BLS Data Shows Job Creation Decline in March

To examine if any seasonality is left in the data after adjustment, we have developed Figure 2. In the eight years since and including 2011, job creation in March has declined by 35 percent. This year, the decline was 64 percent, therefore worse than normal. The difference between this and the historical March average was to a large extent a payback for the very strong February result. February was up by 85 percent from January compared to a historical average gain of 22 percent. Of more significance was the downward revision of the number of jobs created in January. In February, the January gain was reported to be 239,000. In March, this was revised down by 63,000 to 176,000. This was the largest revision that we ever remember. 

Total nonfarm payrolls are now 9,865,000 more than they were at the pre-recession high of February 2008. Total nonfarm employment in March was 148.2 million. According to BLS data, the average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in March. In manufacturing, the workweek declined by 0.1 hour to 40.9 hours; overtime declined by 0.1 hour to 3.6 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls declined by 0.1 hour to 33.7 hours. In March, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $26.82. Over the year, average hourly earnings have increased by 71 cents, or 2.7 percent. Average hourly earnings for private-sector production and nonsupervisory employees increased by 4 cents to $22.42 in March. 

Table 1 breaks total employment down into service and goods-producing industries and then into private and government employees. Most of the goods-producing employees work in manufacturing and construction and the components of these two sectors of most relevance to steel people are broken out in Table 1.

In March, 102,000 jobs were created in the private sector and government gained 1,000 jobs. The number employed by the federal government declined by 1,000 to 2.8 million. State governments also lost 1,000 for a total of 5.1 million, while local governments gained 3,000 to reach a total of 14.4 million. Since February 2010, the employment low point, private employers have added 18,647,000 jobs as government has lost 150,000 (Figure 3).

In March, service industries expanded by 88,000 as goods-producing industries, driven mainly by construction and manufacturing, expanded by 15,000. There was an unusual discrepancy between these two sectors in March when manufacturing gained 22,000 and construction lost 15,000 jobs. The construction result was payback for the February gain, which was the largest monthly increase since before the recession. Since February 2010, service industries have added 15,620,000 and goods-producing 2,877,000 positions. This is part of the reason why wage growth has been slow since the recession as service industries on average pay less than goods-producing industries such as manufacturing.

Table 1 shows that primary metals gained 3,700 jobs in March, and in the last 12 months on a percentage basis was up by more than twice that of total manufacturing. Motor vehicles and parts industries gained 3,800 jobs in March, transportation equipment gained 4,800 jobs. Trucking gained 6,700 jobs in March and in the last 12 months was up by 1.6 percent. 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 with the most relevance to the steel industry.

Construction was reported to have lost 15,000 jobs in March, but is up by 3.3 percent in the last 12 months. Construction has added 1,650,000 jobs and manufacturing 1,179,000 since the recessionary employment low point in February 2010 (Figure 4). According to the Associated General Contractors of America (AGC), 78 percent of construction firms are reporting difficulty in finding qualified labor. The jobless rate among experienced construction workers is at a record low, and in the last two years job openings in the construction industry have neared pre-housing bubble peaks.

The official unemployment rate, U3, reported in the BLS Household survey (see explanation below) came in at 4.1 percent, which was unchanged since October but down from 4.8 percent in January 2017. This number doesn’t account for those who have stopped looking. The more comprehensive U6 unemployment rate declined from 9.2 percent in January last year to 8.0 percent in this latest report (Figure 5). U6 includes individuals working part time who desire full-time work and those who want to work but are so discouraged they have stopped looking. The differential between these rates was usually less than 4 percent before the recession; in March it was 3.9 percent.

The employment participation rate is calculated by dividing the number of people actively participating in the labor force by the total number of people eligible to participate. This measure was 62.9 percent in March, which was up from 62.7 percent in each month October through January. Another gauge is the number employed as a percentage of the population, which we think is more definitive. In March, the employment-to-population ratio was 60.4 percent, up from 59.7 percent in January last year and from 59.5 percent in January 2015. The employment-to-population ratio has made progress for the last four years, but the labor force participation rate has been stalled for two years. Figure 6 shows both measures on one graph.

In the 39 months since and including January 2015, there has been an increase of 7,500,000 full-time and 352,000 part-time jobs. Figure 7 shows the rolling 12-month change in both part-time and full-time employment. This data comes from the household survey and part-time is defined as less than 35 hours per week. Because the full-time/part-time data comes from the household survey and the headline job creation number comes from the establishment survey, the two cannot be compared in any given month. To overcome the volatility in the part-time numbers, we must look at longer time periods than a month or even a quarter, which is why we look at a rolling 12 months for the full-time and part-time employment picture shown in Figure 7.

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 8 shows the history of unfilled job openings through January when openings stood at 6,312,000, which was an all-time high. There has been an improving trend since mid-2009.

Initial claims for unemployment insurance, reported weekly by the Department of Labor, flattened in 2017 except for the hurricane-driven spike. New claims in late February were at the lowest level since 1969. In the week ending March 31, initial claims were 242,000 with a four-week moving average of 228,250 claims. This is a continuation of the longest streak since 1973 of initial claims below 300,000 (Figure 9).

Another piece of the employment puzzle is the Challenger report, which measures monthly job cuts (Figure 10). This data also tends to be quite erratic; therefore, we again examine a rolling 12 months and can see that job cuts decreased from April 2016 through September 2017, leveled off then ticked up in March 2018. It’s too soon to tell if this is the start of a new trend. March cuts were highest in retail, which announced 35,042 cuts in the month.

SMU Comment: Rising employment and wages are the basis of GDP growth because personal consumption accounts for almost 70 percent of GDP. Steel consumption is related to GDP; therefore, we need to be aware of changes to the employment picture. As we enter 2018, the employment situation is very good, job openings are at an all-time high, and new claims for unemployment are close to a 44-year low. Manufacturing employment is 1.9 percent higher than this time last year and construction is up by 3.3 percent. The employment situation has been described as “full” by some analysts. March was the 88th consecutive month of job growth. If as reported there is a shortage of qualified employees, we can expect an increase in wage-driven inflation soon. Employment growth in manufacturing and construction are signposts for steel sales activity. 2018 is starting off well.

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. The BLS reports on the results of two surveys. The Establishment survey reports the actual number employed by industry. The Household survey reports on the unemployment rate, participation rate, earnings, average workweek, the breakout into full-time and part-time workers and lots more details describing the age breakdown of the unemployed, reasons for and duration of unemployment. At Steel Market Update, we track the job creation numbers by many different categories. The BLS database is a reality check for other economic data streams such as manufacturing and construction. 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 database to obtain employment data for many subsectors of the economy. For example, among hundreds of sub-indexes are truck transportation, auto production and primary metals production. The important point about all these data streams is in which direction they are headed. Whenever possible, we 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 or weakness on a geographic basis. Reports by individual state can be produced on request.