Sat, 7 Jun 2014
After more than six years, the employment market has finally regained all the jobs lost from the 2008 downturn, but not every sector has participated, says Morningstar's Bob Johnson.
Jason Stipp: I'm Jason Stipp for Morningstar. The government released the employment report for May on Friday. It showed that 217,000 jobs were added. That was right about at the consensus estimate. Here to offer his take on the report is Morningstar's Bob Johnson, our director of economic analysis. Bob, thanks for joining me today.
Bob Johnson: Great to be here.
Stipp: You walked into the studio yawning. You said this was a boring report in some respects. What did you mean by that?
Johnson: If you looked at the data, there were no revisions to past months. Usually there's tens of thousands of revisions to prior months' [job gains], and that throws off all the comparisons. It was right at the consensus, which absolutely never happens. It's usually 50,000 one way or the other of the consensus number, so that was pretty much flat.
The number itself, 217,000, was relatively close to the last 12-month average of about 197,000 and the 2013 number of 194,000 jobs added. Hours worked were unchanged and wages were up their usual 0.2%. So it was a very boring, very down-the-middle type of report.
Stipp: In April, we had originally reported 288,000. That came down just a little bit in revisions. Some folks were worried, though, because April was so good, we could have payback in May.
Johnson: And that's why the consensus was that we'd only add something like 218,000 jobs. The thinking was that the result was so good in April that it would be a little lower in May, but I was pleased to see that we didn't swing to the other side of the average--that as much as we were above trend in April, we didn't end up at 100,000 jobs added in May to average 200,000 or something like that between the two months.
We've actually strung together a March, April, and May that were all above the average, so that's really good to see and does indicate some improvement. I'm really glad to see that.
Stipp: Let's talk about the job mix we saw in the jobs that were added last month.
Johnson: Professional and business services was one of the biggest adders, and there was actually a little bit more emphasis on the professional side. A lot of good-paying white-collar jobs showed a really nice increase.
A lot of people will say, if professional and business services are up, then it's all the temp workers. It actually wasn't in May. That was about 23,000 of an overall 55,000 gain. So, a lot of it was truly white-collar professionals.
Even the temp jobs are actually really good-paying jobs. They're pretty close to the top-level jobs, which are utilities and finance and information services. They're actually not very far behind. It's not like a restaurant job or a hotel job that run just about half of the better-paying jobs.
Stipp: What about health care, where we'd been expecting to see jobs for a while, but we hadn't been?
Johnson: We finally got a little bounce there. We added about 34,000 jobs, and that category had been a little bit soft. We had all thought, with all the money that allegedly in the GDP accounts is being added for health care, we were wondering, where are the workers? And this month's report actually showed a little bit better number in health care, which was good to see.
Stipp: Manufacturing and construction, which are also good jobs, how did they do?
Johnson: They didn't do so well. They were relatively flat and off of trend. Those were a couple of the weaker segments. Again, some of that may be related to the fact that they had a really nice bounce that was weather-related a couple of months earlier, and this month they were kind of settling into the status quo a little bit.
I'm especially not worried about the manufacturing side of the house. I am a little bit more worried about the construction side of the house. Some of the construction data, the monthly construction data for May came in below trend quite a bit, and now [we can see] it wasn't an accident. Construction jobs are also showing a little bit of softening. So, I was disappointed in that part of the report.
Stipp: The big headline that we're seeing about this job report is that we finally got back all the jobs that had been lost since the downturn. It took quite a long time to do that. What's your take on the duration between the downturn and finally recovering these jobs?
Johnson: It was almost 6.5 years. The last high in employment, which is just over 138 million people employed according to the establishment survey, we finally--all-in government, services, and manufacturing--got back to the level that we were at in January 2008, about 138 million jobs. That took 6.5 years, and that's a long time, it's the longest it's ever taken to gain back the jobs lost.
But I will say, the other thing that's very interesting is that it's not all even--not everybody is going to feel like we're back to normal. We're still down 1.7 million construction jobs. Some of that has obviously been channeled into manufacturing and some turned into health-care workers, but that sector is still in a world of hurt.
The other number that's down considerably is government--down about 600,000 jobs. So, to some people, it may not seem like the recession is over.
Stipp: So all the jobs came back, but the makeup of those jobs does look different. What's your take on why it did take so long to get the jobs back this time around?
Johnson: I think the pain of laying people off made companies very cautious about hiring people back. We went through a lot of uncertainty, and you think about all the different things that we've had: The fiscal cliff, the budget negotiations, Hurricane Sandy, the tsunami in Japan, the Middle East situation, the rapid rise in oil prices, up and down commodity prices, are all things that created a lot of business uncertainly. Companies wanted to work the people they had a little bit harder and there didn't seem to be the incentive to really go out and hire more people.
Stipp: You mentioned earlier that the last few months have been building on a good trend, a better trend than we had seen on average recently. What's your take for the rest of this year? Might we see continued improvement like we're seeing on that trajectory these last few months for the rest of the year?
Johnson: I'm printed on record as 190,000 jobs per month. I think we'll probably do a little bit better than that--maybe 200,000 jobs a month. I think that we've had three really great months. I think we'll stumble along at that 200,000- 220,000 jobs for a little bit here going forward, if construction doesn't fall off the cliff here on us.
Stipp: Great insights as always, Bob, on the employment market. Thanks for joining me again.
Johnson: Thank you.
Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.