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The Jobs Will Come

Jason Stipp

Jason Stipp: I'm Jason Stipp from Morningstar. The government released its employment data Friday morning. Although we were hoping for a little bit of a job gain, we did see 20,000 more jobs lost in January--a small number. And there were a lot of bright spots in the report, including unemployment rate dipping down to 9.7 percent, from 10 percent before.

Here with me to talk about the numbers is Morningstar's Bob Johnson. He's associate director of economic analysis. And Vishnu Lekraj, he covers the employment sector. Thanks for joining me, guys.

Vishnu Lekraj: Thank you.

Bob Johnson: Nice to be here.

Stipp: So first things first, we talked yesterday. We weren't necessarily expecting to see job gains. We were hoping to maybe see some job gains. We did see a little loss. So Bob, what was behind that slightly negative number?

Johnson: Sure. I think one of the things we alluded to yesterday was the construction sector. And we did lose 75,000 jobs there. And that was a little bit more than I had been thinking even, and that's what swung the negative. Most of the other categories performed better than I expected during the quarter.

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It was mainly in construction. And frankly, it was mainly commercial construction. Residential construction did lose a few jobs with the tax credit expiration, but it turns out most of it was on the commercial side of the house.

Stipp: OK, and I know that these two things are figured differently, the unemployment rate and the number of jobs lost. But we did see the unemployment rate tick down. So what do you think? How are you looking at the unemployment rate right now and that improvement that we saw?

Lekraj: Well, there could be two things. Number one, it's just a good report. So you might have seen some improvement there, with some folks finding jobs. But the re-entrance rate, the folks who are re-entering the work force went up. So that threw a wrench into everything.

If that stays the same, you're probably going to see a little increase in the unemployment rate, over the next couple of months. Just for the fact that when things get better, people become more brave, and enter the workforce again and try to find work. And they can't find it right away, so that rate goes up.

Stipp: OK, so maybe don't be too surprised if it ticks up next month.

Lekraj: Right.

Stipp: You had alluded to that it was a good report, so there were several positive things. Bob, what would you point out as some of the positive things that you saw this morning?

Johnson: Sure. I'm looking beyond just the employment numbers. I like to look at a lot of other numbers, and the one thing that I really like is the real hourly wage number looked good again this month. We were on the nominal; we were up five cents again on that number.

So that's a good thing to see. People have more money to spend, and incomes obviously drive a lot of things. The hours worked were up, again, another tenth of an hour. So we were up from a base of 33 to 33.3 hours per week. So that's a good thing to see.

The manufacturing side of the house, in terms of hours worked, looked even better than that and we're up rather dramatically over the last six months there. The manufacturing is beginning to hum.

Stipp: Vishnu, what did you see that you thought looked especially positive?

Lekraj: When you look up and down every category, everything was positive except for construction. Financial services was down a little bit, and leisure and hospitality was down a little bit. But everything else was very good.

What got me excited, again, was the temporary sector. That's up 50,000 jobs. That dovetails or that correlates to what the staffing agencies have been reporting over the past week plus, which is a very good sign.

Again, I want to echo what Bob said: hours went up, wages went up. So this report was very good, very good even though we had a decrease.

Stipp: We actually saw some government numbers in there as well, that were up a little bit, which is something we hadn't seen before. So that's potentially another positive sign there.

Lekraj: Right. The federal government hired some folks. We have Census hiring coming up here, over the next month. What was down was the state and local governments. Obviously, their budget situations are getting worse by the day. We may see some help there from the jobs package that the government may pass over the next quarter.

But again, overall, positive.

Johnson: And the manufacturing sector is really exciting to me, here. I mean this is the first time, this recession, that we've actually seen growth in the manufacturing numbers. That number was up.

Then, if we look earlier in the week, we had the purchasing managers survey, and that number absolutely knocked the cover off the ball. And the employment indexes, the new orders indexes means that we've got at least two or three good months coming in manufacturing. I come from a manufacturing state originally, and to see the manufacturing numbers move up, it pulls through a lot of service numbers eventually.

So the improvement there is really a big deal, in my opinion.

Stipp: So it sounds like a lot of positive things on the horizon then. So what are you looking at next month? I know, Bob, you've been saying that you're expecting growth, growth, growth. And it's been a little bit slow in coming, but what are you looking at for next month, and when do you think it's really going to hit?

Johnson: Sure. I think we're going to see growth next month, most likely, and positively by March. The reason I say positively is because I think that we're going to have more Census workers hired. That's going to be a big number here. And it looks like the government's going to be pretty good about breaking that number out, so we can look at it.

But we're talking of adding three-quarters of a million or more people to payrolls, over the next four or five months, just to take the Census. Not high-paying jobs necessarily, but some nice, what I call, pump priming, to get people back in the workforce, spending some more money, and it starts to cycle and feed on itself a little bit.

Stipp: Almost like a bit of a stimulus then. Vishnu, if you were going to pull out your crystal ball, what do you see for us?

Lekraj: Probably again, like I said, it's going to be slow growth here. You're going to see some, again, pump factors, as Bob said, from the Census Bureau, and you're going to see this jobs package pass, which may help. And again, I go back to the staffers. They've been really very positive. So you're going to see some slow growth here, over the next couple of quarters.

I don't expect a V, by any means. But again, there should be some positive signs, going forward--nothing down.

Stipp: Well, guys, great insights, and thanks so much for joining me again today.

Johnson: Great to be here.

Lekraj: Thank you.

Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.