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U.S. Employment Situation
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The story with wage growth (or lack thereof) ...
The Fed made an expected move last week when it ended its bond-buying program because of the strengthen economy and resulting in renewed speculations about rising interest rates. But discussions among monetary policy makers and Fed-watchers persist about the apparent lack of wage growth in the current economy. With so many other employment metrics showing an improving employment situation, the question remains why is the labor market not tighter? The answer likely lies in wage growth (or the lack thereof). There are myriad reasons why this metric is part of the bigger picture so it's important to know why and what has been occurring with it.
Many other employment market indicators (unemployment rate, new job creation, insured unemployment, growth of the labor force, which we have previously examined in detail) are showing an economy that is expanding, but wages, although increasing, are apparently rising below what the Fed would like to see. Officially, the Fed may not have an official "target" for wage growth as it does for inflation at 2 percent. "Inflation running persistently below its objective could pose risks to economic performance," according to an official Fed transcript from a June news conference. The Fed's current inflation projections are 1.5 to 1.7 percent in 2014 and 1.6 to 2.0 percent in 2016 [yes, 2016 -- ed.].
Although it is generally understood the changes in wages are tracked through the Employment Cost Index (which also tracks total compensation, which includes benefit costs), it is only released quarterly.
Therefore, we have used another data set that is available monthly. Even though wages are rising about 2 percent (also what the ECI shows) on a seasonally adjusted basis -- as this chart shows -- the Fed considers a 2 percent increase as "essentially flat rather than rising, and real wage growth really has not been rising in line with productivity."
And the change on the average weekly pay shows wage growth that has been fairly stagnant for some time after dropping during the recession and recovering in the early stages of the recovery. Wage growth has clearly not returned to the pre-recessionary level.
When wages rise more rapidly than inflation, people experience a real increase in take-home pay. And, within limits, when that occurs across the labor market, it could be a sign of a tighter labor market. Wage growth at a greater rate of inflation should also translate into greater buying power among workers which, in turn, could encourage increases in consumer spending, which is growing at a healthy pace now. However, the up tick in consumer spending now not necessarily because of higher wages but possibility because a) consumers have improved their personal balance sheets and eliminated the debt overhang from the last recession and b) low interest rates do not provide any incentives for savings.
Just for grins, let's take a look at two sectors relevant to the staffing industry -- the major sector of manufacturing and computer systems design that is dominated by technology. Unfortunately, seasonally adjusted data are not readily available at this level. In order to partially compensate for the "static" in the not seasonally adjusted series, we've also presented the six-month moving average trend lines and made them prominent.
As the six-month moving average shows, nominal wage increases in manufacturing have not changed much after rising briefly after the recession ended. Perhaps that rise was a strategy to attract workers as the recession left the sector short of enough staff as the manufacturing sector picked up post-recession.
But, the six-month moving average for the computer systems design and related services sector tell a different story. Pre-recession wages in this sector were growing rapidly year-on-year, but plummeted during the recession likely as businesses that used the services of this sector stopped or put IT projects on hold. And since that drop, wage growth -- as a manifestation of demand for professionals with those skills in the computer systems and design and related services sector -- has not recovered to the pre-recessionary trend. However, this phenomena may be due to an increase of outsourcing so labor shortages for these skill sets may very well exist, but are showing up in other sectors.
Media request (possible PR opportunity)
Recently we were contacted by a reporter with Bloomberg Businessweek working on a story about Amazon's use of temporary help services to staff its warehouses. Yeah, we know this can be a controversial subject. But it can also be an opportunity for you and the staffing industry to tell your side of the issue, even if just to explain why your staffing company would not want to service Amazon, or just participate as part of a large contract.
His name is Adam Satariano and he can be contacted at: firstname.lastname@example.org | 415-617-7204
He's willing to have a conversation "on background," which means that your name and company will not be revealed (but make sure to set those ground rules before you start a conversation).
If you want to talk to me first, just give me a ring (numbers at the bottom of this report) and I'll answer any questions you may have.
OurTemporary Help Services Interactive Data Book tool will enable to view the local (down to the county level) temporary help services trends as well as benchmark your local staffing operation to discover exactly where you are positioned in the market and if your offices are performing up to the local market.
Then use ourEmployment Tracking Tool that is designed to assist you in identifying and evaluating new sectors and markets. It examines the overall employment trends by industry in the given market to help determine possibly under-serviced industries to target marketing efforts (as well as what industries to avoid). By doing this, it shows what industries are growing and therefore are in expansion mode making them eager for a wide variety of products and services and likely in need of additional staff.
What will 2022 look like for staffing services?
The U.S. Bureau of Labor Statistics recently published 10-year employment projections. These projections are based upon a plethora of criteria including how changes in population demographics will affect the demand for specific goods and services, the types of jobs, and levels of education for workers to fill those jobs. Our report highlights some of the changes in the direction that both jobs (occupations) and well as employment changes by industry and sector that may be of special interest to staffing industry executives planning for the near-term future.
You may be surprised to learn that it appears that light industrial will be a growing sector for staffing services encompassing growing portion of staffing services jobs by the year 2022; office and administrative support jobs, although they will remain a significant part of staffing services jobs, will decline slightly as its portion of the overall mix.
Our report on the expected employment projections to the year 2022, which is only eight years away, as they relate to staffing services to assist you in planning for the future. Given the highly analytical nature of our readers and followers, this brief, eight-page report is light on words but heavy on tables and charts. And because we know you are a busy executive, you don't even have to go to the additional step of requesting this gratis and valuable report from us. Just directly download it from here.
Looking for more? Check out our podcasts!
Podcasts of the current employment situation will be available by 4:00 p.m. ET, Thursday, July 3rd. The video podcast, which you can start and stop to study the tables and graphs as well as replay individual sections, includes additional data and information. Watch the video version here or just listen to the audio version here (no special hardware or software required), which also can be downloaded to an iPod or any smartphone.
The "ultimate consultant's consultant."
"Bruce is an invaluable resource to me in working through the strategic planning process with my clients in the staffing industry. Bruce consults with me on each engagement and customizes his deliverables accordingly, exceeding my expectations each time. He expediently gathers and compiles the data I need and delivers it in user-friendly reports which make the analysis portion of my job easy. Because with Bruce's assistance I can make strategy recommendations with confidence and accuracy, my clients benefit greatly in turn. He is the ultimate "consultant's consultant." -- Amy Bingham, Bingham Consulting Professionals | View more Testimonials
October 2014 Employment Report
The unemployment rate incrementally declined in October to 5.8 percent and the last time it was at this level was more than six years ago in July 2008. In September it was 5.9 percent and a year ago in October 2013 it was 7.2 percent. For more detail, see the "Household Survey" section at the bottom of this column.
On the other side of the monthly employment picture, the total number of jobs was up 214,000 and although that was good job growth, it was as strong as some labor market gurus were expecting. [Some of those expectations were based upon the holiday retail season -- and associated hiring -- starting around Halloween. Guess some those gurus were either too optimistic or the bump in hiring didn't occur until after the reference week, which is the week that includes the 12th day of the month. See data on Retail sector below. -- ed.] In September, it was up 256,000 and a year ago, in October 2013, total nonfarm jobs grew by 237,000.
Total private-sector jobs grew by 209,000 in October that, again, was good but below September's growth of 244,000, but on par with August's gain of 200,000. A year earlier, in October 2013, private-sector grew payrolls by 247,000.
The private Goods-producing sector grew by 28,000 jobs in October compared to growth of 36,000 in September, and although better than August's gain of 22,000, it was not as good as a year ago (October 2013) when it grew by 38,000.
The private Service-providing sector contributed 181,000 more jobs in October, which was off the pace from the 208,000 it added in September but consistent with the 178,000 it gained in August; a year ago in October 2013, this sector was up by 209,000.
The total number of Government jobs was up by 5,000. The federal government was down 3,000 jobs; State government was up by 1,000; and Local government grew by 7,000.
Temporary Help Services Roundup
No need to change our opening sentence from last month's report: Temporary Help Services continued to grow and reach new highs with consistent and strong growth.
In October, Temporary help services was up 15,100 to 2,942,700, which was 0.5 percent sequential growth and year-on-year growth of 8.8 percent.
In September, THS was up by 17,800 jobs, and although October's growth was slower, let's look at the sector's performance one year ago. In October 2013, THS was only up by 4,000 jobs with sequential growth of 0.1 percent and year-on-year growth of 7.5 percent. The next two months, THS grew by more than 30,000 in November 2013 as well as December 2013.
Temporary help service's market share -- that is its portion of all jobs -- continued to increase and reached an all-time high of 2.107 percent in October, the first time it breached 2.1 percent (previously reported data were revised downward); in September it was 2.099 percent and was 1.974 percent in October 2013. To see a chart of Temporary help's growth from January 1991 to October 2014 and comparing the trend to total employment, click here.
(if the chart is unclear, click onit to open in a browser window)
TheOctober 5.8 percent unemployment rate -- the lowest it has been since July 2008 -- was a 0.1 percent decline from September's 5.9 percent. In October 2013, was 7.2 percent.
That 5.8 percent unemployment rate was the result of a labor force despite growing by 416,000 and there were 683,000 more employed persons while the number of unemployed persons declined by 267,000. The number not in the labor force declined by 206,000.
The employment-to-population ratio jumped (this metric rarely moves this much sequentially) by 0.2 to 59.2 percent in October and up from 58.2 percent a year earlier. The labor force participation rate incrementally increased to 62.8 percent (was 62.7 percent in September) and it was the same as a year earlier. The number of discouraged workers continued to decline with only 770,000 of them compared to 815,000 a year earlier in October 2013.
BTW, we maintain an updated table of many major employment as well as other economic indicators here or here for the mobile version. And, in case you missed it in our opening commentary, we are starting to change the format of our economic indicators, starting with this month's jobs and employment data.
NEXT EMPLOYMENT REPORT --FRIDAY, DECEMBER 5, 2014
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