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Employment Growing…But At A Slowing Pace

imageYesterday, the US Bureau of Labor Statistics released its monthly employment report for November, 2015. As it is every month, this report is a highly anticipated monthly release from BLS and will often have an impact on the market.

Whereas while it seems most of the market focuses on unemployment as an indicator of economic health, I focus on the employed. Employment, coupled with productivity, is the primary driver of economic activity.

If you haven’t spent much time looking at the data on the BLS site, I highly recommend that you do so. I’ve been following and analyzing the BLS employment data for years. In one of my prior companies, we used a subset of the data to forecast work-related injuries, which in turn drove our revenue. Now I use the data more to gauge where I think the economy is headed.

In addition to the employment information, the BLS compiles and reports on prices, inflation, employee compensation, productivity, and other metrics. Go take a look.

November Employment Increasing

I primarily focus on the year-over-year growth as a percentage each month more than I look at the numbers absolutely. And because I’m looking at year-over-year, I use non-seasonally adjusted data. I also use total private employment, rather than total non-farm which adds federal, state, and local government employees. Not that I have any problem with government workers, but I feel those tend to be less driven by the state of the economy and more driven by the current political environment.

The report indicates total U.S. private employment of 121.6 million in November, up 2.6 million, or 2.2% from November, 2014. For some perspective, in February, 2015, year-over-year employment increased at a rate of 2.8% which was the highest increase seen this year – and actually the highest percentage increase since 1998.

For even more perspective, if you look back at the data over the past 30 years, you can see some very interesting trends.

As you can clearly see from the chart, looking back over the past 30 years, we have had three periods where total private employment growth was negative:

  • 12/90 to 3/92 (16 months)
  • 7/01 to 11/03 (29 months)
  • 4/08 to 7/10 (28 months)

The first period marked the Gulf War. The second, the attacks on 9/11. And the third, the great housing recession. Although interestingly, the decline in 2001 actually began before 9/11 and dropped below zero in July prior to the attacks. But I’m sure the attacks pushed the declines into record low territory. In 2009, we had three consecutive months of -5.9% year-over-year declines – by far the worst we have seen.

Also over the past 30 years, we have had a number of periods with 3% or better year-over-year growth:

  • 10/87 to 4/89 (19 months)
  • 3/94 to 6/95 (16 months)
  • 3/97 to 5/97 and 9/97 to 4/98 (11 out of 14 months)

Unfortunately, we haven’t seen anywhere near 3% growth since then. In fact, after 9/11, we didn’t see 2% growth again until midway through 2005.

If you look more recently, since we emerged into positive territory in Aug, 2010, we have been pretty steadily hovering somewhere in the 2% growth range every month. We saw the peak at 2.8% in February earlier this year and have been trending downward ever since to the most recent report of 2.2% for November.

What does all this mean?

If I look into my crystal ball, I would wager that we have hit the peak at least for a period of time. And I would go further to say we are due for a correction whereby at the minimum, we’ll drop down to the 1% range and probably more likely, we’ll see another below zero period in the next 12 to 18 months.


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