Author: peter.c.rupert

By Thomas Cooley and Peter Rupert

The BLS announced that payroll employment increased 559,000 in May and the three month average at 541,000. The increase was widespread across the various sectors aside from construction, declining 20,000 and retail trade down 5,800. The service sector increased 489,000, leisure and hospitality led the way with a 292,000 increase.

Weekly hours of work stayed at an elevated 34.9 for the third consecutive month. During the pandemic, fewer workers were working longer hours and we expect average hours of work to come down once the affected sectors ramp up. Average hourly earnings rose $0.15 to $30.33.

Household Survey

The data from the household survey showed an increase of 444,000 employed individuals, however the labor force declined 53,000 and the labor force participation rate fell from 61.7% to 61.6%. The number of persons unemployed fell by 496,000. These changes led to a fall in the unemployment rate from 6.09% to 5.79%. Long-term unemployment fell by 431,000.

Unemployment Claims

Initial claims for unemployment fell by 20,000 to 585,000, continuing the downward trend. However, continued claims has been quite stubborn and increased 169,000 to 3,771,000.

It is clear that the various backstop unemployment policies have had an impact on the speed of adjust and its allocation across sectors. We will need to see some of the more generous policies end before the economy tries to reallocate jobs and effort on its own.

Headline unemployment rates are essentially meaningless at this point because may have stopped participating in the labor force. There are encouraging signs that the economy is ready to reallocate jobs, perhaps with healthier wages, when supply chain issues get resolved and government’s artificial supports are removed.

Everyone is expecting a robust recovery but the impact of conditions in the rest of the world remains unknown.

By Thomas Cooley and Peter Rupert

The BLS announced that payroll employment increased by 266,000 in April. Some had (thought/hoped/wished) the economy would add something like 1 million jobs. Not only was the 266,000 addition much lower than expected, the March number was revised down from 916,000 to 770,000 but February up an additional 68,000. As vaccines have become more prevalent and cases falling, some sectors that were more negatively affected have seen some expansion. In particular, leisure and hospitality employment increased 331,000; although, that sector is still only 83% of its pre-pandemic level. Retail employed dipped down 15,300 and temp help fell 111,400.

Average hours of work rose to 35.0, matching that of January and substantially higher than the pre-pandemic readings. Employment is still about 5% below its pre-pandemic level, therefore there are fewer workers working more hours now compared to last February. Average hourly earnings increased $29.96 to $30.17.

Household Data

Employment in the household data rose 328,000, with employment of women falling 8,000 and employment of men rising 336,000. The largest one month increase in employment was by women last June, increasing nearly 3 million. Last month employment of women rose 595,000 while employment of men increased by 15,000.

Where Do We Stand

Between February, 2020 and April, 2020 employment fell by 22,092,000, one year late the economy has gained back 14,147,000 jobs, or 64%. Looking at the Great Recession it took roughly 5 years to get back 64% of the jobs. Evidently, these are very different episodes and comparisons are not very useful.

The number of job openings from JOLTS now stands as a series high 8,123,000 (the series began in December of 2000). The number of unemployed persons now stands at 9,182,000. Another way of looking at this comes from the Beveridge Curve that just plots the same data in a different way. Again the pandemic appears much different compared to the Great Recession. Why have jobs come back so fast now? One explanation is that in the current environment jobs were not really “destroyed” as in a regular recession (whatever that means!). Instead, jobs were mandated shut by government. Further, self-employment fell substantially during the Great Recession and has not recovered. It also fell during the pandemic but is now higher than the pre-pandemic level.

Initial Claims

Initial claims showed a substantial decline last week but continued claims rose. Those unemployed 27 weeks or longer fell somewhat but represents about 43% of the unemployed persons.

Inflation

The Consumer Price Index increased 0.8% over the month and year-over-year was up 4.2%. Used car prices led the way, increasing 10% over the month and 21.0% over the year. Airline prices rose 10.2%. During the webinar with Loretta Mester she made it very clear that the Fed is obviously watching and believe the recent rise is transitory. This was reiterated by Vice-Chair Richard Clarida:

These one-time increases in pries are likely to have only transitory effects on underlying inflation, and I expect inflation to return to — or perhaps run somewhat above — our 2% longer-run goal in 2022 and 2023,” he said, adding “this outcome would be entirely consistent with the new framework the Fed adopted in August 2020

Recent speech to NABE

By Thomas Cooley and Peter Rupert

The BEA announced the advance estimate for Q1 GDP showing an increase of 6.39%. The increase was largely fueled by a massive increase in in consumption. Personal consumption expenditures were up 10.7%, with the purchases of goods up 23.6% coming from durable goods up 41.4%. Durables consumption was mostly fueled by the demand for motor vehicles. Government spending increased a solid 6.3% due to increase spending on vaccine distribution. Business investment was strongly positive wit much of it allocation to software and technology little on structures.

Going back a little farther in time it is obvious there was a recession in 2008-2009, less so in 2001. The huge gyrations coming from the pandemic make it very difficult to interpret the state of the economy.

Initial and continuing claims

Initial claims fell once again, however the data show the claims to be quite stubborn, remaining substantially higher than historical numbers, the last reading was 553,000. For example, initial claims in 2019 averaged about 210,000. Continuing claims (insured unemployment) have also been stubbornly high.

The prospect is for growth throughout 2021 in the U.S. The prospects for Europe and elsewhere are an open question.

By Thomas Cooley and Peter Rupert

Establishment Survey

The Bureau of Labor Statistics employment report showed that payroll employment increased 916,000 in March, 780,000 of that in the private sector. February’s job growth was also revised upward by nearly 90,00 jobs. All of this seems to foretell a robust recovery of employment in the coming months as the economy open up further. The pre-report estimates were in the ball park of 675,000 according to a Dow Jones poll so this was a happy surprise.. Service producing jobs were up 597,000 jobs as many of the COVID-shuttered sectors have started coming back online. Leisure and hospitality employment grew 280,000. Not all of the gains shown today, however, were COVID-related as warmer weather has also arrived and so to an increase in construction employment, up 110,000.

Before writing home with such good news it is useful to step back and look at the bigger picture…where are we now compared to just before the pandemic hit? In February 2020 employment was 152,523,000. As of today’s report there are 144,120,000: We are still down 8,403,000 jobs or roughly 5.5%. Leisure and hospitality employment was 16,915,000 in February 2020 and is now 13,781,000, about 19% below the pre-pandemic level. The usual interpretation of the monthly jobs report is how many new jobs have been created. Of course it is always the case that some jobs are just hires back into the same job; however, it is a welcome sign to have more and more people getting back to work.

The report showed strength in pretty much every super sector except temporary help services, declining very slightly. The average workweek increased substantially, to 34.9 from 34.6, almost reaching the 35.0 mark set in January, the highest since 2006 when the series for total private workers began from the BLS. Average hourly earnings fell slightly, from $30.00 to $29.96, likely reflecting the fact that many of the workers coming back on line are in sectors with typically lower earnings.

Household Survey

The household survey showed an increase in the labor force of 347,000. The number of people employed jumped 609,000 and number unemployed fell 262,000. The result of these changes decreased the unemployment rate from 6.22% to 6.05%. But labor force participation and the employment population ration continue to be a historically low levels, consistent wth an economic environemnt where many are still sitting on the sidelines.

Initial claims were released on Thursday and had a bit of a hiccup, rising to 719,000 compared to 658,000 the week before. Note, however, that the BLS revised its seasonal adjustments for 2016-2020 with this report.

Long term unemployment, those unemployed 27 weeks or more, continues to rise and the percent of the unemployed who are long term is nearly as high as during the Great Recession and considerable more than at any time since the data started in 1948. This is significant because these are the workers who experience “scarring” as a result of prolonged layoffs and this has implications for productivity in the long run.

So, where can we go from here? It is apparent that people are eager to get back to work and businesses are clamoring to re-open. As we go forward in the recovery from the pandemic we expect employment in the service sectors to rebound relatively quickly. The housing market is booming suggesting construction will likely continue to rise apace. Finally, manufacturing would be recovering even faster except for disruptions to global supply chains. Once these begin to get resolved there will come a little normality…maybe.

By Thomas Cooley and Peter Rupert

The establishment data from the BLS revealed a 379k gain in payroll employment resulting from an increase of 465k from the private sector and an 86k decline in the public sector. Goods employment fell 48k with construction the biggest loser, shedding 61k jobs. The service sector added 513k jobs, likely led by the reopening of leisure and hospitality businesses, up 355k. The data pretty clearly show the effects of the seesawing of pandemic related closures for the leisure and hospitality sector. The damage can also be seen in the unemployment rate for that sector at the onset of the closures, with the unemployment rate reaching nearly 40%.

There was a large decline in average hours of work, falling to 34.6 from 34.9, the highest recorded since 2006. The 34.9 mark was a likely result of the decline in part-time and shorter hours of the workers who lost their jobs during the pandemic.

The household data revealed little change in the civilian labor force, rising 50k with no change in the labor force participation rate, sitting at 61.4. The number employed increased 208k and the number unemployed decreased 158k. The unemployment rate was little changed, falling from 6.32% to 6.22%.

It remains to be seen how quickly labor force participation will spring back as more people get vaccinated and businesses re-open. Many expect there to be significant “scarring” effects of the prolonged separation from employment. At times the fundamentals of the economy seem largely sound, with strong monetary and fiscal support from the government and the Federal Reserve. We will stay tuned.

By Thomas Cooley and Peter Rupert

The BLS announced that payroll employment rose by 49,000 in January. The added pandemic lockdowns over the past couple of months in many areas pushed retail employment down 37,800 and the leisure and hospitality sector shed 61,000 jobs. The health care sector also saw a decline in employment of 29,600. The declines can all be traced to the winter surge in the coronavirus. As the pandemic goes, so goes the economy with all of the hits being taken in the most vulnerable service sectors.

Average weekly hours rose slightly as did average hourly earnings, but not much to write home about.

Labor force participation rates fell, 61.5 to 61.4, while the employment to population ratio increased, 57.4 to 57.5. The unemployment rate fell to 6.3% from 6.7%. The decline came from a fall in the number of people unemployed, a rise in the number employed and a small increase in those not in the labor force.

With the infection rate now subsiding and more people getting vaccines, most are expecting an improving jobs picture over the next few months. Many other parts of the economy continue to be strong, a fact reflected in the frothy financial markets. There will continue to be reallocation of jobs in retail and in travel and leisure.

By Thomas Cooley and Peter Rupert

GDP

The BEA announced that the advance estimate for Q4 real GDP increased 4.01% on an annual basis. Final Q3 growth was 33.44%. Over the year real GDP fell 3.5%, a historic collapse. But GDP in the second half of the year has continued to bounce back after the first half disaster. Given that continued increase there is some evidence that the recovery will look “V” shaped in the end.

Real personal consumption expenditures increased 2.5% in Q4 and was down 3.9% over the year. Real gross private investment grew at 25.3%, with equipment investment increasing 24.9% and residential structures up 33.5% for the quarter.

The personal savings rate fell slightly but remains elevated at 13.4%.

The BEA released personal income today and showed that real disposable personal income increased 0.22% over the month while real personal consumption expenditures declined 0.61%. It appears that after the wild gyrations things may have settled down somewhat.

Unemployment Claims

Initial claims and continued claims were also released this morning. Both showed improvement with initial claims falling 69,000 and continued claims down 203,000. The composition of the unemployed has also been changing with a decrease in the share of job losers and an increase in re-entrants.

The economy continues to show signs of underlying strength but obstacles will remain until the pandemic is under control enough for services and the retail sector to recover.

Count us among those who believe the Fed has done all it can or should to support the recovery. With Powell at the Fed and Janet Yellen at the Treasury we can be assured of thoughtful cooperative monetary and fiscal policy as the year progresses.

By Thomas Cooley and Peter Rupert

December’s employment report ends a dismal year on a dismal note. The BLS establishment data showed a decline of 140,000 workers. Private payrolls fell by 95,000 as the government shed 45,000 jobs. The recent lockdowns from the spike in COVID cases and hospitalizations drove the leisure and hospitality sector to reduce employment by 498,000 while retail trade employment grew by 120,500. Since the large declines in March and April the labor market has recovered about 54% of those losses. Overall, the labor market lost about 9.5 million jobs over the year.

For a while, after the March meltdown, it looked like the economy, aided by a robust stimulus response, might be able to bounce back. The optimistic view (not our view!) was that we might have a v shaped recovery. But the government’s pathetic response to the pandemic, failures of testing, mitigation measures and lack of leadership, made the resumption of economic activity dangerous and halting and the second surge has slammed on the brakes.

Average weekly hours fell slightly to 34.7 and average hourly earnings increased from $29.58 to $29.81. Average hourly earnings in the leisure and hospitality as well as the manufacturing sector saw a huge increase early on in the pandemic as the lower paid workers lost their jobs but then has continued to come down as many of the workers returned to work. The construction sector did not see those massive swings in average hourly earnings.

The household data showed very little movement. The labor force increased slightly, up 31,000 and the number employed up by 21,000. The labor force participation rate and the employment to population ratio were unchanged and remain well below the pre-pandemic levels. The unemployment rate also remained constant from the previous month.

The composition of the unemployed has also been changing with more of the unemployed coming from reentrants and fewer from job losers, although the bulk of the unemployed are from job losers. Moving forward, the number of those unemployed long-term, 27 weeks or more, will continue to climb since the pandemic-related losses are only in the 9th month or so.

Initial claims have been quite sluggish and remain elevated, indeed we are still seeing around 800,000 people applying for first time unemployment insurance every week. Moreover, the not seasonally adjusted claims rose by about 80,000. Continued claims, however have been trending down, but only slightly so.

There is certainly a strong desire to resume a normal pace of activity. People are tired of lockdowns and remote lives. But, right now the virus is in control. The great hope is that widespread vaccination will enable things to return closer to normal over the next several months. But the roll out is being brought to you by the same architects who designed our initial response and our testing programs. Temper your optimism with that thought.

By Thomas Cooley and Peter Rupert

The BLS announced that payroll employment increased 245,000 in November, continuing a clawback to pre-pandemic levels. However, since June the additions have been moderating. Private employment grew by 344,000 while government employment fell by 99,000. Employment in the retail sector shed 34,700 jobs after gaining 95,100 the previous month. The rise in pandemic hospitalizations will likely cut into employment in both that sector as well as leisure and hospitality.

There is no way to sugarcoat the fact that this is a disastrous report. It bodes poorly for the economy as a whole. The fact that the pandemic is just entering a more robust and deadly phase means the larger consequences of what we see in the labor market are going to be dire. On top of that, many of the support policies that were put in place in the CARES Act are expiring this month.

Average hours remained at 34.8 for the third straight month, the highest level in a decade. Average hourly earnings rose to $29.58.

The household survey showed an employment decline of 74,000. The labor force declined 400,000 and the labor force participation rate declined from 61.7 to 61.5. The unemployment rate fell from 6.88 to 6.69.

The fact that workers are dropping out of the labor force and ceasing active job search – means that many have few or no prospects and have given up. Fully 23% of the pre-pandemic workforce have given up on finding employment. This leads to inevitable scarring of their prospects for the long run.

There are no wise and hopeful interpretations of this labor report. The situation is dire and more fiscal stimulus is needed. But, the political process that could deliver it is broken.

By Thomas Cooley and Peter Rupert

The BLS announced that nonfarm payroll employment increased 638,000, however, private sector nonfarm employment increased 906,000 as the government side shed 268,000 jobs in October. Over the last two months government employment has fallen nearly half a million…but note that government for July was up 235,000 and in August up 465,000.

Overall the employment report was strong. Nearly every sector increased employment with retail up 103,700 and temp help services up 108,700. A slight decline in utilities and information, totaling 4,500. The employment to population ratio continues its climb but remains about four percentage points below the first of the year.

The household survey showed the unemployment rate fell from 7.86% to 6.88%. The labor force grew by 724,000 and the number unemployed fell by about 1.5 million. Last Thursday we saw further declines in both initial and continued claims. Initial claims have been moving down slowly over the past few weeks, while continued claims have been falling much more quickly.

Is The Recovery Stalling?

Although employment continued to rebound the pace of the recovery has slowed. So far the economy has made up about 55% of the 22.2 million decline in employment in March and April. This is not the robust V shaped recovery everyone hoped for and the reasons are clear. Reallocation takes time and it also takes a healthy environment and workplace where people can safely resume their normal activities. As the pandemic worsens, that is far from the reality.

It also seem clear that additional stimulus, which everyone has called for, could help to boost this recovery some. But it, and the welfare of the country, have fallen victim to the toxic politics in Washington D.C.