The Bureau of Labor Statistics will ring in the new year this Friday with the December nonfarm payroll report. Expectations are high, as this comes on the heels of solid job gains in October (+200,000) and November (+203,000) and the traditionally active holiday season.
Several major resources — including Moody’s Analytics and CNBC.com — have projected the gain to be at least on par with those of the past two months. As the nation awaits the report, REBusinessOnline.com speaks with two economists to analyze trends unfolding in the labor sector.
Improvement Despite Fluctuation
Gains in monthly nonfarm payroll employment averaged 189,000 through the first 11 months of 2013. It would appear that the market has adapted to the moderate increase in interest rates seen during the summer months.
“From May through August — a period of rising rates — job growth averaged 169,000 per month,” notes Bob Bach, director of research at Newmark Grubb Knight Frank. “But from September through November — a period of stable, if fluctuating, rates — job growth averaged 193,000 per month. Thus, rising rates can be accommodated by, and are in fact a byproduct of, a growing economy.”
Besides interest rates, the other main concern during the fall and heading into the winter was the potential impact of the partial federal government shutdown. While growth in fourth-quarter GDP may suffer some — Merrill Lynch projects growth of 3 percent as of Jan. 3, down from 4.1 percent in the third quarter — any major threat has passed, says Bach.
“There will be an impact on Q4 GDP of perhaps half a percentage point due to decreased government expenditures during that period,” says Bach. “But that amounts to less a ‘storm’ of effects than just enough ‘precipitation’ to get wet.”
Ryan Severino, senior economist and associate director of research at Reis Inc., agrees on the matter of the shutdown and goes so far as to say that the labor market has proven if not impervious to, then certainly resilient against, any issues emanating from Washington, D.C.
“It seems like the labor market has weathered all of the headwinds from the government last year — the shutdown, contractionary fiscal policy, monetary policy uncertainty and healthcare policy uncertainty,” says Severino.
Certain Sectors Soar
As the holiday shopping season ran its course, predictable surges in transportation and warehousing jobs (+30,500 in November), retail (+22,300) and food services (+17,900) came to pass. Otherwise, it was the healthcare industry that truly shined, adding 28,400 jobs for the month.
Interestingly, a large majority of those healthcare jobs — 26,300 — came within the ambulatory services subsector.
“It looks like a big chunk of that increase was in home healthcare services,” says Bach. “That would be a sign of the aging population receiving care at home due to personal preference and lower cost than a facility.”
Severino acknowledges healthcare as a growth sector, but also notes the inconsistency in its growth during the year. Also, the jobs gained in the healthcare segment come with the same caveat expressed by many pundits and economists during the course of 2013: These jobs are not necessarily career positions.
“It’s important to note that a lot of the jobs being created in healthcare are lower-skilled, lower-wage jobs,” says Severino. “That’s reflective of the economy and the majority of the jobs that are being created today.”
Finally, as for the overall unemployment rate, neither economist interviewed was overly enthusiastic about the metric’s decrease to an even 7 percent in November. Severino notes that the figure falling below this level could be an “important psychological threshold” for the market, but he and Bach agree that not too much stock can be placed in one number.
“The decline is not as significant as it looks,” says Bach. “The unemployment rate understates the level of stress in the labor market because it doesn’t count discouraged workers who have given up looking for work and part-timers who would prefer to work full time if they could find a full-time job.”
That number — commonly referred to as U-6 unemployment — is 13.2 percent as of early December, according to the U.S. Bureau of Labor Statistics.
— John McCurdy