Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Jeremy Glaser | 03-07-2012 01:00 PM

Can Job-Growth Momentum Continue?

Morningstar's Bob Johnson and Vishnu Lekraj see plenty of evidence that February's jobs report will continue the strong trend, but some headwinds remain.

Jeremy Glaser: For, I'm Jeremy Glaser. This Friday we're going to get February's jobs report. After a few months of better-than-expected numbers, can that momentum continue? I'm here today with Morningstar senior analyst Vishnu Lekraj and director of economic analysis Bob Johnson to take a look at some positive and negative factors that are going to have an impact on this report. Guys, thanks for joining me today.

Vishnu Lekraj: Thank you.

Bob Johnson: Great to be here.

Glaser: Let's start with the positive side of the ledger. We have seen some relatively good news on the jobs front, as I said, during the last couple of months and also in some of the other numbers that we follow in the last couple of weeks. Could we run through what some of those numbers are and what they could mean for this particular report? Vishnu, I know you look closely at ADP's numbers. Could you talk a little bit about those?

Lekraj: Yeah, we got ADP's numbers on Wednesday and they were pretty good. What it shows is an acceleration in terms of job growth. What's really positive with that report was that every category in terms of small, medium-size, and large businesses grew and grew robustly, and other categories that showed a lot of weakness during the past few years have started to rebound and rebound in a positive way. In particular, manufacturing was about 10% of the job growth out of the ADP report, which is good news. And it kind of corroborates what's been happening within the manufacturing sector during the past six months.

Johnson: Did the construction sector even look up this time?

Lekraj: Yes, it did. So, 7% of the job growth from ADP's report was in construction, which is key, again, and I think hopefully shows some signs or some pickup here in the housing market.

Glaser: Certainly the housing market has been a big drag, and the hope is that when people have jobs, they'll actually go out and buy houses. Are we starting to see that in the numbers, such as with the other people like financial workers who might be in the mortgage industry and are getting more jobs, or is that indeterminate at the moment?

Lekraj: The finance industry has been hit pretty hard during the past, again, year or so. However, we have seen some growth here out of the ADP report, which is kind of surprising because you hear about all the layoffs happening at all of the investment banks and a lot of the commercial banks. Consumer banks have talked about reshuffling and reorganizing their operations, but we might be seeing is them tooling their workforce versus just laying people off.

Glaser: Bob, every week we get a look at how many people are filing for unemployment claims for the first time. What have you seen in that data? Has it been an encouraging sign?

Johnson: Yes, that's one reason I think people feel good about Friday; we'll likely have a decent number. Right now we're at about 350,000 initial claims, and on a four-week moving average basis that is at the best level of this recovery. I would say something like 320,000 would be normal, so we've made almost all the improvement in layoffs. Nobody is laying anybody off anymore. The question is: Are they hiring very many? Obviously, the number we see is a net number, but certainly on the layoffs side, the numbers look pretty good on the initial unemployment claims and have been frankly for several weeks trending down. Now, this is the time of the year when they typically trend down a little bit, but we'll see if that holds.

Glaser: You mentioned the seasonality at this time of the year. Obviously, a lot of hiring is seasonal. What effects are we going to see from this just being February? Are there going to big adjustments that are being made in these numbers?

Johnson: Let's talk about that just a little bit. The Bureau of Labor Statistics reports the raw numbers, and again, because companies hire lots of people in May and they tend not to hire so many in other months, the BLS has to make a seasonal adjustments to make the numbers comparable from one period to the other. In January, the seasonal factor is a big adder, and in February, it's a tiny subtracter. This is not a month that will be aided or helped much by seasonality, so that will be interesting to see. At least, that's nothing we have to really worry about in a big way.

Glaser: So, the number that's coming in really represents the number of people who actually got new jobs that month versus a number that's being adjusted through some statistical models?

Johnson: Exactly.

Glaser: So, are there any other positive factors that you think could provide that bit of an extra boost to keep those numbers going up in February?

Read Full Transcript
{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article