Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights job growth.
- In contrast to August’s reported net zero job growth, the economy added 137,000 private jobs in September and lost 34,000 government jobs for a net non-farm job growth of 103,000. The unemployment rate held steady at 9.1 percent. Average hourly earnings in September erased the decline they had shown in August. On the year hourly earnings are up 1.9 percent and hours are essentially unchanged.
- Looking closer, 45,000 of these private jobs were Verizon workers who were on strike last month who have been added back to payrolls. This swing means that private job growth was essentially the same in September and August.
- The August picture was not quite as dire as was portrayed due to the striking workers and due to upward revisions in the data for both July and August. Still, the average private job growth in the 5 months from December to April was 196,400. The average in the 5 months since then has been 105,200. If those rates were to hold over the course of the year, the difference is about 1 million jobs.
- To step back a bit, the economy lost 8.8 million non-farm jobs in the course of the recession. Since recovery, we’ve added back about 2.1 million, leaving a 6.7 million job deficit from the previous payroll employment peak. (The trend for private employment is similar. The job loss was 8.8 million, but we’ve added 2.6 million private jobs back already. Government job trimming, particularly among state and local governments, explains the difference.)
- Analysts often remind us that population has grown since the January 2008 peak in payroll employment; there are about 7.5 million more civilian, non-institutionalized, working-age people now than there were at peak payroll. You might think that we need more jobs for these people that are otherwise pushing up the unemployment rate, but they’re not pushing it up, why?
- Population growth has not translated into much higher unemployment rates because the labor force—those with jobs and those looking for jobs—actually declined during the recession by about half a million and is now right about at the same level as January 2008. If the labor force doesn’t grow, adding back only those jobs that were lost, could bring the unemployment rate back down to about 5 percent. That’s a pretty big if though, given the current labor force participation rate.
- The labor force participation rate—the share of the civilian, non-institutionalized working-age population that is working or looking for a job—was high in the 1990s, above 66 percent for the whole decade. This rate peaked at 67.3 in early 2000 but had eased back to closer to 66 percent by 2004 and remained at about that level until the recession began when the rate decreased. The participation rate seems to have stabilized in 2011 at about 64 percent, a level last seen in 1984. As the economy improves, expect the labor force participation rate to creep back up—maybe not all the way to the 67 percent peak, but higher than today’s rate. Every one percent added to the labor force participation rate adds about 2.4 million people to the labor force. This phenomenon will keep the unemployment rate elevated even as jobs are being added.