Are The Jobs Numbers Fake Now?


When similar results were posted in past employment data, Trump was dismissive and calling them lies. Now that the first labor report of his nascent presidency has been released, he is changing his tune. Trump officials are now openly touting the numbers as evidence that they are facilitating change. In reality, it is not much different than what we have seen over the last year.

There was an increase of 235,000 jobs and a modest decrease of the unemployment rate is 4.7 percent. Certainly, this is a positive development, but we should also recognize that there were 2,000 more jobs created at this time last year.

Having said that, Trump should receive some credit for the upbeat news. His promise to introduce more business-friendly legislation is being warmly received by business leaders and that’s reflected in bulging stock markets. Also, his efforts to reduce environmental oversight has already reaped benefits in manufacturing. After a long period of stagnant growth, there have been 57,000 jobs added in the past three months with almost half of that total occurring in February.

On the other hand, there hasn’t been demonstrative change in other employment factors. The labor force participation rate has changed little from 63.0 percent from 62.9 percent last year. Also, the employment-population ratio edged up slightly from 59.8 percent to 60 percent. An alternative measure of unemployment accounting for those only marginally attached to the labor force dropped to 9.2 percent. While continuing a long-running downward trend, its rate was matched as recently as last December.

As for wage growth, it continues to fall short of the three percent threshold that’s been illusive in recent history. In fact, we haven’t reached that growth level in almost six years. Currently, wages have grown by 2.5 percent over the past twelve months. While that’s better than last month, the average wage growth for the first two months of this year (2.3 percent) is slightly behind last year’s pace of 2.4 percent.

Until Trump passes a legislative agenda that reflects changes to taxes and regulation, it is unfair to judge his record, regardless of whether the future economy expands or contracts over the next few months. Let’s wait until this time next year where we can then more accurately measure his economic stewardship as commander-in-chief.

In summary, the employment picture is brightening, but that trend started long before the inauguration of Trump last November. It is more accurate to say that he effectively crafted a misleadingly gloomy view of employment prospects that elevated him to an improbable victory.

What’s fake is insinuating that the labor market is only now experiencing positive change.

Are We Seeing Weakness In U.S. Jobs Market?


March job numbers were disappointing.  Even though the unemployment rate was unchanged and this marked 61 months of positive job growth, job gains of 126,000 was the lowest since December 2013.  Though one should not overreact to data over a month’s period, we are seeing evidence of a disturbing trend.  Here’s the quarterly job rates over the last four quarters:

Screen Shot 2015-04-06 at 7.04.06 PM

Certainly, the last quarter of 2014 performance was strong, but the first quarter saw a decline of 39 percent and this was despite low gas prices that you would think boost consumer spending.  However, that has not occurred.  It is possible that a stronger U.S. dollar and Middle East turmoil might be finally filtering to U.S. employment figures.  A stronger dollar makes U.S. goods relatively more expensive than foreign goods, so that would lead to lower sales and dampened expectations for job growth.  Then factor in troubled spots throughout the global economy and that also diminishes outlook for U.S. exporters, who have gained greater influence over the overall economy.

So is this temporary or a precursor to further decline?

Most industries witnessed little growth, though there were some modest exceptions.  Retail trade employment rose at a similar rate to last year.  There are also steady gains in the health care industry.  Even though there were job gains in professional and business services, its rate of increase was less than last year.  However, there was not much growth in any other sectors.

Despite these concerns, there are some positive trends to note.  One, the unemployment rate is falling and the labor force participation rate is starting to stabilize a bit.  There has been little change in the labor force for over a year.  We can see this from the Atlanta Fed graph below.

Screen Shot 2015-04-06 at 7.14.02 PM

Another encouraging sign is that long-term unemployment continues to fall over the last year.  Over the last year, the percentage of long-term unemployment has fallen from 35.3 percent to 29.7 percent.  Due to this improvement, a broader gauge of unemployment (U-6) has fallen from 12.6 percent to 10.9 percent since March 2014.

On the other hand, there are troubling signs that appear to be on the horizon.

  1. Manufacturing activity is falling.
  2. Retail sales, excluding food, have fallen over the last couple of months.

With falling gas prices, one would think that it would loosen the pocketbook of consumers, but that has not come to fruition yet.  Retail sales have fallen below expectations over the last few months, which suggests that they are not pocketing this new-found wealth back into the economy.  A recent slowdown in manufacturing activity may mean that firms are not expecting robust growth this year.  That is consistent with a survey of CEOs, who are predicting modest growth that will fall below the 3 percent threshold that would point to good growth.

In summary, it appears that the downside risk outweigh the upside risk, so do not be surprised if turbulence returns to the labor market.

Labor Market Momentum Continues To Grow


The Bureau of Labor Statistics released their January 2015 jobs report that showed the economy grew by 257,000 jobs and the unemployment rate had a modest increase at 5.7 percent.  This is a good sign because January and February are typically slow hiring months with weather being a factor.  Over the last six months, we have gained at least 250,000 jobs or more in four of those months with an average job growth of 282,000.

Here is why the figure of 282,000 is significant.  If we can maintain this pace over the next two years, then we can close the jobs gap originating from the Great Recession before 2017.  Even though we have recovered all of the jobs lost from the Great Recession, a gap remains because there were not enough jobs created to account for the growth in the labor force.

When consumers feel that low gas prices will be permanent, we feel ‘richer’ and that will show in our spending habits.  As a result, we have seen retail trade employment grow by 46,000.  Other industries enjoying gains include health care, financial services, and manufacturing.

Another encouraging sign is in construction.  Despite January typically being a slow month due to weather, there was a gain of 39,000 jobs.  This figure exceeds monthly average of 28,000, thus suggesting that the housing market and business activity might see gains in the future.

Previously, we have seen job gains, but wages have been stagnant.  Hopefully, that trend will begin to reverse, which we have seen in January with average hourly wages increasing by 25 cents.  Even though the Fed will closely monitor wage growth for concern of inflation, Americans will be gratified to see their pay increase in the future.

Here are three graphs courtesy of the St. Louis Fed’s FRED research website that show how much the labor market has improved over the last year.

  1. Civilian unemployment rate is steadily falling.                 Screen Shot 2015-02-09 at 3.59.34 PM
  2. The alternative measure of unemployment (U-6) rate that attempts to measure discouraged workers and underemployed workers continue to fall.   Screen Shot 2015-02-09 at 4.00.52 PM
  3. Part-time employment for economic reasons is also falling.  Screen Shot 2015-02-09 at 4.02.03 PM

We are off to an encouraging start in January, so let’s hope the momentum continues through the year.

Jobs Are Steady Drizzle When Downpour Needed


Screen Shot 2013-07-09 at 6.11.23 AM

A look at June’s labor market shows no change in the unemployment rate of 7.6 percent, but there was an increase of 195,000 jobs created last month.  This marks thirty-three consecutive months of positive job growth.  Even though most of the job creation were in leisure and hospitality and retail trade (over 57 percent),  this total did exceed the expectations of economists, who were expecting growth of only 155,000.  Therefore, markets reacted positively.

Even though most of the job growth occurred in seasonal sectors, there were positive signs to draw in the broader measure of unemployment.  The U-6 unemployment rate fell from 14.8 percent to 14.3 percent over the last year.  This measure looks at those individuals, who are underemployed.  For example, an engineer, who loses his $80,000 job, but continues working part-time as a substitute math teacher at a fraction of that salary, would still count as being employed within the official figures.  However, earning a substitute teacher salary is a far cry from pay of a typical engineer.  Therefore, the U-6 rate would still count the engineer as unemployed.  Based on this rate decline, we can say that the labor market is brightening even when accounting for the normal seasonal gains.

As for the plight of the long-term unemployed, there was also some relief.  Of those unemployed, 36.7 percent have been looking for work for 27 weeks or more.  That is down from 41.7 percent last year.  While that is a positive sign, it is far from the 17.4 percent recorded in December 2007 when the Great Recession began.  This remains a concern because people who are out of a job for such a long period of time are more likely to experience diminished employment prospects well into the future.

On the downside, there was very little change in construction and manufacturing.  Large gains in construction infers that housing should be on the uptick.  More housing starts mean people will be buying more homes and that will lead to a multiplier effect where consumer spending will rise as they stock up on household and consumer items.  An increase in manufacturing activity is a sign that businesses are looking to expand and start adding to their payrolls.

While we can be comforted by the steady drizzle of job growth, a downpour of job creation will be needed to return to normalcy.  The Economic Policy Institute estimates that it will still take five more years before we will reach the pre-recession unemployment rate if current conditions are maintained.