Early Glimmers of a Jobs Rebound
By Gene Balas
| Nov 14, 2011 | 5:30 PM EST |
It's early still, and there are well-known risks on the horizon, but I am seeing glimmers of improvement in the jobs market. Several data series point toward job growth, and upcoming data will tell us more.
One of the more promising data series is the Jobs Openings and Labor Turnover Survey (or JOLTS report) from the Bureau of Labor Statistics. In it, we see that the number of job openings in September was 3.4 million, up from 3.1 million in August. Although job openings remained below the 4.4 million when the recession began in December 2007, the level in September was 1.2 million higher than in July 2009 (the most recent trough for the series).
The number of job openings has increased 38% since the end of the recession in June 2009 and is the highest in the past six months. In fact, the number of openings is about 600,000 more than a year ago. Welcome news indeed. And the initial jobless claims numbers recently fell below the 400,000 level that tends to be associated with increased hiring. Survey data for both manufacturers and service industries from the Institute for Supply Management also show that companies are adding to staff.
Job openings are where we can see the earliest glimpse of intentions to hire. They tend to lead job additions by a month or two, but the usual caveat with this data series is that some openings get filled with an internal candidate, and other positions might not get filled at all, for whatever reason.
The other thing to remember is that employers are rather picky in this environment. They are taking the time to hire the "perfect" person, so there may be a bit more of a delay than usual when we might see these hiring trends show up in the Employment Situation report (a.k.a. non-farm payrolls).
We see increased job openings in each of the main sectors included in the report, except for construction. Even state and local governments show an increase in job openings. The trade, transportation and warehousing sector was among those with the biggest increase in absolute terms in job openings. And recall that transportation is often, though not always, a leading barometer of economic growth.
Another sector with large gains in job openings was professional and business services. This category includes accountants, legal professionals, engineers, architects -- and temps. The JOLTS data doesn't break down this sector among subcategories, but the more comprehensive Employment Situation report (which does break out temporary workers as a separate subcomponent) indicates that companies are hiring temporary workers rather than bringing people on board as permanent, full-time employees.
In prior economic cycles, temp hiring was often seen as a precursor to permanent hiring, and thus was usually considered a leading indicator. Not anymore. These days, companies are hiring temps instead of, rather than prior to, adding full-time, permanent staff. Companies are reluctant to commit to hiring permanent employees with so much "uncertainty" (I really hate to use that word – it is really overused at this point) in the current environment. Temps, after all, can be easily dismissed if they are no longer deemed necessary or cost effective. Companies are trying their hardest to control costs, and being able to "right-size" (another term I loathe) their staff quickly can keep their costs manageable.
Cost control is where the good news ends, at least for the time being. Companies might be a bit more willing to hire, but right now, they are not willing to give their employees raises. Real (i.e., inflation-adjusted) hourly earnings for all private employees, as reported by the BLS, are down 1.9% from a year ago. They fell 0.1% from a month ago, after a 0.6% drop the month before.
For non-managerial and production staff, the picture looks even dimmer: Real hourly earnings fell by 2.4% from a year ago and by 0.2% from a month ago, after falling by 0.5% in the prior month. This is not quite an encouraging trend, especially since we are not seeing this pattern of a decline in inflation adjusted hourly earnings show any signs of reversal in recent months.
These reports contain some good news, but I'm not ready to give the all-clear just yet. We will have to wait for confirmation of these job openings in actual hires in upcoming months, such as through the Employment Situation report, which will measure actions, not merely intentions. Still, the lack of real wage gains is going to make it harder for consumers to increase their spending, even if more of them have jobs.
So, even if hiring does rebound a bit, the aggregate real-income growth of the economy -- which is arguably just as important to economic growth as the unemployment rate, if not more -- will still be quite lackluster, unless companies both hire and give their existing workers more pay. |
