December 9th, 2012

The November Bureau of Labor Statistics (BLS) report released Friday surprised many.  Two days earlier, ADP, the private payroll firm that processes 24 million paychecks, released their estimate of private employment gains of 118,000 for the month of November.  Estimates of the BLS total employment growth were in the 80,000 range.  The reductions in government employment, which ADP doesn’t track, are largely over and don’t act as a drag on employment gains each month.

The reductions have been particularly heavy at the local level.  The number of civilians served by each local government employee has risen slightly since the official end of the recession in June 2009 but they are at relatively historic lows over the past five decades.

The thinking was that SuperStorm Sandy would have a significant impact on job growth in the heavily populated tri-state region of New Jersey, New York and Connecticut.  However, the BLS reported “our analysis suggests that Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November.”  Huh???!!  The headline employment gains were 148,000, not enough to reduce the unemployment rate but enough to keep up with population growth.  The other headline number was that the unemployment rate had dropped to 7.7%, a drop of .2%.  Again, huh???!!

Given the circumstances, this was a good report – until one started diving into the numbers on the report.  Here it comes again – that big old BUT!  Another 200,000 workers dropped out of the labor force in November, and none – that’s right – none of them were older workers retiring.  Since November 2011, 2.5 million have left the work force; of those, one million are over 65.  Another 300,000 simply didn’t look for a job in the past month.  Some have gone back to school, whether by choice or the lack of it.

The ranks of the long term unemployed has dropped 200,00 in the past month, 900,000 in the past year.  Some have found jobs; some have run the course of their unemployment benefits and taken what they could get or given up.

Despite the recent rebound in housing, construction continued to lose jobs.

Leading gains were in professional and business services (43,000) and health care (20,000), both fields which have been steady gainers the past several years.  BUT, in the health care field, about 40% of job gains went to staff nursing homes.  

This trend will only get more pronounced as the Boomer generation ages and resource strapped elderly people and their families can not afford even temporary home care that might delay admittance to a nursing home.

Since the summer, businesses have been adding retail workers.  The graph below is seasonally adjusted so that the upward trend is more reliable.  Since June 2009, this sector has added 1/2 million jobs.  BUT – there it is again – many of these jobs are part time and pay below average wages.

The core work force, those aged 25 – 54, dropped last month and has gained only 200,000 in the past year.  How many sometimes think, “I would enjoy my kids more BUT I’m having difficulty keeping a roof over their heads.”

Employment gains of married men and married women have been flat in the past year.  Women head of households, ever resourceful, have gained 1/2 million jobs in the past year. 

Those aged 55 and over have seen job gains of 2 million in the past year; part of these gains are due to an age shift in the population; some is due to older workers continuing to work past their intended retirement.  Regardless of the causes, the trend is dragging down the economic recovery.  Older people simply don’t buy as much stuff as younger people do. 

Fans of the Silver Surfer – let’s climb on our galactic surfboards and rise high above space and time to look at the unemployment rate over the past several decades.  As the manufacturing sector has shrunk, the peaks and troughs of unemployment have risen.

The percent of unemployed workers who have been unemployed more than a half year also shows this disturbing long term trend.

The shrinking of the manufacturing sector, an inherently cyclical one, has had the positive effect of reducing the frequency of unemployment cycles.

2012 was the year that the first of the Boomers reached their full retirement age of 66.  Regardless of the health of the economy, we can expect to see the “Not in the Labor Force” number continue to rise as Boomers drop out of the labor force.  Since mid-2008, 3 million older workers have dropped out.

Each year about 2 million young adults graduate and enroll in college. (Census Bureau Source)  The other 2 million need some kind of work, either part or full time.  The level of unemployment has dropped by 50% for these new entrants into the work force but is still far above the 2007 level – a difficult job market is not a good way to start one’s working career. 

The delayed retirement of many Boomers will continue to put pressure on the job market with young adults particularly impacted.  GE is one company that is planning on bringing back jobs to this country from lower cost countries.  They cite two negatives that plague manufacturers in emerging countries: the lack of adequate patent protection and the theft of intellectual property. Two positives of domestic manufacturing are lower transportation costs and faster times to market.  Let’s hope that this repatriation of manufacturing becomes a trend – young people need the work.  The unemployment rate among those aged 18 – 19 has stayed above 20% for three years.