Employment: No News is Good News

Now that Calculated Risk has pointed me out as one who follows such things, I feel obliged to comment on the labor indicators that have come out over the past 2 days. Overall, they were a bit stronger than I expected, but a bit weaker than I think the market expected.

Yesterday, we had both the July Help Wanted Index from the August Monster Employment Index. The picture is mixed. The Monster index bounced back from the distressing drop in July, and my first impulse was to put up a post under the title “Friendly Monster” to contrast with my earlier “Scary Monster” post. On closer analysis, though, the bounceback was not as impressive as it first appeared. The index rose from 165 to 173. In percentage terms, that increase is a little bit smaller than last year’s July-to-August bounce, but a little bit larger than the one in 2004. Since last year was a year of substantial job growth, I would say this year’s bounce still certainly goes in the “good news” column, but it is not large enough to make up for the unexpectedly large drop in July.

The Help Wanted Index dropped to 32 from an upwardly revised 34 in June. This leaves it a point lower than the original June report, which was already coming on the heels of a dramatic drop from February to May. The index is getting closer to its record low of 24 set in April 1958, and remember that the labor force has more than doubled in size since then. Relative to the level of payroll employment, the July figure is actually the fourth successive record low. If we combine the July Help Wanted Index with the August Monster index (using a procedure described briefly here) and normalize by payroll employment, the result is just 1.6% above the record low set in May 2003, and 15.5% below the recent peak in February.

Then there is the Employment Situation report that came out this morning. It adds up essentially to no news, which is news to me, because I expected it to be weaker than expected. Payroll growth at 128,000 is right in the middle of the range of values that are typically given as being sufficient to absorb the expected population growth. If you think the long-term trend in labor force participation is accelerating downward, then 100,000 might be enough, but if you attribute the decline since 2000 to a weak job market, then something like 155,000 are necessary. I tend to lean toward the high end of that debate, meaning I think that the August growth was a bit weak, but there is room for disagreement. Interesting that construction employment was up. Given what builder confidence indicators are saying, I expect that will change in coming months. Other than that I haven’t yet found anything interesting in this report.