Jobs
Looking for People
A
number of key reports due out this week will tell market participants how many
jobs were added in March 2012, in what industries the jobs were added, how much
workers were paid, and why workers were unemployed. If the consensus is
correct, the private sector economy will add more than 200,000 jobs for the
fourth consecutive month, and the nation’s unemployment rate will stay at 8.3%.
Each month, financial markets and the media turn the monthly jobs report into
the most closely watched economic indicator on the calendar. A few days later,
the same government agency — The Bureau of Labor Statistics within the
Department of Labor — will release a report called the job openings and labor
turnover (JOLTS) report with little fanfare from the financial markets or the
financial media.
The
JOLTS report does not get a lot of attention, mainly because it is dated (the
next report due is for February), and by then, the market already has plenty of
information on the labor market in March, including a reading on initial claims
for unemployment insurance — a closely watched weekly metric on the labor
market — for the week ending April 7. However, the JOLTS data provides more
insight into the inner workings of the labor market than the monthly employment
report does. One key takeaway from the JOLTS data is that small and
medium-sized businesses in the South are looking for highly skilled workers.
JOLTS
provides data on:
·
The
number of job openings economy-wide, by firm size, and by region,
·
The
number of new hires in a given month, and
·
Job
separations.
On
the surface, the data reveals just how dynamic the U.S. labor market is,
demonstrating how the economy creates (and destroys) tens of millions of jobs a
year. It can also help us answer questions we receive quite often in the LPL
Financial Research Department like: Where are all the jobs coming from? What do
those jobs pay? What kind of companies are hiring, and where are the jobs
located?
At
the end of January 2012 (the latest data available), there were 3.1 million job
openings, up from 2.1 million open jobs at the start of the economic recovery
in June 2009. However, the 3.1 million open jobs at the end of January 2012 was
more than a million fewer than at the end of the 2001 – 2007 recovery. Thus,
the JOLTS data tells a familiar story: The labor market is healing, but it
still has a long way to go to get back to normal.
Where Are the Jobs?
The
industry group that has seen the biggest percentage change (nearly 100%) in the
number of open jobs since the start of the recovery is the professional and
business services area, where there are currently 729,000 open jobs, nearly
double the amount in June of 2009. Note that jobs in this category pay on
average 15% more ($23 per hour versus $20 per hour) than the average job.
Jobs
in this category include:
·
Legal
services,
·
Accounting
and bookkeeping,
·
Architectural
and engineering services,
·
Computer
systems design,
·
Management
and technical consulting services, and
·
Temporary
help services.
With
the exception of temporary help services, which are a catch-all for temporary
employment agencies, the vast majority of the jobs in the professional and
business services area appear to be in professions that demand advanced
education or training. Indeed, in recent Beige Books — qualitative assessments
of banking and business conditions compiled for the Federal Reserve (Fed) by
private sector business owners and bankers prior to each of the eight Federal
Open Market Committee (FOMC) meetings a year — there have been scattered
reports of labor shortages in certain industries. In addition, in recent public
appearances, Fed Chairman Ben Bernanke has noted that a mismatch exists between
skills and open jobs.
How Much Do They Pay?
Job
openings have surged in the relatively low paying ($12 per hour on average)
leisure and hospitality area (by 68%) and by 36% in retail ($14 per hour). But
large increases in job openings since the beginning of the recovery have not
been limited to low paying jobs. Manufacturing (by 54%) and construction (by
44%), which are among the highest paid jobs, have seen sizable increases in the
number of open jobs. There has only been an 18% increase in open jobs in the
health care and education area, as these sectors didn’t see many job cuts
during the recession. Government job openings have increased by just 12%, with
a decent gain in state and local openings almost entirely offset by a drop in
job openings at the Federal level.
What Kinds of Companies Are Hiring?
Since
the early 1990s, small businesses have created two-thirds of the jobs in the
United States. The Bureau of Labor Statistics collects this data, but it lags
the other data mentioned in this commentary, and the most recent report is from
the middle of 2011. However, some private sector firms collect data on hiring
by firm size, most notably, in the ADP employment report, which is also due out
this week. The data shows that small businesses (under 499 employees) have done
virtually all of the hiring in the last two years. Recent surveys do show an
uptick in small business optimism, albeit from very low levels, helping to
corroborate the hiring data. But returning to the JOLTS data, we find that the
entire increase in open jobs since the start of the recovery, can be accounted
for by firms between 1 and 249 employees. While larger firms have seen
increases in open jobs, the vast majority of the increase in job openings over
the past two-and-a-half years has come from small businesses. As of the fourth
quarter of 2011, 75% of the job openings were at firms with less than 250
employees. This suggests that confidence and certainty in fiscal and monetary
policy and in overall leadership in Washington will be keys to sustaining the
gains made in the job market in recent months.
What Regions Have the Most Job Openings?
The
region with the most openings (1.43 million) and the biggest increase in job openings
since June 2009 is the South. On the other hand, the Northeast has seen the
smallest increase in job openings in the past two-and-a-half years and also has
the fewest open jobs right now. The Western region has fared a bit better than
the Northeast, but still has seen the second-smallest increase in job openings
and has the second lowest number of open jobs. One explanation for the lagging
performance in these two regions is that both were hurt by: 1) the collapse in
the real estate bubble (fewer construction jobs); and 2) the Northeast was also
hurt by the collapse in the financial services sector due to the bursting of
the real estate bubble. Looking around the country at open jobs by industry,
firm size, and pay, it seems like a good time to be a highly skilled worker in
the South looking for work in a small to medium-sized business.
In
a speech to a group of business economists in late March, Bernanke noted that
in order for the unemployment rate to drop further from here (it has moved down
by nearly a full point since last summer to 8.3%), the economy needs to pick up
steam. Our view remains that the labor market continues to heal at a modest
pace. The economy has added 3.9 million private sector jobs since February
2010, after shedding 8.8 million jobs between early 2008 and early 2010. At
8.3% the unemployment rate is well below the recent peak (10.0% in late 2009),
but nearly double the rate seen (4.4%) prior to the Great Recession. The
broadest measure of unemployment, which includes those working part time, and
those who have given up looking for work, stood at 14.9% in February, down from
15.1% in January and a recent peak of 17.2% in late 2009. This measure of slack
in the labor force is still nearly double what it was (7.9%) prior to the onset
of the Great Recession.
_______________________________________________
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