January Employment Report: Weak but Contains “Green Shoots”

Morris Segall      "green shoots" in employment, 2009 economy, 2010 employment data, employment report, future trends, strenthening 2011 economy, unemployment, winter recovery in jobs

The January monthly employment report reported on Friday showed a dispappointing creation of 36,000 jobs versus the 150,000+ again expected by economists and analysts. 2010 job market data for both the Household and Business Surveys have been revised to reflect new Census numbers and new seasonal adjustment and other measurement changes. Since October’s 171,000 revised level of new jobs, November, December and now January’s job growth have not been close to the 150,000 level expected since October. Yes, the revisions to November and December job growth numbers  have been positive, as we expected, amounting to a cumulative 40,000 additional jobs from previously reported data. Nonetheless, the average number of new jobs created in November and December of last year amount to a weak level of slightly over 100,000. We have no doubt the very low level of job creation in January was negatively affected by harsh winter weather and expect an upward revision when February monthly job data is reported because of the absolutely low level of job creation reported. We also believe the weather in January interrupted timely and more complete survey reporting. However, December winter weather was harsh also and still allowed for over 120,000 new jobs being created. In addition, the weather so far in February continues to be severe, so it might be a March thaw before job creation, per the monthly surveys, show a more normalized pattern. In addition, major benchmark revisions to 2010 data will be forthcoming in February which will reflect new readings on the 2010 labor market. Finally, the unemployment rate surprisingly dropped for the second month to 9%. However, the drop in the unemployment rate since November primarily reflects a decline in the labor force of over 750,000 workers, a sign of continued discouragement among American workers.

Despite the low level of new jobs reported, the January employment report shows some continued improvement in  labor market trends that we mentioned in our January 9th blog article. Namely, further improvement (+ 49,000) in manufacturing employment making it three consecutive months and a cumulative increase of 78,000 jobs in this important sector. It supports the strengthening in the manufacturing sector in the fourth quarter of last year which is leading to increased hiring. In addition,  jobs were created in wholesale and retail trade, in furtherance of the fourth quarter hiring in these sectors. This reflects the strong retail sales trends in the fourth quarter of last year and the positive indications for retail sales in January as recently reported by major retailers. Lastly, the January data show a drop in temporary help hiring, the first such decline in a year, and significant increases in IT and administrative jobs indicating a broadening of permanent hiring in the important Professional and Business Services category. Continuing a positive trend first seen in December, job losses due to the ending of temporary assignments dropped again by nearly 500,000 and the number of  unemployed 5-14 weeks in duration dropped by 168,000 and are down over 400,000 since October. Thus, while the overall employment situation is still weak, we see “green shoots” in the monthly data and improvement in the weekly unemployment claims data. Other positive data on consumer and business spending and manufacturing orders and production augur well for further improvement in job creation going forward.

Morris R. Segall, CFA, CIC