Economic Notes: More than meets the eye…
2/08/2010
By Patrick O'Keefe, Director of Economic Research, J.H. Cohn
Despite finding that employment declined in January, the Bureau of Labor Statistics (BLS) monthly jobs report confirms that the nation’s labor market has begun to recover. Except for November’s employment increase, January’s drop was the smallest job loss in two years.
The improved tone of the jobs market was most evident in plunging underemployment – those involuntarily working in part time jobs due to economic conditions. In January, underemployment dropped 9.5% – falling below 9 million workers for the first time since early autumn. The shift from recession-shortened to full-time jobs may not command headlines, but it translates into higher incomes.
Private service providers, who account for more than two-thirds of all employment, added jobs for the second time in three months.
Job gains in the recession-resistant health care sector were outstripped by increased temporary help employment, a precursor of broader hiring in the coming months.
The retail sector was credited with a jobs gain, but it was an artifact of seasonal adjustment as merchants’ post-holiday layoffs were fewer than usual due to subdued pre-holiday hiring.
Although goods producers continued to shed jobs, once again the picture was mixed.
Manufacturers added jobs for the first time since December 2006 – a year before the recession began. Increased production workers are needed to restock inventories in anticipation of continued acceleration in the pace of new orders.
Factories’ gains were exceeded by cutbacks in construction jobs. And the building sector remains schizophrenic, as it has been since housing tanked in 2006. Now, however, even as residential construction moves off last spring’s bottom, nonresidential activity continues to contract. Consequently, hard hat employment has yet to find its footing.
Joblessness fell for the third consecutive month and the unemployment rate – the number of individuals actively seeking work as a percentage of the labor force – fell below 10% for the first time since September.
Among the unemployed were fewer “job losers” and more reentrants, indicating improving prospects for those who lost their jobs during the downturn. Despite the improvement, however, the average spell of unemployment continues to lengthen.
Over the course of the recession, the U.S. lost 8.4 million jobs – 6.4% of its total employment.
Increased employment is the sine qua non of a sustainable recovery. But January’s loss of jobs, while unwelcome, masked a marked improvement in the nation’s labor markets.
Rising temporary help hires and the shift of underemployed workers to full time jobs are two signs that the demand for labor is increasing – which bodes well for consumer confidence.
In other words, January’s jobs report was more than meets the eye.
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