In October net job creation was 161,000. August was revised up by 9,000 and September revised up by 35,000. Using a three month moving average (3MMA), the result for October was 176,000 down from 233,000 in August and from 206,000 in September. Figure 1 shows the 3MMA of the number of jobs created as the brown bars since 2000.
These numbers are seasonally adjusted by the BLS so to examine if any seasonality is left in the data after adjustment we have developed Figure 2.
Evidently the seasonal adjustment is less than perfect. In the six years since and including 2011, October job creation has been down by 5.5 percent. This year October was down by 15.7 percent therefore this is not a great result. Total nonfarm payrolls are now 6,587,000 more than they were at the pre-recession high of January 2008.
Table 1 slices total employment into service and goods producing 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 the components of these two sectors that we consider to be of most relevance to steel people are broken out in Table 1. In October, 142,000 jobs were created in the private sector and government gained 19,000. The Federal government gained 12,000 as state governments and local governments gained 3,000 and 4,000 respectively. Since February 2010, the employment low point, private employers have added 15,460,000 jobs as government has shed 241,000. In October service industries expanded by 161,000 as goods producing industries exactly broke even compared to September. Since February 2010, service industries have added 13,231,000 and goods producing 1,988,000 positions. This is part of the reason for stagnant wage growth since service industries on average pay less than goods producing such as manufacturing.
In October manufacturing lost 9,000 jobs and for the year as a whole is down by 62,000. Half of the YTD loss occurred in the last three months. In October total manufacturing employment was 0.4 percent less than a year ago but 0.1 percent higher than two years ago. Primary metals have had only one month of positive job growth in the last 21 months and have lost 3.9 percent in the previous 12 months and 7.9 percent in 24 months. Table 1 shows that in October truck transportation added 3,000 people. Trucking lost 11,200 people in the period February through June but has gained back 9,500 of those losses in the last four months. A welcome trend. In the last four months there has been zero net loss in oil and gas extraction. Motor vehicles and parts have been stagnant for the last four months with a total loss of 1,700 positions. Note the subcomponents of both manufacturing and construction shown in Table 1 don’t add up to the total because we have only included those that we think have most relevance to the steel industry.
Construction was reported to have gained 11,000 jobs in October and is up by 82,000 YTD. There is no sign of a slowdown in the growth of construction employment as 44,000 of the YTD gain has occurred in the last four months. This conflicts with the construction expenditures report (CPIP) issued by the Department of Commerce which is showing a continuous slowdown since March. The Associated General Contractors of America have been reporting for months of a lack of availability of skilled workers which is being ameliorated by longer work weeks. Perhaps the industry is now catching up.
Some of the major construction sub categories are routinely reported one month in arrears which distorts the data in Table 1. These include, industrial buildings, commercial buildings and highways and streets. Construction has added 1,179,000 jobs and manufacturing 805,000 since the recessionary employment low point in February 2010 (Figure 3).
Construction has leapt ahead of manufacturing as a job creator but the growth of construction productivity is very low (or non-existent), in contrast to manufacturing where it is very high. The difference is the difficulty of automating construction jobs.
The official unemployment rate, U3, calculated from a different survey at 4.9 percent is the same as it was in January with small monthly variations ranging from 4.7 percent to 5.0 percent. This number doesn’t take into account those who have stopped looking. The more comprehensive U6 unemployment rate was down from 9.9 percent in January to 9.5 percent in October (Figure 4).
U6 includes workers working part time who desire full time work and people who want to work but are so discouraged that they have stopped looking. The differential between these rates was usually less than 4 percent before the recession but is still 4.6 percent.
The employment participation rate is widely quoted in the press as going nowhere. In October 2016 the rate was 62.8 percent, with a 3MMA also of 62.8 percent. In January the rate was 62.7 percent. We’re not sure that we understand what this is a percentage “of” because of the multiple descriptions of the labor pool. Another measure is the number employed as a percentage of the population which we think is much more definitive. In October this measure was fell from 59.8 to 59.7 but the 3MMA was unchanged also at 59.7 percent. There has been a gradual improvement in employment to population ratio since late 2011. Figure 5 shows both measures on one graph.
In the 22 months since and including January 2015 there has been an increase of 4,259,000 full time and a gain of 221,000 part time jobs. Figure 6 shows the rolling 12 month total change in both part time and full time employment.
Frequently in the press we read that a large part of job creation is in part time employment which in some months, including October is true but the part-time numbers are extremely volatile. For the first time this month we have included full time and part time statistics in Table 1 just to keep an eye on them. This data comes from a different BLS survey therefore the total of the two cannot be compared with the headline result in any particular month. To overcome the volatility we have to look at longer time periods than a month or even a quarter which is why we look at a rolling 12 months for this component of the employment picture in Figure 6.
The job openings report known as JOLTS is reported on about the 10th of the month by the Federal Reserve and is over a month in arrears. Figure 7 shows the history of unfilled job openings through September when openings stood at 5,486,000 not far off the all-time high of 5,845 in April. There has been an improving trend throughout 2016.
Initial claims for unemployment insurance, reported weekly by the Department of Labor have continued their downward drift this year and in w /e October 29th were 257,750 on a four week moving average basis. This marks the longest streak since 1973 of initial claims below 300,000. (Figure 8).
The last piece of the employment puzzle that we examine is the Challenger report which measures job cuts monthly (Figure 9).
This data also tends to be quite erratic therefore again we examine a rolling 12 months and can see that job cuts increased from late 2014 through April this year and have declined for the last six months.
SMU Comment: The employment picture is pretty much business as has become usual for almost five years. October was the 72st consecutive month of job growth but it looks as though a slowdown is occurring. The high months in 2015 were lower than 2014 and that trend continued into 2016. Manufacturing data had been disappointing this year as construction has been encouraging. Primary metals have had growth contraction for 21 months. The recent results for the road hauling sector are encouraging and job losses in the oil fields have halted. The results for manufacturing and construction are sign posts for steel sales activity. In the big picture, layoffs are historically low and job openings are close to all-time highs therefore there seems to be no reason for pessimism.
Explanation: On the first Friday of each month the Bureau of Labor Statistics releases the employment data for the previous month. Data is available at www.bls.gov. At SMU we track the job creation numbers by many different categories. The BLS data base is a reality check for other economic data streams such as manufacturing and construction and we include the net job creation figures for those two sectors in our “Key Indicators” report. It is easy to drill down into the BLS data base to obtain employment data for many sub sectors of the economy. For example, among hundreds of sub-indexes are truck transportation, auto production and primary metals production. The important point about each of these hundreds of data streams is in which direction they are headed. Whenever possible we at SMU try to track three separate data sources for a given steel related sector of the economy. We believe this gives a reasonable picture of market direction. The BLS data is one of the most important sources of fine grained economic data that we use in our analyses. The States also collect their own employment numbers independently of the BLS. The compiled state data compares well with the federal data. Every three months SMU examines the state data and provides a regional report which indicates strength of weakness on a geographic basis. Reports by individual state can be produced on request.
Peter WrightRead more from Peter Wright
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