Net Job Creation by Industry through November 2016

These numbers are seasonally adjusted by the BLS. In order to examine if any seasonality is left in the data after adjustment we have developed Figure 2.

In the six years since and including 2011, November job creation has been up by 19 percent. This year November was up by 25 percent, therefore, this is a historically good result. Total nonfarm payrolls are now 6,763,000 more than they were at the pre-recession high of January 2008.

Table 1 slices total employment into service and goods producing industries and then into private and government employees.

Total employment equals the sum of private and government employees; it also equals the sum of goods producing and service employees. Most of the goods producing employees work in manufacturing and construction and the components of these two sectors that we consider to be of most relevance to steel people are broken out in Table 1. In November, 156,000 jobs were created in the private sector and government gained 22,000. The Federal government gained 3,000 as state governments and local governments gained 5,000 and 14,000 respectively. Since February 2010, the employment low point, private employers have added 15,626,000 jobs as government has shed 231,000. In November service industries expanded by 161,000 as goods producing industries driven by construction expanded by 17,000. Since February 2010, service industries have added 13,376,000 and goods producing 2,019,000 positions. This is part of the reason for stagnant wage growth since service industries on average pay less than goods producing such as manufacturing.

In November, manufacturing in its fourth consecutive month of decline lost 4,000 jobs and for the year as a whole is down by 60,000. Half of the YTD loss occurred in the last four months. In November total manufacturing employment was 0.4 percent less than a year ago and 0.1 percent lower than two years ago. In the last three months primary metals have been doing better than manufacturing as a whole with a small total gain of 800 jobs. Table 1 shows that in November oil and gas extraction gained 1,100 jobs and has had positive growth for the last three months. Truck transportation also added 1,300 people. Trucking lost 11,200 people in the period February through June but has more than made up that loss with a gain of 15,600 in the last five months. Motor vehicles and parts have been stagnant for the last three months with a total gain of only 1,000 positions. Note the subcomponents of both manufacturing and construction shown in Table 1 don’t add up to the total because we have only included those that we think have most relevance to the steel industry.

Construction was reported to have gained 19,000 jobs in November and is up by 107,000 YTD. There is no sign of a slowdown in the growth of construction employment as 59,000 of the YTD gain has occurred in the last three months. The Associated General Contractors of America have been reporting for months of a lack of availability of skilled workers which is being ameliorated by longer work weeks. Perhaps the industry is now catching up.

Some of the major construction sub categories are routinely reported one month in arrears which distorts the data in Table 1. These include, industrial buildings, commercial buildings and highways and streets. Construction has added 1,204,000 jobs and manufacturing 807,000 since the recessionary employment low point in February 2010 (Figure 3).

Construction has leapt ahead of manufacturing as a job creator but the growth of construction productivity is very low (or non-existent), in contrast to manufacturing where it is very high. The difference is the difficulty of automating construction jobs.

The official unemployment rate, U3, reported in the BLS’s Household survey (see explanation below) came in at 4.6 percent which was the lowest since June 2008. This number doesn’t take into account those who have stopped looking. The more comprehensive U6 unemployment rate was down from 9.9 percent in January to 9.3 percent in November, the lowest since April 2008 (Figure 4).

U6 includes workers working part time who desire full time work and people who want to work but are so discouraged that they have stopped looking. The differential between these rates was usually less than 4 percent before the recession but is still 4.7 percent. The employment participation rate is accurately reported in the press as going nowhere. In November 2016 the rate was 62.7 percent which was the same as in January. We’re not sure that we understand what this is a percentage “of” because of the multiple descriptions of the labor pool. Another measure is the number employed as a percentage of the population which we think is much more definitive. In November this measure was 59.7 percent up from 59.6 percent in January. There has been a gradual improvement in employment to population ratio since late 2011. Figure 5 shows both measures on one graph.

In the 23 months since and including January 2015 there has been an increase of 4,268,000 full time and a gain of 339,000 part time jobs. Figure 6 shows the rolling 12 month total change in both part time and full time employment.

Frequently in the press we read that a large part of job creation is in part time employment which in some months, including November is true and it does look as though a high proportion of the employment gains have been in part time work over the last six months. This data comes from the Household survey and part time is defined as < 35 hours per week. Last month for the first time we included full time and part time statistics in Table 1 just to keep an eye on them. Because the full time/part time data comes from the Household survey and the headline job creation number comes from the Establishment survey, the two cannot be compared in any particular month. To overcome the volatility in the part time numbers we have to look at longer time periods than a month or even a quarter which is why we look at a rolling 12 months for this component of the employment picture in Figure 6.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in November. In manufacturing, the workweek declined by 0.2 hour to 40.6 hours, while overtime was unchanged at 3.3 hours. The average workweek for production and non-supervisory employees on private nonfarm payrolls was unchanged at 33.6 hours. In November, average hourly earnings for all employees on private nonfarm payrolls declined by 3 cents to $25.89, following an 11-cent increase in October. Over the year, average hourly earnings have risen by 2.5 percent. Average hourly earnings of private-sector production and non-supervisory employees edged up by 2 cents to $21.73 in November.

The job openings report known as JOLTS is reported on about the 10th of the month by the Federal Reserve and is over a month in arrears. Figure 7 shows the history of unfilled job openings through September when openings stood at 5,486,000 not far off the all-time high of 5,845 in April. There has been an improving trend throughout 2016.

Initial claims for unemployment insurance, reported weekly by the Department of Labor have continued their downward drift this year and in w /e November 26th were 268,000 with a four week moving average of 251,500. This marks the longest streak since 1973 of initial claims below 300,000. (Figure 8). The result for w/e November 12th at 233,000 was the lowest since April 1974.

The last piece of the employment puzzle that we examine is the Challenger report which measures job cuts monthly (Figure 9).

This data also tends to be quite erratic therefore again we examine a rolling 12 months and can see that job cuts increased from late 2014 through April this year and have declined for each of the last seven months.

SMU Comment: This employment report will probably provide the impetus for the Fed to raise rates at their Open Market Committee meeting later this month. November was the 73rd consecutive month of job growth however it looks as though a gradual slowdown is occurring. The high months in 2015 were lower than 2014 and that trend continued into 2016. Manufacturing data has been disappointing this year as construction has been encouraging. Primary metals has finally shown signs of life after contracting for 21 straight months. The recent results for the road hauling sector are encouraging and job losses in the oil fields have halted. The results for manufacturing and construction are sign posts for steel sales activity. In the big picture, layoffs are historically low and job openings are close to all-time highs therefore there seems to be no reason for pessimism.

Explanation: On the first Friday of each month the Bureau of Labor Statistics releases the employment data for the previous month. Data is available at www.bls.gov. The BLS reports on the results of two surveys. The Establishment survey reports the actual number employed by industry. The Household survey reports on the unemployment rate, participation rate, earnings, average workweek, the breakout into full time and part time workers and lots more details describing the age breakdown of the unemployed, reasons for and duration of unemployment. At SMU we track the job creation numbers by many different categories. The BLS data base is a reality check for other economic data streams such as manufacturing and construction and we include the net job creation figures for those two sectors in our “Key Indicators” report. It is easy to drill down into the BLS data base to obtain employment data for many sub sectors of the economy. For example, among hundreds of sub-indexes are truck transportation, auto production and primary metals production. The important point about each of these hundreds of data streams is in which direction they are headed. Whenever possible we at SMU try to track three separate data sources for a given steel related sector of the economy. We believe this gives a reasonable picture of market direction. The BLS data is one of the most important sources of fine grained economic data that we use in our analyses. The States also collect their own employment numbers independently of the BLS. The compiled state data compares well with the federal data. Every three months SMU examines the state data and provides a regional report which indicates strength of weakness on a geographic basis. Reports by individual state can be produced on request.