Finally, it feels like real progress on the jobs front. National nonfarm payroll employment was up 257,000 in January, and the unemployment rate is holding steady at about 5.7 percent (down from about 8.0 percent two years ago).
The prior two months were also revised upward substantially. The pace of growth is better than we’ve seen since the recession, and there are millions of job openings. While there are still some lingering issues, the U.S. economy has come a long way since the recession. Let’s dig a bit deeper.
Data for yearend 2014 has now been released by the Bureau of Labor Statistics (BLS), showing a marked improvement through the year. During 2014, the number of unemployed persons in the United States fell by 1.7 million to reach 8.7 million (just the frictional process of people changing jobs, retiring, and entering the workforce would account for 6.5-7.0 million even at full employment). The unemployment rate was down 1.1 percentage points over the year, and the number of people classified as long-term unemployed fell by 1.1 million.
Job gains during 2014 averaged 246,000 per month, notably better than the 194,000 average during 2013 and a far cry from the hundreds of thousands in monthly losses during the recession. The professional and business services category was an important source of jobs, with gains during 2014 averaging 61,000 per month. Strong hiring also went on in food services and drinking places (up 30,000 per month in 2014) and health care (up 26,000 per month). Manufacturing also improved, with a 2014 monthly average job gain of 16,000, which was far better than 2013’s 7,000.
The number of job openings reached 5.0 million at the end of 2014, the highest level since January 2001. Openings were up across the board: public, private, industries, and regions. Some 5.1 million people were hired in December, the largest number since November 2007. On the other side of that equation, 4.9 million people left their jobs (including quits, layoffs, discharges, and others). The number of quits increased during 2014, which is a good sign (and one that I pay particular attention to) in that it means workers feel more positive about their ability to find a better position.
The primary statistics I see as problematic are that long-term unemployment remains high and millions of people are still working part-time jobs when they would prefer full-time work. During the recession, long-term unemployment (those without a job for 27 weeks or more) was up sharply. While it has since fallen, some 2.8 million (as of January) Americans still fall into this category. Given the way these statistics are collected, you’re only counted as “unemployed” if you’ve looked for a job in the past four weeks. Anyone who has essentially given up on finding a job shifts to another category (“marginally attached to the labor force”) if they’ve searched for work within the past year, and then falls off the count entirely. The labor force participation rate remains low (62.9 percent) as does the employment-population ratio (59.3 percent).
What this says to me is that there may be millions of people who are no longer considered “unemployed” by the BLS who would actually like to re-enter the job market if they thought they might find work. Similarly, there are now 6.8 million people working in part-time jobs involuntarily. Certainly, conditions are improving, and we will likely see some relief in these areas as the hiring momentum continues.
Another positive signal is that wages have finally begun to rise, with hourly compensation up 0.9 percent during the fourth quarter of 2014. In addition, the number of hours worked rose by 5.1 percent in 4Q 2014, the largest gain since 1998. The hours worked series is another one I keep a very close eye on. When companies begin to see rising demand for their products or services, they first try to meet that demand by working their existing employees more. Adding shifts or overtime, for example, can temporarily allow firms to produce more without hiring. At some point, this slack is used up and additional people are required. A notable jump in hours worked is thus a sign that more hiring is likely on the way, and that wages may be pushed up as the need for workers rises throughout the economy.
Barring a major global economic setback (such as from a war or spiraling fallout from financial challenges in Greece and elsewhere), it looks like Americans are finally set for an increase in wages and income. We may also see people long discouraged with their job prospects enticed back into the labor market as hiring continues. Underemployment (where workers are stuck in jobs for which they are overqualified) will also diminish. Progress!! Real progress!! Finally!!
