The Labor Market: Turning the Corner
The labor market has clearly turned the corner and will improve substantially in the year ahead. Although payrolls fell slightly in January, civilian employment — an alternative measure of jobs that includes self-employment — soared 785,000. In the past three months, private payrolls have declined an average of 20,000, while civilian employment has increased an average of 110,000. One reason payrolls seem to be lagging a little is that companies are aggressively expanding hours. Total hours have increased at a 1.8 percent annual rate in the past three months, the equivalent of about 200,000 jobs per month. In other words, the demand for labor is there, it’s just that firms are meeting it by increasing hours. But they can’t do this forever, so we are likely on the cusp of large payroll gains. Meanwhile, the unemployment rate has dropped to 9.7 percent from 10.1 percent and even the more comprehensive measure of unemployment (that includes “discouraged workers” and those working part-time but who say they want full-time hours) has dropped to 16.5 percent from 17.4 percent. Payroll gains have gone from being isolated in education/health and then temps to now manufacturing and retail. The share of industries increasing payrolls is 47 percent versus 17 percent at the low in March 2009. Given the rapid economic growth we’ve had since the fall, job gains will get much more widespread in the months ahead.
— Bob Stein is senior economist with First Trust Advisers.