Full Recovery Ahead? A Big-Picture Look at Employment Data

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on Jun 16, 2014 2:20:00 PM

and tagged Employment

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employment dataReturning to the office after 10 days out, I have a lot of reading to catch up on. One benefit of that, though, is being able to connect individual data points for a bigger-picture view.

Employment, in particular, caught my eye this morning. Taken together, a slew of positive employment numbers paint an even better picture. (The employment data here is from various federal sources, as compiled by Ned Davis Research.)

Business hiring: strong and growing

Unless businesses need to hire, there are no new jobs. That’s why looking at how businesses feel is a good indication of how many jobs will be created. Consider these recent survey results:

  • The Conference Board’s Employment Trends Index rose by the most in six months, hitting its highest level since January 2008.
  • Per the SHRM/LINE survey, manufacturing employment in June is expected to increase at the fastest pace since data started being collected in 2004.
  • According to the Duke/CFO Magazine Global Business Outlook Survey, CFOs plan to increase payrolls at a steady pace, while wages and salaries will accelerate.
  • The NFIB Small Business Optimism Index showed that the net share of firms with job openings held at 24 percent, the highest level since January 2008.
  • The Manpower Employment Outlook Survey rose to the highest level since the second quarter of 2008, with the hiring pace expected to increase or remain stable in 12 of 13 industries.
  • The Job Openings and Labor Turnover Survey showed that the number of unemployed per job opening fell to 2.2, the lowest level since May 2008.

Surveys are good for predicting the future, but they have to be supported by current data as well. For example:

  • Private payrolls increased at a rate of 216,000 last month, well above both the 6- and 12-month averages, showing accelerating growth.
  • The average workweek of 34.5 hours matched its highest level since August 2008.
  • The workweek for manufacturing, production, and nonsupervisory workers was 42.1 hours, the most since 1945. (You read that right—since the end of World War II.)
  • Overtime for those workers hit the highest level since October 2000.
And these are good jobs!

One concern has been whether the jobs being created are good ones, or just part-time, low wage positions. As it turns out, full-time jobs are increasing while earnings for the average worker are growing faster than wages overall.

  • Per the BLS household survey data, the number of employed rose by 145,000, with full-time jobs representing all of the employment increase.
  • The full-time unemployment rate dropped to 6.4 percent, the lowest since September 2008.
  • The number of people working part-time for economic reasons declined by 200,000, sending the underemployment rate to its lowest level since October 2008.
  • Wage growth rose to 2.1 percent, up from an upwardly revised 2 percent.
  • For production and nonsupervisory workers, which account for 80 percent of all jobs, wage income was up 2.5 percent.
  • Aggregate payrolls, a proxy for total wage income, increased 4.2 percent, reflecting increases in hours worked as well as wages per hour.
Unemployment: getting better

If this good news is real, it should show up in the unemployment statistics as well—and it does.

  • The share of long-term unemployed dropped to 34.6 percent, the lowest level since August 2009.
  • The four-week average of initial unemployment claims remains near its lowest level since October 2007.
Slowing population growth could bring further improvements

In the future, growing labor demand will be matched with reduced supply, which should further tighten the labor market.

  • The U.S. labor pool will grow 75 percent more slowly than usual over the next decade, according to John Burns Consulting.
  • Lower worker populations and higher retiree populations should drive labor force growth to around 200,000 per year by 2022, at which point it will stay flat for several years.

I’ve used a lot of italics in this post, I know. But, considered together, these employment data points are enough to convince me that we’ve largely recovered from the financial crisis, at least on a trend basis, and that we should recover on an absolute basis in the reasonably near future.

Upcoming Appearances

Tune in to Bloomberg Radio's Bloomberg Businessweek on Friday, February 28, at 3:45 P.M. ET to hear Brad talk about the market. Stream the show live at https://www.bloombergradio.com/, listen through SiriusXM 119, or download Bloomberg's app, Bloomberg Radio+.

Tune into Yahoo Finance's The Final Round on Thursday, March 12, between 2:50 and 4:00 P.M. ET to hear Brad talk about the market. Exact interview time will be updated once confirmed. Watch at finance.yahoo.com

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