I’ve got to admit, when the employment numbers were released last week, I was incredibly happy.
The fact is, it’s hard to be completely unbiased when all you’ve talked about for four years has been decreases in employment or the incredible lagging recovery. There aren’t too many people left unscathed either, whether it be a family member, friend or colleague. Add into that equation housing and health care woes and you find yourself rooting for better news.
But just a week after the euphoria of this positive news, there are a couple of sobering reminders that we’re not out of the woods yet. Even a couple of months like the one we just had won’t solve anything. It’s still better than the alternative, though.
Jobs stagnation
I don’t want to be a buzz kill because truly, it is better than it has been. But there are a couple of problems worth pointing out.
For one, as John Zappe pointed out in his piece on TLNT, the Monster Employment Index — which tracks the number of jobs posted across many outlets, not just Monster — has declined for the last several months. And even though a comparable study from The Conference Board says that there were employment increases in December and January, it still isn’t as high as it was in April of last year.
As anyone in recruiting knows, it can take time to fill jobs. A position posted today could be filled in March or April (or even beyond that). If what we had as a boost at the end of 2011 and early 2012 was the result of a relative glut of jobs posted earlier in the year, the worry is that hiring could cool down.
Not every job is posted, and certainly The Conference Board Index shows hiring is increasing, so it isn’t a certainty. Still, that’s not the only issue.
Participation rates
One of the prime numbers that’s used to gauge the employment market is the labor participation rate: the amount of people of working age who are either in a job or want a job.
As a Bloomberg News article yesterday pointed out, labor participation is at a 29-year low:
Last week’s Labor Department announcement that the jobless rate fell to 8.3 percent in January sent stocks and bond yields higher. The same report showed the share of working-age people in the labor force had declined to the lowest level in 29 years.
The so-called participation rate was cited by Federal Reserve Chairman Ben S. Bernanke yesterday to support his assessment that the rate of unemployment obscures vulnerabilities in the job market. Bernanke, speaking to the Senate Budget Committee, confirmed the Fed’s stance that interest rates will stay low at least through late 2014, and repeated his view that the job market is a “long way” from returning to normal.”
In short, if more unemployed people started looking to participate in the workforce, the actual monthly unemployment number could go up. And if the economy does improve, and if there are more opportunities out there, more people could choose to participate and official unemployment rate could continue to lag even as things are improving.
Stagnating wages
The Bloomberg article also mentions the fact that wages are still fairly stagnant. Wages were up just 1.9 percent for hourly earners, the lowest increase since April, and for factory workers, the 1.5 percent jump is the lowest since they started recording in 1965.
While stagnant wages may have a less direct impact on employment (and certainly, some investors think it is a plus that labor costs are staying low), it shows that true competition for labor is still a rarity outside of a couple of key areas and industries. While out-of-control, inflating wages are detrimental to businesses too, being above historic lows would be a positive indicator things are going the right way.
In short, we’re not out of the woods yet but we’re a step closer in many respects than we were a year ago. With elections around the corner, you know it will be a hot topic in all of the local, state and national contests taking place.
But with due respect to our dear politicians, this one issue is probably bigger than them. They might be able to help (or hurt) somewhat, but the actions businesses (and the global economy as a whole) take are going to take precedence over anything decided in November.