Outlook for June Jobs Report

If tomorrow’s jobs report for June looks like the June 2011 report, we will see payroll job growth of 132,000.  If the labor market report matches the average growth in the decade prior to the 2008-2009 recession payroll employment would increase by 193,000.  Even this more rapid growth would correspond to an annual employment growth rate of 1.75%, barely enough jobs to keep pace with population growth and the rising participation rates of women and older workers.

Labor market observers should pay attention to the growth in full-time employment between May and June (from the household survey) for adults age 20-24, many of whom are just finishing school.  From 1998 to 2007 the full-time employment of workers in this age group increased by 9%, on average, between May and June.  Over the past four years, as new graduates have struggled to find jobs, full-time employment grew by an average of only 6.3% between May and June for adults age 20-24.

Comparing Half-time in America to Morning in America

The Bureau of Labor Statistics just released another solid jobs report, for February.  The labor market is recovering from the recession, but payroll employment is growing much more slowly than it was in early 1984.  Moreover, the unemployment rate remains stubbornly high relative to 1984 and previous recoveries.

Payroll employment grew by:

• 926,000 jobs in the first two months of 1984 or about 1.0 percent
• 511,000 jobs in the first two months of 2012 or about 0.4 percent

Employment grew 2.5 times faster in early 1984 than in early 2011.  Payroll employment needed to increase by 1.33 million jobs rather than 511,000 jobs in the first two months of 2012 to be comparable to 1984.

The current unemployment rate of 8.3% is slightly higher than the unemployment rate of 7.8% in February, 1984.  The natural unemployment rate in 1984 was higher because the workforce was less mature.  Younger and less experienced workers tend to have higher unemployment rates because they are often switching jobs.  It is therefore more accurate to compare unemployment rates by age group.

The table below shows that, age-group by age-group, the unemployment rate in 2012 is 0.7% to 4.4% higher than in 1984.

Age Group	Unemployment Rate February 2012	Unemployment Rate February 1984	Difference
16-19	23.8%	19.4%	4.4%
20-24	13.8%	11.7%	2.1%
25-34	8.7%	7.9%	0.8%
35-44	6.8%	5.3%	1.5%
45-54	6.4%	5.0%	1.4%
55-64*	6.1%	5.4%	0.7%
65-69*	6.5%	3.9%	2.6%
*Not Seasonally Adjusted for these Age Groups

 The unemployment rates of young workers and seniors are much higher today than in 1984.  The unemployment rate of prime working age adults, age 35-54, is about 1.5% higher than in 1984.

Despite a few solid jobs reports, the labor market recovery remains weak by historical standards.  Employment growth is not as robust, unemployment rates are higher, and a higher fraction of the unemployed have been out of work for at least six months compared to earlier recoveries

Could it be the Weather?

Friday’s jobs report showed that the economy lost almost 2.7 million jobs between December 2011 and January 2012.  That’s pretty good for a January.  In the world of labor statistics and seasonal adjustments it translates into a gain of 243,000 jobs.  How does that work?  The Job loss of 2.02% in January of 2012 was better than what we have seen recently.  If we exclude the change from December 2008 to January 2009, at the depths of the recession, the average December to January change since 2006 was a decline in employment of 2.11%.

We learned on Friday that employment is 9/100 of one percent higher than it would be have been if January 2012 was like the typical January in recent years.  With total employment in the U.S. of approximately 130 million, this means there were 117,000 more people working in January than we would have otherwise expected.

What does this mean for our economic outlook?  It could be that employment was slightly higher due to an unusually mild winter.  It could be that fewer seasonal workers were hired heading into the holidays and laid off in January.  The January employment declines in retail and leisure and hospitality were unusually modest; 3.4% compared to the typical 3.6% decline.  These two industries account for half of the 117k additional jobs.

Friday’s jobs report may be signaling that the labor market recovery is accelerating as we head into 2012.  Or it may indicate that consumer spending was a little higher during an unusually mild January.  If the latter is correct we should be prepared for smaller than usual employment gains as we head from winter into spring.