Workplace Economy Slides November Final1


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October’s report brought some welcome signs of life in the U.S. labor market, specifically 159,000 new private sector jobs.

The unemployment rate is holding steady at 9.6%. The slight increase in unemployment shows that those who may have stopped searching for a job are now looking to rejoin the labor force.

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  • Economists React: ‘Step in the Right Direction’ on Jobs Wall Street Journal By Phil Izzo Economists and others weigh in on the increase in jobs and steady unemployment rate. – The October jobs report suggests that labor market conditions are improving. We believe this reflects a transition from a productivity led recovery to a modest expansion that is sustained by job and income growth. –David Greenlaw, Morgan Stanley – The October employment report, in the context of the current recovery, was terrific and included upward revisions to previous months of 110,000… The report is better than expected and a most welcome development, corroborating our general thesis: the recovery is ongoing while the data continue to suggest that worries about a double dip recession are overblown. –Dan Greenhaus, Miller Tabak – One upbeat employment report does not change the picture that this will be a slow and long-drawn-out recovery. And there were strong private employment gains back in March and April that didn’t continue. But today’s news does further reduce the likelihood of the dreaded “double dip”, and as that risk is seen to recede, businesses and households may become more confident to hire and spend.–Nigel Gault, IHS Global Insight – Even though October’s job growth is a step in the right direction, given the backlog of 14.8 million unemployed workers in this country, the pace of job growth is not strong enough to bring the unemployment rate down to pre-recession levels anytime soon. At October’s rate of job growth, the economy would achieve prerecession unemployment rates (5% in December 2007) in roughly twenty years. –Heidi Shierholz, EPI – Jobs are jobs, they generate income and that is all to the good and perhaps from here the recovery can finally begin to gain some traction. The lion’s share of the increase in employment was on the service side and of the services that hired, 28,000 went to retail and 21,000 to accommodation and food services. Another 35,000 went into temporary hiring (Obamacare is writ large in the ongoing growth of this group) and 24,000 into health care – a standard monthly increase. Where the data today are consequently a bit disappointing is that growth was centered in those industries servicing consumer needs (personal and laundry services were up 11,000) and not in the expansion of what is produced by either the goods or service sector. The numbers also failed to put a dent into long-term unemployment. –Steven Blitz, ITG Investment Research – Local government education workers declined by a whopping 117,000 seasonally adjusted from July through September. I viewed some of that as statistical noise and, indeed, the category rebounded somewhat in October, though the 8,000 gain is obviously meager compared to the prior losses. I will probably call for another gain in this category in November. Meanwhile, there were several categories that were still soft, including manufacturing (down 7,000), finance (down 1,000), leisure and hospitality (down 5,000), and noneducation state and local government workers. It is encouraging that there are still plenty of areas that are ripe for improvement. –Stephen Stanley, Pierpoint Securities — Retailers have begun to hire for the holiday shopping season. With better mood, it is hoped that consumers would splurge during the season. Education and health continue to be the workhorse of the job market. Temporary help, a harbinger of more full-time jobs, rose 35,000. Also, average work week and average hourly earnings moved in the right direction. The index of aggregate hours worked, a good measure of economic growth, rose by 0.43 percentage point indicating that the economy is growing slowly. –Sung Won Sohn, Smith School of Business and Economics – This report plus the revisions to previous months suggest that services employment and overall labor market conditions have been stronger than original data had indicated. Private employment has now averaged gains of 112,000 during 2010. While the recovery in employment has been disappointing relative to the sharp decline in employment observed during the recession, the trends in the underlying data suggest that the unemployment rate should remain on its gradual downward trend. –Michael Gapen, Barclays Capital – We had not been expecting sustained private payrolls at this pace until next spring, and this could easily be a fluke. But for now it looks good. –Ian Shepherdson, High Frequency Economics – The unemployment rate held steady Tat 9.6% despite a 330,000 decline in the volatile household jobs offset by a 254,000 decline in the labor force. For the first 10 months of 2010, private sector jobs rose by 1.1 million (110,000 per month) and household jobs rose by 1.27 million (127,000 per month) which is a very consistent picture of a moderate improvement in the labor market. To be sure, in a “full-speed” recovery, job gains would be double these numbers and the Unemployment rate would be dropping. –Stuart Hoffman, PNC – An increase in the number of long-term unemployed looks a tad suspicious since weekly data show a fairly impressive drop over the corresponding interval between survey weeks. This divergence highlights the sometimes conflicting signals that often complicate the interpretation of various high-frequency job data. –David Resler, Nomura Global Economics – The slow rebound in employment since last spring is clearly due to the very moderate pace of the economic expansion. If demand for goods and services produced in the United States is climbing slowly, most employers have little reason to add to their payrolls. State and local governments face a grim budget outlook. With the expiration of federal fiscal relief and little prospect that it will resume, we should expect public employment to be weak for a considerable period. Total job growth is still far too slow to put a dent in the nation’s high unemployment rate. –Gary Burtless, Brookings Institution – With so much slack in the labor market, income growth is still hobbled, and this is what matters most for the sustainability of the recovery. Fortunately, there has been some acceleration in the pace of private income gains; more hours worked will promote healthy gains in paychecks even if pay gains stay anemic for some time as we expect.– Aaron Smith, Moody’s Analytics
  • After months of painful losses, the economy added jobs last month, spurring hopes that the labor market may finally be turning around. The economy added 151,000 jobs in October, the Labor Department reported Friday, an improvement over September, when the economy lost 41,000 jobs. That was much better than the 68,000 gain that economists surveyed by were expecting, and the best overall number since May. "It's maybe an indication that we're starting to turn the corner," said Stephen Bronars, senior economist with Welch Consulting. "It's a small step, but at least we're going in the right direction. Things are definitely not going to get worse.“ Businesses continued to hire for the tenth month in a row, following nearly two straight years of private sector losses. Companies added 159,000 jobs to their payrolls in October, much stronger than the 92,000 jobs economists had predicted for the sector. But the government continued to slash jobs, shedding 8,000 workers in the month. Only a handful of census workers were cut from government payrolls in October -- nearly the last of the temporary census jobs that have dragged down public sector job growth for the last four months. And upward revisions for August and September showed there were 110,000 additional job gains in those months than previously reported. The unemployment rate, which is calculated in a separate survey, remained unchanged at 9.6%, the government said Friday. President Obama praised the numbers in an address following the announcement, but emphasized that more improvement is needed. "We've now seen four months of private-sector job growth above 100,000, which is the first time we've seen this kind of increase in over four years," he said. "That's not good enough. The unemployment rate is still unacceptably high and we've got a lot of work to do.“ Americans still struggling While the report was a generally positive sign, the job market is still very fragile. The labor market needs about 150,000 jobs per month just to keep pace with population growth, and at least 300,000 per month to make a dent in unemployment, Bronars said. Unemployment is likely to remain high for some time. The rate doesn't include 1.2 million discouraged workers who've stopped looking for a job. "There are still a lot of people who have stopped looking for work because there weren't as many hires, and as they come back in, it's going to keep that unemployment rate high for a while," Bronars said. The number of Americans who are involuntarily working part-time, fell to 9.2 million in October but still remains just shy of record highs. This category includes workers who are stuck in part-time jobs because either their hours have been cut or they can't find full-time work. The so-called underemployment rate, which counts both discouraged workers and involuntarily part-time workers, slipped to 17% from 17.1% in September. That means more than one in six adults are still without the job they want or need.
  • As of September 2010 report
  • The number of new jobs in the government's October employment report was good news. But the improvement in wages might be even better news. That's because getting more money into consumers' pockets is the key to getting the economy moving again. Part of that improvement will come from the gain in 151,000 jobs in the October report, led by the best hiring by businesses in six months. But a bigger economic impact may come from the extra wages spread across the 90% of workers who already had jobs. Average weekly wages improved by the biggest percentage in October than at any time since the start of the Great Recession -- up 3.5% compared to a year ago. That's not because of an improvement in hourly wages. In fact, hourly wages made only modest gains -- 1.7% from a year ago. It's still a buyer's market for employers, and with their choice of job applicants desperate for work, they aren't under any pressure to raise wages. But with increases in the number of hours worked, workers still came out on top. Average hours were up 1.8%, the biggest year-over-year gain in hours in 26 years. Employees whose hours had been cut were returning to full-time status in October, as the number of workers stuck in part-time jobs when they wanted full-time work plunged by 318,000 in the month. That's a good sign for the future, since employers are more likely to ramp up the hours of their part-time workers before they start hiring new employees. "Businesses are saying they need more help, but they're not willing to commit to more workers yet, so they're adding hours, adding temporary employees," said economist Jay Bryson of Wells Fargo Securities. "That's good, since it generally means more full-time hiring comes next.“ Private companies added 159,000 jobs in October, leading to a stronger-than-expected overall gain. It was the best gain in business hiring in six months. Still, economists say even stronger business hiring is necessary to bring down the unemployment rate from the stubbornly high reading of 9.6%. But the most important effect of the extra hours isn't as a signal of hiring to come. It's the fact the extra hours means more money in paychecks, which will hopefully lead to more spending and economic growth ahead. "All these things -- the longer hours, the pick-up in hiring -- they're going to give a nice kick to income and that's very good for spending," said Robert Brusca of FAO Economics. "That's the way things will get better.“ While economists caution that one strong employment report is not enough to declare a job market rebound, they said the gains shouldn't be discounted. The October report might eventually be looked upon as a turning point for the economy, said Sung Won Sohn, economics professor at Cal State University Channel Islands. The timing of the income gains, right before the start of the holiday shopping season, could also be a key, he said. "If we can have a decent holiday shopping season, we can feel more comfortable about the economy and employment, and everything will come together," said Sohn. "We have already seen some uptick in retail sales. Retailers are feeling a bit more optimistic about the upcoming holiday season. That's one reason they added 28,000 workers in the month.“ The other good news behind the headline numbers were the revisions to previous months' reports, which showed the labor market wasn't quite as weak as previously thought. The revisions added a total of 110,000 jobs to last month's readings for August and September. That's on top of revisions from the previous two months that added 108,000 jobs above earlier readings. "Things aren't going gangbusters relative to what the economy needs. But there are positive things going on there," said Brusca. "I think the bottom line is that it looks better."
  • Jason Henry for The Wall Street Journal After looking for work since 1999, John Brown, of Jacksonville, Fla., last week started a $15-an-hour job installing and repairing cable service. MVP RV Inc., a Riverside, Calif., manufacturer of recreational vehicles, hired 65 people last month—on top of the 120 on its payroll—and plans to add more in the months ahead, says Scott Degnan, vice president of sales and marketing. The company shuttered in April 2009 as demand for its products dried up and manufacturers across the RV industry collapsed. It restarted in August with new investors and now has a backlog of orders. Still, the job market faces a long road to full recovery. After losing almost 8.4 million jobs during the downturn, the economy has added 874,000 jobs since December. But at October's pace it would take almost 50 months just to replace the lost positions. The economy generally needs to add at least 100,000 jobs a month on top of that just to keep pace with growth in the labor market. At the current pace, the unemployment rate would not return to its pre-recession level of around 5% for almost two decades. Last month, the number of people unemployed for more than six months rose by 83,000 to 6.2 million. That's about 42% of the 14.8 million unemployed. Many of those people face the prospect of losing their extended unemployment benefits at the end of this month if a lame-duck Congress doesn't act. While the high unemployment rate will keep pressure on Congress to extend jobless benefits and expiring tax cuts, the stronger payroll data should relieve pressure on the Fed. The central bank on Wednesday unveiled plans to buy $600 billion in Treasury securities through next June. The economy is "not growing very fast," Fed Chairman Ben Bernanke told college students in Jacksonville, Fla., on Friday. "And as a result, the unemployment rate, if at all, is coming down very, very slowly." Some of the strongest gains in October came from the professional and business services sector, which added 46,000 positions, and the retail industry, which added 28,000 jobs. Construction payrolls increased by 5,000, while manufacturing shed 7,000 positions and government lost 8,000. For many businesses, consumer demand remains too low to plan for significant increases in payrolls. Chattanooga, Tenn.-based Chattanooga Bakery Inc., for example, has seen demand for its MoonPies and other pastries steadily growing. The company never cut workers during the recession. But with costs for commodities like sugar running higher, and with customers unwilling to pay more, it's holding off plans to add to its work force. "It's awfully hard to consider passing along cost increases in this environment with people hurt so badly," said president Sam Campbell. "When we get a more stable pricing environment, we do have plans to expand."
  • New York Times (Online) The economy added 151,000 jobs on net in October, as the ramp up in private hiring finally overtook the job losses in the government. In just the private sector, payrolls increased by 159,000 in October, after rising by 107,000 in September. The chart above shows job changes in the most recession compared with previous ones, with the black line representing the current downturn. The line has risen since last year, but still has a long way to go before the job market fully recovers to its prerecession level. Since the downturn began in December 2007, the economy has shed, on net, about 5.4 percent of its nonfarm payroll jobs. And that doesn’t  account for the fact that the working-age population has continued to grow, meaning that if the economy were healthy we should have more jobs today than we had before the recession. The unemployment rate (measured by a different government survey, and based on how many people are without jobs but are looking for work) stayed flat at 9.6 percent.
  • Workplace Economy Slides November Final1

    1. 1. Economic data As of November 2010 Reflective of the October 2010 National Jobs Report from the Bureau of Labor Statistics
    2. 2. Private sector growth continues 0 -3 -6 -9% 2 4 6 8 1210 14 16 20+ Months of job losses Unemployment Lines Cumulative job loss in selected recessions, as a percentage of total jobs JOBS GAINED IN OCTOBER UNEMPLOYMENT RATE WORST UNEMPLOYMENT RATE SINCE 151,000 9.6% 1983 0 -3 -6 -9% 2 4 6 8 1210 Months of job losses 1945 1948-49 1953-54 Current recession 1981-82 1973-75 2001 18
    3. 3. Unemployment rate remains unchanged at 9.6% Source: Labor Department 0.0 2.0 4.0 6.0 8.0 10.0 12.0 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Percent
    4. 4. Change in non-farm payrolls for October 2010 Source:
    5. 5. Continued private sector business gains are needed for growth
    6. 6. Leisure&Hospitality Construction Manufacturing Retail Legal Accounting Architecture/Engineering Finance IT/Technical Healthcare Temporary +5 -7 -5 +27.9 -.3 -4.7 0 +2.6 +7.5 +24 +35 In thousands Sector changes for October
    7. 7. 9.6% 4.7% 8.5% 10.1% 15.3% National average College educated Some college High school diploma Less than high school Education continues to be the job search differentiator…
    8. 8. Regional unemployment snapshot… 7.3% 7.7% 7.8% 7.9% 8.2% 8.5% 8.7% 8.7% 9.4% 9.4% 9.5% 10.0% 10.5% 11.8% 12.1% 13.4% 15.0% Boston Milwaukee Baltimore Dallas Houston New York Philadelphia Seattle Chicago Cleveland St. Louis Atlanta San Francisco Los Angeles Miami Detroit Las Vegas
    9. 9. Weekly earnings increase by 3.5% compared to October 2009 Source:
    10. 10. Surprising job growth, Yet steady unemployment rate Source:
    11. 11. Comparing recoveries: Job changes Source:
    12. 12. The October jobs report brought significant private sector job growth with unemployment remaining steady… Opportunities • The growth of private sector jobs pleasantly surprised economists, more growth will be needed to lower the unemployment rate. • As the holiday season approaches, this year the retail sector is performing even stronger than in past years with employment rising by 27,900 jobs in October. • Increased weekly earnings indicates positive economic growth and could indicate increased consumer spending Weaknesses • Government job cuts account for most of the 8,000 public sector jobs losses • The unemployment rate remaining stagnant at 9.6% is a sign that although jobs are being added to the economy, they are not being creating quick enough to counteract the increase in job seekers looking for new employment In summary