Jobs – Lot of Them

Today’s employment report was very positive. It is difficult, even for a conformed skeptic like myself, to find much to gripe about – we will get to my caveats in a moment. If this keeps up the election this November takes on a totally different tenor. More importantly, a whole bunch of people will be newly employed. About time.

According to the report the US economy added 243,000 jobs in January. Virtually all of this was in the private sector and was well distributed across the economy – no one sector or industry dominated, so this was a broad based gain. Of note was the 50,000 new jobs on manufacturing, and the gain in retail stores which was a little patchy but nonetheless strong. The retail sector lost 14,000 jobs in specialty clothing stores as places like The Gap retrenched, but this was more than offset by gains elsewhere, such as the 19,000 pick up in department stores. Overall retailers have added 390,000 jobs since the end of 2009, which suggests that demand is filtering back and that business confidence is growing.

The manufacturing gain was particularly strong in the durable goods sector, which reflects the increase in investment we have seen over the last year. Overall durable goods manufacturers have added 418,000 jobs in the past two years.

One of the caveats we need to note: construction id reported to have added 21,000 new jobs in January, after having added 31,000 in December. We should be cautious here. The unusually warm weather may have allowed firms to hire earlier than they normally would. Plus the seasonal adjustment may be giving a positive skew to the data. Let’s see if this trend keeps up further into spring.

The service sector contributed the most to the overall gain. Firms providing professional services led the way by adding 70,000 new jobs, with almost half that coming in the employment industry itself. Clearly the workplace is changing for the better if the employment bureaus feel the need to staff up to cover the volume. Other notable gains were in accounting, 13,000 new jobs, and architecture and engineering, with 7,000 new jobs. Elsewhere in services, health care continued to add jobs – 31,000 in all – with a notable contribution being made by the businesses affected by the new health care reform, which clearly did no harm to the private sector.

Lastly we should note that the hospitality industry, including restaurants and other eating places, is recovering well. It has added 487,000 jobs since the low reached for that industry in February 2010, with 44,000 coming this January alone.

This stronger job growth is reflected in the unemployment rate which dropped 0.2% to 8.3%, and is now down 0.8% since last August. Within the demographics, the unemployment rate for adult male and female workers is now the same at 7.7% – the rate for male workers fell in January. Teenage unemployment remains very high at 23.2%, while the unemployment rate for blacks fell to 13.6%.

The number of people who are marginally attached to the workforce – to use the rather dry term tossed about by the government – remained about the same at 2.8 million. These people are those who are wanting to work, have looked for a job in the past year, and are still without a job. This group consists of about 1.1 million discouraged workers – people who have given up looking for work currently because they don’t think there is anything out there; and about 1.7 million who have not looked for work in the past four weeks – usually because of things such as school commitments and so on.

This leaves the total of unemployed workers at 12.8 million, down from 13.1 million in December 2011, and 13.9 million a year ago. Obviously progress is being made.

What do we make of all of this?

First an additional caveat: the Bureau of Labor Statistics annually changes its estimate of the population. This year it added over a million people to its estimate. That alters the proportions favorably when we are discussing unemployment. I don’t think this alters the trend at all, but it does give the appearance of a more dramatic gain than might be real.

With that in mind, this is a good report. Jobs are being created across the board – except in the government sector which has lost 276,000 jobs in the last year, but didn’t change much in January. There is now a noticeable recovery in the private sector which added about two million jobs in 2011. Most of that growth has been in the last six months alone. The rate of job creation in manufacturing is now at a six year high. The flip side of job creation measured by the new claims of unemployment assistance has dropped to a new, and much lower, level. So the tone of the labor market has improved markedly.

Things are definitely looking up. There is no denying the progress being made.

Now back to my normal grumpiness: this is not enough. An unemployment rate of 8.3% this far into an erstwhile recovery is mediocre at best. Even at January’s pace of job creation we will have unusually high levels of unemployment well into 2014, which is absurd and painful given that we all knew how to avoid the problem.

Which brings us to politics: the recent steady improvement in the employment situation will start to have a knock-on effect in the presidential election. If, and it is still a big if, the unemployment rate gets below 8.0% during the summer, and if, also a big if, growth chugs along above 2.0% all year, then Obama’s re-election chances will surely rise dramatically. It would also take away the primary line of attack from whichever Republican he is running against. I wonder how long it will be before we hear of conspiracy theories surrounding the government’s supposed rigging of the numbers. I guess mid-summer.

But that is speculation.

What is real is this improvement in the labor market. Let’s applaud and hope for more.