Why the Jobs Picture Is Not as Gloomy as It Looks
Though the headline May employment number was disappointing, ISM employment, job opening, and small-business hiring data paint a picture of continuing, if gradual, improvement.
Why the Jobs Picture Is Not as Gloomy as It Looks Jason Stipp: I’m Jason Stipp with Morningstar. Last Friday’s unemployment report was disappointing on the face of it but putting that number in the context and digging a little deeper to look at some other employment indicators presents a far more interesting and richer picture on the employment situation. Here with me to talk about some of those details is Morningstar’s Bob Johnson. He’s the Associate Director of Economic Analysis. Thanks for joining Bob. Bob Johnson: Great to be here. Jason Stipp: So, first things first. We did have a full report on the employment situation last week but I just want to emphasize the importance of putting this number in the context. Can you tell us a little bit about how you think of that number now that you have had a few days to reflect? Bob Johnson: Sure. I think that when you look at the number certainly after two hundred ninety some thousand to have something or 224 if you take out the census and then have it go down to 41, it was disappointing to people but (a) the number is growth and we actually had employment growth, we didn’t turn the boat around and sink unemployment or employment and the other thing is I think we really need to look at those two months kind of combined and put the 290 together with maybe the 40 and say, the right number was probably something like 140,000 or 150,000 if you average the two months out a little bit and I think that’s a fair representation of where we’re at. Jason Stipp: And these numbers, there is a margin of error around them. I mean we look at them and we get them every month and it seems like you get the full picture there but they’re often revised later as well. Bob Johnson: Yup. They’re revised and even still, they may not be perfect. There is a large margin error. These are done by surveys. They don’t count every single person. They ask so many households if you’re working or not and so obviously, they are subject to a bunch of error. That 41,000 could be as far off as we could have actually lost jobs last month or it could be on the other side. It could have been the number that everybody was hoping for and it would still be in the confidence range. Jason Stipp: Sure, been important not to put too much emphasis on that one number. Bob Johnson: You know we got all wound up on that number and I was just as guilty as the next guy for promoting a number. It looked good. It looked like it was in the bag and I think everybody got so hang up on it and you can’t ever get hang up on one number. Jason Stipp: Sure and if we do want to average those two and we saw, if we do want to maybe estimate that there could be over those two months, 120, 140 jobs at it, it’s actually consistent with maybe some other data that you’ve seen that sort of implies a slow but positive recovery here. Bob Johnson: Yeah and let me touch on that a little bit. I mean, seeing the 290 that one month, I mean I may have thought we could have done 300,000 or 400,000 going forward. I think the number is more realistically 200,000 and maybe we can get the 300 in a couple of good months. So, I have brought my thoughts down a little bit just to be entirely upfront about that but these surveys now are pretty consistent with those 200,000 numbers that are out there. The ISM purchasing manager data, those are the survey. I love the overall survey. I’ve talked about it and read about it many times but there is also a sector in there where they look at employment. They ask are you hiring or firing more people and that index struck another new high for this recovery last month and had a nice improvement over the prior months. So, that’s consistent with growth, not massive growth but nice growth. And then also I was looking at the manufacturing side but even on the ISM numbers for the non-manufacturing, on the service sector, we are up over 50%. That means more than half the people we’re thinking of hiring and firing. That number was positive for the first time in this recovery. So, the manufacturing is beginning to pull through the service jobs. We’re seeing the train work the way it usually does which is good news. Jason Stipp: I also had some information from temporary employment services on manpower which tends to also support this thesis of generally gradual but positive recovery. Bob Johnson: Yes, absolutely. Manpower did their numbers both U.S. and internationally. Domestically, we had a small tick up in the number for the third quarter hiring plans versus the second. Not huge, something was consistent with growth but not massive growth. So, that was good news and by the way, that’s also kind of support of a mid-western or of a manufacturing deal where manufacturing is predominantly in the mid-west and the numbers there in the mid- west were the best of the manpower numbers. The worldwide numbers were also excellent and I forget now, 30 -- I think 31 of the 36 countries had surveys showed in improving hiring picture versus being almost negative a year ago. Jason Stipp: This is certainly very important for manpower’s business. They’re trying to get this right. They’re not just running the survey for informational purposes. So, it’s positive to see that information comes out of them. Another thing I know that you look at is job openings and we actually also saw a continuation of a good trend there. What did you see on job openings? Bob Johnson: Yes. The labor department this week reported on job openings, a number of positions that are opened and that number moved up to 3.1 million. Put that in some perspective at the low, we were about 2.4 million, so we’re up nicely from that but at a peak, normal -- I mean a really great time, we might be at 4.5 million. So, we’ve got a long way to go but we have made some recovery and we’re up from the prior month nicely on an accelerating basis. So, that was a good number to see. Jason Stipp: And I think that sort of underscores the point that that number you get -- job growth number is a net number. So, even though we are seeing a certain number of new net jobs at it, there actually are more job openings out there. Maybe some people are letting people go but that happens in good economies as well. Bob Johnson: Absolutely. Jason Stipp: So, you just have to think that job openings are getting higher. Eventually that’s going to lead to net job growth as well. So, the last thing that we’re keeping track of is small business and hiring trends there which a lot of folks say are real growth engine of the economy in some ways. So, tell us about what you see in small business. Bob Johnson: The small business, the national federation that we look at the data they provide every month, their overall index again was up when it was reported a couple of days ago and the employment part of that also flipped to the positive side where people were hiring more than they firing for the first time of this recovery and I think it was the first time in 19 moths they’ve seen an improvement in that index that the small businesses are beginning to turn and our pickup truck index that we joke about. I mean it’s not how we manage our business or think about it but it’s interesting to see that pickup truck sales continue to go up as well which is a good sign that small businesses are seeing better things.