How to Read the Monthly Jobs Report
Over the years, I have written at length about why the obsession with the monthly nonfarm payrolls report is misplaced (see e.g., this this and this). What matters isn't any single data point, but the trend's direction. And as we have seen since 2010, that trend has been positive. More recently, it has been picking up speed.
Many people seem blessedly unaware of this or are in willful denial.
Monthly U.S. Jobs Report
There is no doubt that this jobs recovery hasn't been as potent as some, nor have its benefits been evenly distributed. If you have a technical or graduate degree, it has been much easier to find a job, keep that job, and occasionally get a raise and receive good benefits. Geography matters as well, with oil-boom states in North Dakota and Oklahoma and a rebound in the financial-services industries in New York, San Francisco and Chicago. The same can't be said for semiskilled or unskilled workers, or regions that once depended on heavy industry.
But the bottom line is that the jobs data has been strong and getting stronger.
Let's do a quick review of the trends since 2009; it might surprise you. In that year, the first half of which was contractionary, the U.S. lost an average of 424,000 jobs a month. For the entire year, more than 5 million people were thrown out of work. Every monthly employment report was negative, with February being the best of the year, with a loss of only 6,000. March was the worst, with an 826,000 loss.
January 2010 was the first post-crisis month with a positive jobs number -- an 18,000 gain. In that year, jobs were lost in five of the 12 months instead of all 12 months the year before. It was 2010 when we could see that the trend was in flux, slowly shifting from negative to positive.
Consider the average monthly jobs gains by year:
Year Average monthly change in payrolls
The last negative payrolls month was September 2010, with a loss of 57,000 jobs. Since then, after a series of fits and starts, the employment situation has steadily improved. Each calendar year marked an improvement from the year before. The pace accelerated every year, with the biggest increase coming in 2014.
Since September 2010, we have had a record-setting run of monthly gains: November 2014 is the 50th straight month of rising payrolls. During that period, the U.S. economy has gained almost 10 million jobs. This is below what we typically see in a recovery from a recession, but it may well be better than what we might have expected from a post-financial-crisis recovery.
November, by the way, was the 10th consecutive month when the economy added more than 200,000 jobs. The last time we had a stretch of 10 or more months of 200,000-plus job gains was from March 1994 to March 1995.
There is a subset of people who have dismissed the stead improvements, regardless of the data. But 50 months and 10 million new jobs later, it is becoming almost impossible not to claim that the economy is healing itself, and that the recovery seems to be intact and gaining speed.
Not that data will convince everyone: Some are politically biased, some innumerate, others dwell in some alternative universe. And then there are sites such as Zero Hedge, which traffic in negativity wrapped in doom, vitriol and conspiracy theories. At least the posts are often entertaining and the charts are pretty.
For the rest of us, the potential acceleration in the employment trend raises some important questions:
-- What does this mean for the Federal Reserve's interest-rate policies?
-- Will this lead to wage increases?
-- Would rising wages have implications for inflation?
-- Will companies step up their capital expenditures?
-- What does this mean for corporate profits and equity valuations?
-- How might an improving economy affect the 2016 presidential elections?
All of these questions are interrelated.
The acceleration in the trend is what's significant. It provides clarity not available in any one month's jobs report.
Welcome to the recovery.
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