(What’s Left of) Our Economy: What “Retail-pocalypse”?

Tags

bricks and mortar, electronic retailing, Employment, hiring, job openings, Jobs, JOLTS, on-line shopping, private sector, retail, {What's Left of) Our Economy

Could the evidence be clearer? President Trump constantly bewails job losses in parts of the economy like manufacturing and coal mining. But he’s ignoring the much larger employment bloodbath in the nation’s retail sector. Worse, the contrast shows what a racist and sexist Trump is, since minorities and women make up much larger shares of the workforce in retail than in factories and mines.

Here’s one answer: The evidence for these propositions could be a lot clearer. Indeed, according to the U.S. government’s employment statistics, it doesn’t exist.

I decided to look at the numbers because the JOLTS data for May came out this morning, and I was once again amazed at the results for retail. As known by RealityChek regulars, these data measure turnover in the labor force, and are highly regarded by no less than Fed Chair Janet Yellen – a leading labor economist. The new figures, which are still preliminary, show that American retailers claimed 638,000 job openings in their businesses, and hired 718,000 new workers (the latter data represent total positions filled, not net new hires).

It’s true that the openings numbers in particular can be dicey. But those for this past May seem pretty consistent with the data going back many years. Moreover, they show that over the last eight years (practically the length of the current economic recovery), retail openings have more than doubled, and hires are up by nearly 31 percent. Both indicators are lower than that for the private sector as a whole (where job openings are up 140.14 percent, and hires are up 45.24 percent since May, 2009). But the gap is hardly yawning. Nor is there any indication from the JOLTS data that retail openings or hires have lost major – or any – momentum in the last few years.

The actual net new job-creation numbers don’t reveal any “retail-pocalyse,” either. Since June, 2009 (when the current recovery officially began) retail payrolls have grown by nine percent. That’s slower than the increase overall private sector employment (14.39 percent). But the gap proportionately was actually greater during the previous recovery, when private sector employment rose by 5.83 percent, and the retail sector’s staffing was up by 3.18 percent.

Maybe this is because, as widely reported, jobs are migrating from bricks and mortars retail stores to on-line shopping businesses? Absolutely. And this trend is indeed rising in importance. During the previous recovery (which only lasted six years, from the end of 2001 through the end of 2007), electronic retail employment rose by 64 percent – just about a third as fast as during the current recovery (174.44 percent).

But in absolute terms, the electronic retail sector is hardly a mass employer. Its workforce totaled less than 260,000 as of this May. Retail overall employed just under 15.85 million that month, and during the recovery, bricks and mortars payrolls grew by a not-too-shabby 1.14 million.

At the same time, the actual employment figures do show that retail hiring is running out of steam, at least for the time being. Year-on-year, the sector boosted payrolls by just 0.12 percent. The previous two May-May annual increases? 1.37 percent between 2015 and 2016, and 1.71 percent the year before. By contrast, employment grew by 12.22 percent in electronic retailing from May, 2016 to May, 2017, and by 12.60 percent the year before. So conventional stores are now losing employees on net.

At the same time, these results are a far cry from a blood-letting. And annual job-creation in the overall private sector has been slowing as well. Further, many observers insist that bricks and mortars companies long built way too many stores. So their payrolls (and overall scale) may, at least to some extent, simply be returning to more sustainable levels. These conclusions obviously won’t satisfy the Trump-haters among us. They’re simply consistent with the facts.

Advertisements

(What’s Left of) Our Economy: JOLTS of Confusing News About the U.S. Jobs Market

Tags

government jobs, job openings, JOLTS, Labor Department, labor shortage, living standards, manufacturing, private sector, productivity, recovery, retail, wages, {What's Left of) Our Economy

Since the U.S. economy has settled at its current level of near-full employment (at least by the official figures), the monthly JOLTS reports issued by the Labor Department have been attracting much less attention – including from me! After all, with so many Americans working, it’s been less important (though not totally unimportant) to learn about one of the key findings in each such survey of labor market turnover – how many new job opportunities business and government say they’ve been creating. 

So it’s not surprising that today’s JOLTS report (for April) hasn’t had much impact on the financial markets this morning. But it still contained more than its share of noteworthy results that reinforce what we think we already know about the economy’s current biggest problems, and that raise major questions about other portions of the conventional wisdom.

The overall job openings number, for example, was quite the stunner: At 6.044 million, it was an all-time high in absolute terms. (The JOLTS series dates from December, 2000.) And the 4.48 percent increase over May’s 5.785 million level represented the biggest monthly jump since last July’s 7.91 percent.

Openings in the private sector hit a new record in April, too (5.464 million). And that 4.20 percent monthly rise was the great sequential increase since last July (8.46 percent).

But as RealityChek regulars know, the economy’s growth has been sluggish even by the meager standards of the current economic recovery. In the first quarter of this year, real growth came in at a paltry 1.15 percent annual rate. So the JOLTS figures indicate that employers feel they need record numbers of new employees even though as a group their output is historically lousy.

That adds up to more evidence that American business boosting its productivity only sluggishly at best – which is awful news given that productivity growth is the nation’s best hope for improving living standards in a sustainable, not bubble-ized, way. And as I’ll be reporting on shortly, the latest government labor productivity numbers once more confirm that the economy is stuck in a productivity crisis.

Yet these JOLTS results carry more complicated implications for another broadly accepted feature of the American economy. They support the idea that U.S. businesses are struggling to overcome almost unprecedented labor shortages. How else to explain the enormous number of reported job openings? But companies that desperate to find workers should be raising wages at rapid and indeed accelerating rates. Everything that we know about hourly pay, though, tells us that nothing of the kind is happening. If anything, wage growth, which has underwhelmed throughout the current recovery, is showing signs of slowing.

One other new record revealed by today’s JOLTS report – total government job openings (540,000) have never been higher except in April, 2010, when the call went out for temporary Census workers. Even more interesting, most of the openings were in state and local governments outside the schools.

Also somewhat surprising: The “retail-pocalypse” so commonly bemoaned or hailed (depending on your viewpoint) is nowhere to be seen in this JOLTS report. Sure, retail job openings fell between March and April from 593,000 to 577,000. Moreover, that’s the lowest level since December, 2015, and the numbers now are generally, though unevenly, trending down. But for the first more than seven years of this nearly eight-year old recovery, they were trending solidly up. With overall economic growth down and consumers still cautious, the reported retail openings numbers are far from screaming “disaster!” – or even “serious trouble!”

Finally, although manufacturing output has been modestly recovering lately from its most recent recession, its job openings fell from 404,000 in March (the second highest record and best since January, 2001’a 496,000) to 359,000 in April. Still, the decline followed a major increase in March (from 364,000), and the manufacturing numbers have been pretty volatile for more than two years.

Maybe the safest conclusion to draw from the JOLTS numbers is that, for now, the economy is heading for more of the same. Whether that’s the safest result for incumbent American politicians is another matter entirely.

(What’s Left of) Our Economy: Murky Jobs Signals from the New JOLTS Report

Tags

BLS, Bureau of Labor Statistics, Federal Reserve, healthcare services, Janet Yellen, Jobs, JOLTS, recovery, subsidized private sector, turnover, {What's Left of) Our Economy

Economy-watchers just got another reminder today of how difficult it remains to figure out how healthy the current recovery is – from the data on employment turnover released by the Labor Department’s Bureau of Labor Statistics (BLS). The biggest surprise they delivered concerned the numbers of job openings reported (preliminarily) for February in the economy’s subsidized private sector.

Whereas the last few months of BLS data indicate that hiring in industries like healthcare services (which are heavily dependent on government support) hasn’t been quite so outsized as over the last decade, the new job turnover numbers (commonly known by their acronym JOLTS) suggest that they’re still punching above their weight.

If you think – as you should – that the real private sector should flat-out dominate job creation because it’s the economy’s leader in productivity and innovation, that’s not such a great development.

For the first three months of this year, the subsidized private sector accounted for 18.57 percent of the 533,000 total net new jobs America created. During the first three months of last year, this figure was 21.26 percent. These numbers will be revised several times more, but so far they signal that subsidized private sector jobs gains have lost some of their relative steam. (For more on the robust hiring in these industries during the current recovery, see this recent post.)

But the job turnover data appear to be sending the opposite message. Here we only have statistics going through February, and they’ll be revised down the road, too. But for the first two months of this year, 19.38 percent of the 11.368 million total job openings have come in the subsidized private sector. For the first two months of 2016, that figure was only 17.76 percent. In fact, the 1.138 million job openings estimated in the subsidized in February were the highest monthly total ever in absolute terms. (This data series started in 2000.)

To be sure, the subsidized private sector’s share of total job openings this year is a little below the levels that have held for most of the recovery. (See this post for more detail.) But its year-on-year rise is tough to square with the relative decline in actual job creation.

Another noteworthy result found in today’s job turnover report: The decline of retail job opportunities comes through plain as day. It’s not that the sector, whose bricks-and-mortars segment is under such tremendous pressure from on-line shopping, isn’t reporting any job openings at all. In fact, at 541,000 in February (on a preliminary basis), they were on the low end but still respectable by the standards of the last few years.

Look at the year-on-yer change, however, and you can see the retail employment problem. Reported job openings during January and February combined were down nearly ten percent. Those kinds of drops haven’t been seen since early in the recovery, in 2010.

These employment-related developments stand in especially stark contrast to the Federal Reserve’s apparent conclusion that the economy is just about fully recovered, and that the central bank’s new priority is sustaining “what we have achieved,” as chair Janet Yellen declared yesterday. This approach of course entails continuing to raise interest rates gradually, and reducing the immense amount of bonds the Fed bought as part of its stimulus program. Here’s hoping that the Fed’s confidence more accurately reflects the true state of the economy than these latest figures.

(What’s Left of) Our Economy: New Data Showing the Labor Market Still Needs Some (Positive) JOLTS

Tags

Jobs, JOLTS, Labor Department, labor market, Obama, recession, recovery, Trump, turnover, {What's Left of) Our Economy

Although today’s government statistics on turnover among American workers lag reality by two months, they’re still worth looking at because they fill in more crucial details about the state of the U.S. employment scene as the Obama years draw to a close, and how it’s changed. And the main message sent by these so-called JOLTS numbers? Despite some very recent improvement, the country’s job market still features historically high levels of (a) private sector jobs and job openings that shouldn’t really be described as private sector, and (b) jobs in low-wage parts of the economy.

According to these new figures from Labor Department, American employers said their companies had openings for 5.522 million workers in November. (These numbers are still preliminary.) Of these, fully 20.28 percent could be found in what I call the economy’s subsidized private sector – industries where levels of activity, and therefore employment, depend heavily on government funding. (Health-care services is the leading example.) Openings in the “real” private sector – where activity is driven largely by market forces, and therefore more accurately reflects the economy’s underlying strengths or weaknesses, amounted to 69.76 percent of the total.

These results are better than those for November, 2015. A statistical year ago, that subsidized private sector comprised 21.41 percent of 5.198 million total reported job openings. And only 69.49 percent of such opportunities were reported for the real private sector. Moreover, these improvements have slowly been emerging over the last year.

The nation has also seen progress on this front going back to the start of the current economic recovery, in mid-2009. That June, subsidized private sector job openings stood at 22.28 percent of all reported openings, and their real private sector counterparts came in at just 64.25 percent.

Yet it’s also clear that the American job market hasn’t returned to normal levels – at least if “normal” is defined as its state on the eve of the Great Recession, at the end of 2007. Back then, the subsidized private sector generated only 18.31 percent of all reported job openings, and the real private sector’s share was 71.74 percent.

Somewhat more discouraging trends can be seen in the economy’s low-wage sectors – notably retail; leisure and hospitality; and the poorly paying portions of the overall high-wage professional and business services sector. (My figures for the latter are extrapolations based on their share of actual professional and business services employment, because they’re not explicitly reported in the JOLTS statistics.)

Job openings in these low-wage industries represented 32.58 percent of all openings in November, the Labor Department reported this morning. As with subsidized private sector openings, this share has been slowly trending down in recent months, and certainly from November, 2015 levels (33.49 percent).

But when the current economic recovery began, in mid-2009, the low-wage sectors produced only 28.38 percent of all job openings. And when the last recession began, in late 2007, their share was 31.94 percent – still smaller the most recent results.

It’s now more than seven years since this recovery began. Will a President Trump be able to give it the jolt it needs and that so many American voters clearly want? Keep watching the JOLTS reports for valuable insights into the emerging answer.

(What’s Left of) Our Economy: Away from Election Spotlight, Troubling Jobs Market Signs

Tags

Federal Reserve, interest rates, Jobs, JOLTS, labor market, subsidized private sector, wages, {What's Left of) Our Economy

The failure of Wednesday’s monthly Labor Department reading on job turnover (for August) to attract much attention amid presidential campaign scandals is as understandable as it’s unfortunate. For this last set of “JOLTS” numbers that we’ll get before election day continues showing levels of openings in low-wage sectors hovering near recent highs recorded during this recovery. And the more generally humdrum nature of the findings – total openings fell sequentially to an eight-month low of 5.443 million – could cast a little more doubt over the chances of the Federal Reserve viewing the economy and labor market as strong enough to justify another interest rate hike.

These low-wage portions of the economy consist of the retail sector, leisure and hospitality industries, and the big low-wage administrative and support services sub-sector of the larger and higher wage professional and business services category.

Add up the August openings in these industries and you come up with 32.98 percent of the total (which is still preliminary). That’s not a record for this troubled recovery – but it’s close. Further, it’s higher than July’s final 32.36 percent, which itself was revised up from 32.17 percent.

For some perspective, recall that when the Great Recession officially began, at the end of 2007, low-wage job openings made up 31.94 percent of total openings. At the recovery’s outset, in June, 2009, their share fell to 28.38 percent. So during the current expansion, this number is up more than four and a half percentage points.

The JOLTS data – which are widely thought to be especially closely followed by Fed chair Janet Yellen – also shed light on the prominence of the subsidized private sector in the recovery’s jobs landscape. These are parts of the economy that are placed into the private sector category by the statisticians, but that depend heavily on government spending for their activity levels and therefore the vigor of their hiring. Healthcare services are the leading example.

In August, they accounted for 15.75 percent of all the nation’s non-farm jobs. (The Labor Department’s American employment universe.) But that month, they generated 19.20 percent of all job openings – a finding consistent with their lead role in actual employment growth during the recovery. As a result, rather than accounting for nearly 91 percent of these employment opportunities in August, the “real” private sector produced only about 71.50 percent.

When the Great Recession began at the end of 2007, subsidized private sector openings made up 17.65 percent of the total. When the recovery began in mid-2009, the figure was 22.28 percent – since at that point the national employment picture remained so bleak that the subsidized private sector was virtually the only sector showing any signs of life. And even today, the figure is two and a half percentage points higher than before the last downturn.

Needless to say, since employment issues themselves have barely been discussed in the general election campaign, it’s inconceivable that these JOLTS trends would be brought up. And needless to say, that’s a great way to ensure that the national jobs market becomes ever more dominated by depressingly unproductive industries like healthcare and by menial service positions.

(What’s Left of) Our Economy: This JOLTS Report Won’t Likely Jolt the Fed

Tags

Employment, Federal Reserve, interest rates, Janet Yellen, job openings, Jobs, JOLTS, turnover, {What's Left of) Our Economy

It’s time again for the monthly JOLTS report – for July – an occasion eagerly anticipated by the economics, business, and investing worlds because these data on turnover in American employment are known to be among Fed Chair Janet Yellen’s favorite measures of the labor market’s health. As a result, they’re likely to play a big role in her decision on raising interest rates – which could come next week. This latest edition leaves one recovery-era story intact – regarding the outsized importance of low-wage jobs during this long but weak expansion). But another trend – the prominence of subsidized private sector positions – took something of a hit.

The JOLTS data track how many Americans are being hired and leaving their jobs, the reasons for the departures (voluntary or involuntary), and the numbers of job openings posted by employers each month. I focus on the openings, since they say the most about what employers are seeking, and therefore which sectors of the economy look to be the most robust,at least in terms of employment-creating power. And as known by RealityChek regulars, the share of openings accounted for by low-wage sectors has risen steadily during this recovery.

In July, low-wage businesses – in retail, leisure and hospitality, and the low-pay sub-sector of the generally high-paying professional and business services sector – were responsible for 32.91 percent of all job openings companies said they posted. That’s not a record for the recovery, but it’s not far off. (Also, it’s only preliminary.) Moreover, it’s about a full percentage point higher than the 31.90 percent final figure for June, which was downwardly revised from 31.99 percent.

For comparison’s sake, when the last recession began, in December, 2007, this figure was 31.94 percent. When the recovery began, in June, 2009, it had sunk to 28.38 percent. Maybe this partly explains why Americans are so down on the economy even though it’s officially been growing for more than seven years?

The subsidized private sector consists of those industries where levels of activity (including hiring) are determined largely by government decisions, even though they aren’t formally government-owned. Healthcare services are the leading example. Just as they’ve spearheaded job creation during the recovery, they’ve also generated a disproportionate share of jobs openings recorded by the JOLTS reports. In July, the number was 18.36 percent.

That’s not only much lower than the June figure of 19.97 percent (which was revised up from 19.90 percent). It’s nearly as low as it stood at the recession’s onset (18.31 percent). Yes, when the recovery began, subsidized private sector jobs accounted for 20.31 percent of all announced job openings. But at that time, American employment creation was still deeply recessed — to the point at which healthcare services in particular were practically the only game in town.

Since the Fed says it’s interest rate decision will be determined mainly by the economic data as it comes in, and since recent indicators for the U.S. economy have rarely been more confusing, even the central bankers may not know what they’re going to do when they meet next week. But if the above JOLTS internals shape their conclusions much, bet on yet another “Hold.”

(What’s Left of) Our Economy? New JOLTS Data Provide Little Visibility on Jobs

Tags

Employment, Federal Reserve, Great Recession, Janet Yellen, job openings, JOLTS, low-wage jobs, recovery, turnover, wages, {What's Left of) Our Economy

I’m not sure why the economics and investment world seems pretty uninterested in the new figures released this morning on labor turnover in the U.S. economy. After all, as RealityChek regulars know, these are among the favorite labor statistics of prominent labor economist – and Federal Reserve Chair – Janet Yellen. And she has a lot to say about how low or high interest rates will be, and therefore about how vigorous or weak the current historically feeble recovery will become. Maybe it’s the dog-days-of-August syndrome?

What I am sure of is that the level and makeup of the job openings reported in the new “JOLTS” data leave plenty of room for debate over a key question overhanging the economic progress America has made since the Great Recession: Have hiring and opportunity been too concentrated in low-income sectors?

There’s no doubting that the share of job openings recorded in today’s release in low-wage sectors* is higher (32.17 percent, for June) than it was when the recession began at the end of 2007 (31.94 percent). But it’s not that much higher. This percentage, however, is much higher than it was when the current recovery began, in the middle of 2009 (28.38 percent). So over the longer haul, the “low-wage recovery” story remains intact.

Yet does this trend show more recent signs of ending, or at least moderating? That’s what the new numbers leave so unclear. For example that 32.17 percent figure for June (which is preliminary) is much lower than May’s final 33.30 percent. But the May number was revised up from its original 32.53 percent.

The initial June figure is also much lower than that of June, 2015 (33.67 percent) or June, 2014 (32.60 percent). But the comparable May numbers don’t tell a clear story. They fell from May, 2014 to May, 2015 (33.50 percent to 32.34 percent). But then they rose to that 33.30 percent this May.

It’s a good rule of thumb when examining data that the strongest (underlying) trends are revealed by looking at the longest time periods. But it’s also true that “things change,” and that the kinds of fluctuations seen over the last two years could be signs of a top – just as they sometimes (but only sometimes) are in stock prices. For now, it seems that the firmest conclusion we can draw is that more of the real picture will be revealed by the next set of JOLTS figures, which we’ll get next month. Unless of course it isn’t!

*These sectors are retail, leisure and hospitality, and the administrative and support services subsector of the big professional and business services sector.

 

 

(What’s Left of) Our Economy: No JOLTS to the Low-Wage Recovery Story

Tags

Employment, Great Recession, James Fallows, job openings, Jobs, JOLTS, manufacturing, manufacturing renaissance, recovery, The Atlantic, turnover, {What's Left of) Our Economy

One of those running-around days prevented me from commenting yesterday on the new U.S. government figures on labor force turnover. But since they’re a favorite indicator of Federal Reserve Chair Janet Yellen. and since last month’s figures contained a big surprise, the so-called JOLTS report for May is worth a close look.

First, that surprise. The April JOLTS figures (there’s a two-month time lag for this series) showed a startling 23.15 percent sequential jump in the number of job openings in manufacturing. Moreover, the 415,000 figure was the second highest of all time. The increase, which produced the second highest monthly total of all-time (JOLTS statistics only go back to 2000), convinced observer’s like The Atlantic‘s James Fallows that this long-time employment laggard was suddenly “creating too many jobs.”

As I noted last month, the number looked fishy because it contrasted with virtually everything else we’ve learned about manufacturing in recent years – along with many longstanding assumptions.

So it wasn’t entirely surprising to see that the new JOLTS report revised that April manufacturing figure down to 397,000 – still historically high, but no longer so stratospheric. Just as important, the May total (which is still preliminary), was 353,000. That’s healthy, but has been bested several times in the last decade and a half. Let’s hold off, therefore, on heralding the return of the manufacturing renaissance meme – which has never been justified in the first place.

Second, the May JOLTS figures strengthened claims – including by yours truly – that the current American economic recovery has featured entirely too much low-wage job creation. Since I last looked at this subject through the JOLTS lens, past figures have been revised. But they tell the same story, according to my methodology of taking the reported openings in the retail; and leisure and hospitality employment super-categories, and then adding a pro-rated figure I calculate for the low-paying administrative and support services sector of the generally high-paying professional and business services super-category.

When the Great Recession began, at the end of 2007, these low-wage portions of the economy accounted for 31.94 percent of all job openings. By the time the recovery began, their collective share fell to 28.38 percent. The (preliminary) level for May? It’s rebounded past the pre-recession level and climbed to 32.53 percent.

Employment figures like the JOLTS data have been strongly influencing the Federal Reserve’s decisions on whether to raise or lower interest rates – which in turn helps determine how fast and whether the economy will continue growing, at least in the near future. If the central bankers look at the above crucial JOLTS details, keep expecting the country to stay on its (incredibly) easy money course.

(What’s Left of) Our Economy: For Now, Private Sector Job Creation is Over in Real Terms

Tags

Employment, healthcare services, Jobs, JOLTS, private sector jobs, real private sector, subsidized private sector, {What's Left of) Our Economy

Yesterday we got news that raised big questions about the economy in the form of Labor Department statistics showing a major and puzzling surge in manufacturing job openings that clashes violently with just about everything else we know about the sector’s performance. But we shouldn’t forget that last Friday’s choking dog of a jobs report contained a stunner of its own. It showed that, when properly counted, private sector employment actually fell, and that jobs that benefit from immense government subsidies but aren’t placed in the public sector propped up the labor market to the greatest extent in recent years.

As always, the key is recognizing that, although the Labor Department (and most students of the economy) view industries like healthcare services as private sector industries whose performance is determined mainly by market forces, they’re nothing of the kind. They’d be much smaller, and generate many fewer jobs, without gargantuan levels of public spending that enable their customers (practically all Americans) to avoid the lion’s share of their real costs.

And however tempting it may be to view the May employment figures (which are of course preliminary) as outliers that are as misleading as yesterday’s April JOLTS manufacturing results, in fact, they continue a longstanding trend.

Classify the private sector properly by removing those government-subsidized jobs, and you see that, as opposed to rising by (a measly) 25,000 sequentially in May, its employment fell by 42,000 on net. That’s the first such drop since at least the beginning of 2013. (I haven’t had the chance to examine the monthly figures going back further.) Moreover, the revisions to March and April data magnified the subsidized private sector’s role as well.

But the main evidence that the May results aren’t as aberrational as they seem comes from examining the latest year-to-date figures. For the first five months of 2016, they show that the subsidized private sector accounted for just over 35 percent of all net rise in non-farm jobs (the Labor Department’s American employment universe) and 37.48 percent of all the job creation conventionally defined as private sector.

Both such figures are more than ten percentage points higher than they were just one year ago (25.94 percent and 26.25 percent, respectively). Even more striking, the percentages this year are more than double their levels in the first five months of 2013, when the subsidized private sector was creating only 15.87 percent of all net new non-farm jobs, and only 15.35 percent of all conventionally classified private sector jobs.

The burgeoning employment role of the subsidized private sector is just as clear when you look at the economy on a stand-still basis. Here’s the employment picture at the start of the last recession, in December, 2007, which includes statistics for the conventionally defined private sector minus the subsidized private sector (which I call the “real” private sector):

Private sector as share of total non-farm jobs: 83.83%

Subsidized private sector as share of total non-farm jobs: 13.63%

Subsidized private sector as share of conventional private sector jobs: 16.26%

Real private sector as share of total non-farm jobs: 70.19%

Here’s how the labor market looked from this perspective when the current recovery began, in June, 2009:

Private sector as share of total non-farm jobs: 82.77%

Subsidized private sector as share of total non-farm jobs: 14.97%

Subsidized private sector as share of conventional private sector jobs: 18.09%

Real private sector as share of total non-farm jobs: 67.88%

The big takeaway here – the real private sector took it on the chin during the recession while the subsidized private sector flourished, at least in relative terms. And where is the labor market from this standpoint today?

Conventional private sector as share of total jobs: 84.65%

Subsidized private sector as share of total jobs: 15.73%

Subsidized private sector as share of conventional private sector: 18.59%

Real private sector as share of total jobs: 68.91%

These new figures are telling us that, although the conventionally defined private sector has recovered its share of total American employment (and then some), all of these gains have come from a combination of the subsidized private sector’s continued growth plus the continued weakness of hiring in the government sector proper.

So when politicians and pundits claim that, as of the May figures, the U.S. economy has enjoyed 75 straight months of private sector jobs growth, you now know that, by common sense measures, the string has been broken – and that there was much less to the private sector’s previous 74 months than met the eye.

(What’s Left of) Our Economy: A New JOLT to the Manufacturing Conventional Wisdom

Tags

capex, factory orders, Federal Reserve, industrial production index, Janet Yellen, job openings, Jobs, JOLTS, Labor Department, manufacturing, wages, {What's Left of) Our Economy

Since Janet Yellen is a leading labor economist as well as Federal Reserve Chair, and she closely follows the monthly so-called JOLTS reports, so do I. So should you if you’re interested in how the U.S. labor market is faring and therefore (to a great degree) whether the central bank will move to stimulate the economy or cool it off.

My main interest in these data has focused on what light they shed on job quality – and specifically on whether the job openings reported in these surveys of employment turnover have come mainly in low-wage or high-wage sectors. (My work shows it’s the former.) But this morning’s JOLTS numbers from the Labor Department contained such astonishing results for manufacturing that they deserve special attention – and not simply because the April data were so exceptional, but because since the last recession began, they have contrasted so strikingly with other measures of manufacturing’s performance.

According to the new JOLTS report, America’s manufacturers reported 415,000 job openings at their companies in April. That’s the second highest figure on record (the data go back to the end of 2000), which is newsworthy enough. But it also represents a 23.15 percent jump from the March total of 337. Just as interesting, the year-on-year increase is 23.15 percent, too.

Logically, this surge means that manufacturers became much more optimistic about their prospects in April. Why else would they be looking for so many new workers? Yet nothing else we know about domestic manufacturing in April would seem to justify this optimism.

For example, in inflation-adjusted terms, manufacturing production inched up only by 0.33 percent in April over the March levels – a decent performance by recent standards, but no standout. Since April, 2015, manufacturing output rose by only 0.54 percent.

Do future-oriented gauges of manufacturing signal the appearance of great expectations? New orders for manufactured goods in April did rise by 1.92 percent on month (these are not price adjusted), but that kind of improvement is nothing exceptional. Moreover, year-on-year, this measure of incoming work is down 1.80 percent.

But this disconnect between the job openings data and other manufacturing statistics doesn’t just stem from one month that could be a classic outlier. (Also, the data will be revised next month.) It’s been the case since the recession began.

During the downturn itself, JOLTS trends did follow the other gauges way down. Between the slump’s onset, in December, 2007, and manufacturing’s employment bottom, in March, 2010, industry’s job openings plunged by 45.11 percent. During this period, real manufacturing output sank by 14.92 percent, and factory orders dropped by 16.73 percent. So far so good.

But since March, 2010, the number of job openings reported by American manufacturers has skyrocketed by 184.25 percent. This increase has left in the dust the rise in constant-dollar industrial production (12.68 percent) and manufacturing orders (15.40 percent). And even if you take out the unusual April manufacturing job openings number, the gap is still enormous.

In fact, since the recession began more than nine years ago, manufacturing job openings are up by 56.01 percent, even though real output is down by 4.13 percent and factory orders have fallen by 3.91 percent.

This gap suggests that the conventional wisdom about the relationship between manufacturing employment and manufacturing output need some big rethinking. After all, it’s become a commonplace that manufacturing has no chronic output problem – it does, however, have a serious jobs problem (which is rarely described in this context as a problem) because technology makes it possible to turn out more products with fewer workers.

But the picture created by combining the JOLTS, production, and orders statistics indicates that modest gains in production and orders have been spurring a tremendous increase in the demand for workers. How can that be if the sector is so increasingly capital-intensive? Further, standard economic theory teaches that when businesses find themselves short of labor, they either boost wages in order to attract more applicants, substitute technology (machinery, equipment, software, etc.) if they don’t feel like offering higher pay, or respond with some combination of these steps.

Yet as I’ve exhaustively documented, until very recently, manufacturing wages have been going nearly nowhere. And businesses overall have displayed few signs of significantly increasing their capital spending (on that new machinery, etc.) – at best.

Of course, it’s possible that all of these government statistics are wrong. But I suspect it’s more likely that the so-called experts know much less about manufacturing than they think.