Net Job Creation through June 2014

The total number of people employed in the US is now 138.780 million. The official unemployment rate known as U3 was 6.1 percent in June with 9,474,000 people registered as unemployed. The more significant number be believe is U6 which is officially described as “Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force.” On this basis unemployment is almost exactly double the official figure at 12.1 percent. Figure 2 shows the progression of both U3 and U6 since January 2000. The Armada Executive Intelligence Brief commented as follows on June 23rd: “The good news is that the economy has been adding around 200,000 a month for the last six months and that is a pretty good run. The not so good news is that these gains didn’t have much impact on the overall rate of unemployment. It was assumed that part of that stability stemmed from the fact that some people were coming back into the formal search for employment after being in the ranks of the discouraged worker but the truth is that U-6 unemployment barely budged and this is the place where that discouraged workers tends to show up. Some analysts made a big deal of the fact that the US economy had managed to recover the jobs that were lost at the time of the recession but that recovery took five years and has not allowed for all the people that have come into the workforce since 2009.”

Table 1 slices total employment into service and goods producinf2g industries and then into private and government employees. Total employment equals the sum of private and government employees. It also equals the sum of goods producing and service employees. Most of the goods producing employees work in manufacturing and construction and these sectors are further subdivided in Table 1. In June private employment grew by 262,000 and government by 26,000. Co-incidentally service industries also expanded by 262,000 and goods producing by 26,000 people. The rate of growth of service and goods producing industries has been similar for the last one, three, twelve and twenty four month periods. Private sector employment has expanded by 4.3 percent in the last 24 months as government has contracted by 0.1 percent. The contraction of government has gone into reverse in the last five months during which time 76,000 government jobs have been created. In these five months the federal government has shed 8,000 jobs, state governments have gained 8,000 and local governments have added 76,000 positions.

The growth of construction employment outpaced manufacturing for the last 3, 12 and 24 month periods but in both May and June slowed to a 0.1 percent growth rate, the same as manufacturing. Of the net new goods producing jobs gained in June, 6,000 were in construction and 16,000 in manufacturing. In the last 24 months construction has added 395,000 jobs as manufacturing has expanded by 182,000, (Figure 3). The Associated General Contractors of America (AGC) reported on, June 30th: Construction employment expanded in 218 metro areas, declined in 72 and was stagnant in 49 between May 2013 and May 2014, according to a new analysis by the AGC. Association officials warned that job losses could spread to more metros unless policy makers in Washington quickly agree on providing new funding for the federal highway program. “Construction employment continues to rise in about two-thirds of the nation’s metro areas,” said Ken Simonson, the association’s chief economist. “However, there are still many areas that have not achieved consistent growth, and very few metros have exceeded previous peaks of construction employment.” Association officials urged Congress and the White House to reach agreement on both short-term funding relief for the federal highway trust fund and a long-term renewal and reform of the program. Unless legislation is adopted in the next few weeks, there will be disruptions in payments to highway contractors for work already performed. Another deadline looms on Sept. 30; after that date, both highway and transit construction programs will be suspended if new authorizing legislation is not in place.

Virtually all of the growth in employment since 2010 has been in full time work with almost a net zero increase in part time employment. In the last 12 months 2,117,000 full time jobs have been created and only 10,000 part time.

The global outplacement consultancy Challenger, Gray & Christmas, Inc. issued the following press release on Thursday. At SMU we see relevance in this report as a reality check on other data sources that we use to evaluate the direction and velocity of employment change.

After climbing to a 15-month high in May, planned job cuts announced by U.S.-based employers in June plunged 41 percent to 31,434, the lowest one month total so far this year. The three month moving average fell to 41,600, down by 9.5 percent year over year, (Figure 4). Through the first half of 2014, the pace of job cutting is down 5.0 percent from a year ago. June job cuts were 20 percent lower than the same month a year ago, when employers announced 39,372 job cuts. Job cuts during the month dropped sharply from May, when planned layoffs reached 52,961, which was the largest monthly total since February 2013, when 55,356 job cuts were announced. At the midpoint of 2014, planned job cuts total 246,034, which is 5.0 percent fewer than the 258,932 job cuts announced in the first six months of 2013. The year-to-date figure is the second-lowest first-half total since the end of the recession behind 2011, when 245,806 job cuts were announced from January through June. New Jersey-based employers were hit particularly hard by June layoff activity, accounting for three of the top four job-cut announcements during the month. The closures of two Atlantic City casinos and a Westhampton-based transportation firm resulted in nearly 7,000 job cuts.

The heaviest downsizing through the first half of the year occurred in the computer industry, where employers announced plans to cut 30,002 workers from their payrolls. Retailers have also seen heavy job cuts, having announced 26,863 planned layoffs through June.

“The holidays were not kind to several retailers who answered with heavy layoffs in the first quarter. We saw large-scale job-cut announcements from Macy’s, Best Buy, J.C. Penney, and

Sears to start out the year. Meanwhile, one of the largest job cuts of the year so far resulted from the bankruptcy of Coldwater Creek, which resulted in 5,500 layoffs,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas. “The same arctic weather that sapped momentum out of the entire economy in the first quarter undoubtedly contributed to retailers’ misfortune during the same stretch. The situation appears to have improved along with the weather, as layoffs by retailers declined by more than half in the second quarter,” said Challenger. “It is also important to understand that not all of these job cuts are related to the economy. Retailers, in particular, are vulnerable to constantly changing trends in fashion, technology, and consumer demand. Retail, in general, continues to grow. But it is an increasingly competitive space where we could see more failures than successes. “The same could be said for the tech sector. Obviously, this is an area with a huge potential for growth. After all, we are more and more reliant on computers, software and other technology every day. However, change in this industry occurs rapidly, and some of the larger, less nimble companies are sometimes forced to alter their course and that can be painful. This was exemplified by large layoff announcements in the first half of this year by Hewlett-Packard and Intel,” said Challenger.

The Bureau of Labor Statistics press release, Thursday July 3rd read as follows:

Total nonfarm payroll employment increased by 288,000 in June, and the unemployment rate declined to 6.1 percent. Job gains were widespread, led by employment growth in professional and business services, retail trade, food services and drinking places, and health care. Over the past 3 months, job growth has averaged 272,000 per month.

In June, employment growth was widespread, led by gains in professional and business services, retail trade, food services and drinking places, and health care.

Employment in professional and business services rose by 67,000 in June and had averaged 53,000 per month over the prior 12 months. In June, employment within the industry increased in management and technical consulting services (+8,000), architectural and engineering services (+7,000), and computer systems design and related services (+7,000). Employment continued to trend up in temporary help services.

Retail trade employment increased by 40,000 in June. Over the prior 12 months, employment in this industry had grown by an average of 26,000 per month. In June, job growth in the industry occurred in motor vehicle and parts dealers (+12,000), building material and garden supply stores (+8,000), and electronics and appliance stores (+7,000).

Health care employment increased by 21,000 in June, about in line with the prior 12-month average gain of 18,000 per month. Within health care, employment continued to trend up in ambulatory health care services (+13,000) and in nursing and residential care facilities (+6,000).

Transportation and warehousing employment increased by 17,000 in June. Over the prior 12 months, this industry had added an average of 11,000 jobs per month. In June, couriers and messengers added 6,000 jobs.

Financial activities added 17,000 jobs in June, with a gain of 9,000 in insurance carriers and related activities. Employment in real estate and rental and leasing continued to trend up in June (+9,000). Financial activities had added an average of 5,000 jobs per month over the prior 12 months.

Manufacturing added 16,000 jobs in June, with all of the increase in durable goods manufacturing. Within durable goods, employment increased in motor vehicles and parts (+6,000) and in computer and peripheral equipment (+3,000).

Employment changed little over the month in other major industries, including mining and logging, construction, information, and government.

In June, the average workweek for all employees on private nonfarm payrolls was 34.5 hours for the fourth straight month. Both the manufacturing workweek, at 41.1 hours, and factory overtime, at 3.5 hours, were unchanged in June. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was 33.7 hours for the fourth consecutive month.

In June, average hourly earnings for all employees on private nonfarm payrolls rose by 6 cents to $24.45, following a 6-cent increase in May. Over the past 12 months, average hourly earnings have risen by 2.0 percent. In June, average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents to $20.58.

The change in total nonfarm payroll employment for April was revised from +282,000 to +304,000, and the change for May was revised from +217,000 to +224,000. With these revisions, employment gains in April and May were 29,000 higher than previously reported.

SMU Comment: The recovery in total nonfarm employment is now looking stronger than the 2004 to 2007 time frame but economists still have concerns because the low income level of jobs being created which translates to a slower improvement in total disposable income. The US economy has dramatically transformed in the direction of service industries in preference to goods producing, (Figure 5) and many of the service jobs are low income. Disposable income drives almost 70 percent of GDP which in turn strongly influences steel consumption.