Economic Notes: Disappointed Expectations
12/07/2010
By Patrick O'Keefe, Director of Economic Research, J.H. Cohn
Forecasters who expected job growth to accelerate in November were disappointed when the Bureau of Labor Statistics reported that employment barely budged as a small gain in private sector payrolls was partially offset by an even smaller decline in public sector jobs.
November’s uptick left the jobs count 7.4 million below its pre-recession level. And with unemployment up for two consecutive months, the number of long-term unemployed remains at near-record levels.
Although much attention has been given to November’s “disappointing” performance, the monthly changes were largely numerical noise (i.e., were not statistically significant). Further, technical factors (e.g., the timing of the survey) may have produced anomalies (e.g., a decline in retail employment) that will self-correct in subsequent months.
Better, then, to focus on the trend since employment began rising at the start of 2010.
In the year to date, employment has grown by just under one million jobs, but the recovery has been narrowly focused:
-
Private employers
added 1.2 million workers while public agencies (viz., local governments) cut 220,000;
-
Service providers
accounted for 90 percent of the private sector’s year-to-date increase; and,
-
Temporary help,
which comprises only two percent of the private sector’s jobs, was responsible for more than one-quarter (26.2%) of its year-to-date increase.
The economy’s tepid recovery is primarily responsible for the sluggish jobs growth, but that general drag is compounded by other factors, including inter alia:
- Increasing productivity, translating into more output per worker;
-
Elevated underemployment
(i.e., involuntary part-time workers), inclining employers to increase hours before adding workers; and
- Secular shifts (e.g., declining public sector jobs) as the economy rebalances.
Despite November’s “disappointing” performance, there are reasons to expect that the employment recovery will accelerate in the coming year, including:
While these factors will sustain the recovery and cause job growth to accelerate, it is likely that the rate of improvement will continue to disappoint.
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The statements, opinions, and conclusions contained herein are based solely upon the author’s own studies, research, and personal experience. Neither J.H. Cohn LLP nor the author makes any representation or warranty as to the accuracy or completeness of this information. J.H. Cohn LLP and the author expressly disclaim any liability for any loss or damage which may be incurred, of any kind whatsoever, as a result of or arising from the use of any of the information contained herein or reliance on the accuracy or completeness of it.
Patrick J. O’Keefe is director of economic research at J.H. Cohn LLP. He can be reached at pokeefe@jhcohn.com or 877-704-3500.