The jobs forecast is mixed. Get used to it.
By Michael Beygelman
The December 2010 unemployment numbers painted a picture of hope going into 2011. The U.S. unemployment rate fell by 0.4 percentage points to 9.4 percent in December, and nonfarm payroll employment increased by 103,000 as reported by the U.S. Bureau of Labor Statistics (BLS). Employment rose in leisure, hospitality, and healthcare, but few changes occurred in other major industries.
Monthly revisions of employment data are not uncommon. This is when the BLS goes back two months to update its reported data once it has a chance to more accurately validate initial findings. That recent monthly BLS revisions have been positive could be a sign of encouragement. When things are bad, the monthly revisions are usually negative, but when things are good, the monthly revisions tend to be positive. Given this history of BLS revisions, and looking at the latest jobs report, October and November were revised upward to show that 70,000 more jobs were created than previously reported. This is only one data point, but it does suggest that the economy could be building momentum.
The monthly ADP payroll report, which comes out before the BLS report, is generally viewed as a leading indicator. The December 2010 ADP number begun influencing economists that the job market might be better than expected and that they should consider revising their forecasts of the BLS report. After all, ADP reported in their own monthly survey that the private sector added 297,000 jobs. As it turned out, the official BLS report came in well short of the ADP number. On the surface it sounds like ADP missing their number by a big margin is a problem, but the reality is that when there is a big gap between the ADP number and the BLS number, future BLS revisions will likely move us closer to the better ADP number, which is a good thing for the job market.
Part of the explanation for the unemployment rate drop is discouraged workers dropping out of the labor market. But wait, what were people doing in December? They were shopping! It looks like consumers are getting back their confidence, and in doing so they made 2010 one of the best holiday shopping seasons in many years. Keep in mind that when consumer confidence goes up, corporate confidence begins to increase as well, and when companies are confident they hire people.
Look closer at companies that specifically operate in industries that support corporate hiring and you’ll see that they all (cautiously) agree that things are getting better. Research will reveal that the number of job listings on Indeed.com rose 88 percent from 2009 to 2010. Listings for manufacturing jobs rose 90 percent, and transportation job listings rose 147 percent. It stands to reason that if manufacturing companies are ramping up their production, and transportation companies are preparing to ship more goods, then the broader job market is not far behind because these industries lay foundations for increased economic demand.
In case you haven’t noticed, it is also nearly impossible to find good recruiters right now. Why, you might ask? Because the number of job openings for recruiters—these are the people who companies hire to do the hiring—is also up 20 percent in the past six months, according to Indeed.com. While people in the HRO industry might be biased on this, nevertheless, companies investing in their ability to hire more people could arguably be the most visible indicator of corporate confidence.
One month of good employment data doesn’t mean that our problems are over, but it is certainly a step in the right direction. We have to be sensitive to what the employment picture looks like at the state and local level, which can sometimes be radically different from the national average. We also need to be mindful that certain people are leaving the job market altogether, while others might be turning to alternative employment. The job market needs to absorb college graduates and an additional wave of skilled people, ro the recovery risks a stall. BLS figures show that unemployment among people under 25 with bachelor’s degrees jumped to 9.6 percent in December, which is up from 8.6 percent in November, and substantially up from 5.9 percent only two years earlier when things were actually perceived to be worse.
Employment offers no more safe harbors. Every category is at risk for declines or poised to grow because the job market at the micro level is highly dynamic. However, at the national level what’s clear is that radical moves—up or down—in the overall U.S. unemployment picture are unlikely in the near term.
Michael Beygelman is President, RPO Solutions at Adecco North America, the world’s largest workforce solutions provider. He can be reached at michael.beygelman@adeccona.com
