 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 and the rate fell to a 36-year low (62.8%) at the end of 2013. It has hovered near that level since.

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

In this year’s third quarter (Q-3), the participation rate 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 rate 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 (-329,000) in September to the lowest number since July 2008.

September’s unemployment rate was 5.9%, also the lowest since mid-2008 as, for the second straight month, the number of jobseekers declined, most recently by 329.000.

Jobholders: September’s rise in the number individuals at work, the fifth consecutive monthly increase, returned the number of Americans with jobs to its November 2007 peak of 146.6 million. 

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. 

For the fourth month, the employment rate was 59.0%, the highest in five years.

Other indicators of labor force utilization were generally positive in September: under-employment and long-term unemployment both declined, the number of discouraged jobseekers hovered at a five-year low.


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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