Coverage: The real state of employment
Employment numbers are closely watched by money manager, economists and just about anyone else trying to understand the state of the economy. While unemployment has been steadily dropping, hiring could be slowing. Companies are adding workers, just not at the expected pace.
Dan Burns had these numbers in his story for Reuters:
U.S. private employers added 208,000 jobs in November, falling short of economists’ expectations, a report by a payrolls processor showed on Wednesday.
Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 221,000 jobs.
October’s private payrolls were revised up to 233,000 from the previously reported 230,000.
Private employers have now added jobs for 57 straight months at an average rate of about 186,000 per month.
The Fortune story by John Kell talked about hiring at small businesses being the driver of the numbers for the month:
The gain was driven by a leap in hiring at small businesses, which ADP defines as companies with 49 or fewer employees. Payrolls for those businesses increased 101,000 in November, down 2,000 from October. Medium- and large-sized businesses also added jobs last month.
“Steady as she goes in the job market,” said Mark Zandi, chief economist of Moody’s Analytics. “The tightening in the job market will soon prompt acceleration in wage growth.”
By sector, the trade/transportation/utilities businesses added the most jobs last month. Professional/business services also boosted hiring significantly, while gains were more modest for the construction, manufacturing and financial activities industries.
The labor market has performed well of late, bolstered by U.S. economic growth that has encouraged employers to add jobs at a steady and consistent pace. The gains in jobs have been fairly broad-based in nature, though wages haven’t budged much.
The ADP report was issued two days before the federal government’s monthly jobs report, which includes the unemployment rate. Economists predict that report to show U.S. hiring increased by 230,000 in November, while the nation’s unemployment rate is expected to remain unchanged at 5.8%.
The Wall Street Journal story by Jeffrey Sparshott reported the Federal Reserve Board’s Beige Book numbers, calling the wage gains “muted”:
U.S. businesses added jobs across the country and sectors in October and November, though wage gains were muted outside a handful of fields facing a shortage of skilled workers, according to a Federal Reserve survey of regional economic conditions.
The Fed’s latest “beige book” for the period through Nov. 24 was broadly upbeat, marked by expanding economic activity across most of the country and optimism about growth prospects. The collection of anecdotal reports from the 12 Fed districts on hiring, spending and other aspects of the economy comes as central bankers get set for a Dec. 16-17 monetary-policy meeting where they will confront a mix of economic cross-currents, including steady hiring alongside meager wage gains and low inflation.
“The tone of the Beige Book report was cautiously optimistic, suggesting that the Fed continues to see expansion continuing across much of the U.S.,” said Gennadiy Goldberg, U.S. strategist at TD Securities.
A government report due Friday is expected to show nonfarm payrolls grew by a seasonally adjusted 230,000 in November and the unemployment rate held steady at 5.8%, according to economists surveyed by The Wall Street Journal. U.S. employers are on pace to post the best yearly gain in employment since 1999, though many of the new jobs are on lower-paying industries. But economists are forecasting average hourly wages will rise only 0.2% in November from the prior month. In October, hourly earnings for private-sector workers rose 2% compared with a year earlier, not much above the inflation rate.
But a New York Times story by Patricia Cohen pointed out that employment numbers don’t tell the whole story. Some workers are still struggling to get by on piecemeal jobs:
Income variability is difficult to quantify, but studies that try to measure it suggest that ups and downs in income, particularly among the poorest 10 percent of American families, started to rise in the 1970s, leveled off in the early 2000s and then increased significantly again when the recession started.
A 2012 study by Daniel Sichel, an economist at Wellesley; Douglas Elmendorf, director of the Congressional Budget Office; and Karen Dynan, who now heads the Treasury Department’ Office of Economic Policy, found that “household income became noticeably more volatile between the early 1970s and the late 2000s” despite a period of increased stability throughout the economy as a whole.
A more recent national survey by the Federal Reserve, based on 2013 data, suggests the problem has not only persisted as the economy recovers but may even have worsened. More than 30 percent of Americans reported spikes and dips in their incomes. Among that group, 42 percent cited an irregular work schedule; an additional 27 percent blamed a span of joblessness or seasonal work.
The data show “a clear upward trend in income volatility,” according to a report from U.S. Financial Diaries, which on Wednesday released the first results of an in-depth study of low- and moderate-income families.
In the diaries’ research, nearly all of the 235 households studied experienced a drop in monthly income of at least 25 percent in a single year. The main culprits were reduced work hours, health problems and shifts in household size, like a needy relative coming to stay.
While the labor market might be adding jobs, it seems that wages aren’t keeping up. Many people are struggling with seasonal and temporary work, which will only increase during the retail holiday hiring season. Gains are good, but those that are fleeting aren’t doing much to get Americans back to work for the long-term.