Earlier today, the US Bureau of Labor Statistics, released its monthly employment report.
Those that follow Financial Slacker, know that I have started commenting on this highly anticipated monthly report.
As a reminder, I use this data to gauge where I think the economy is headed. I primarily look at the year-over-year growth percentage each month and I prefer non-seasonally adjusted data. And recall that I typically focus on total private employment, rather than total non-farm which adds federal, state, and local government employees. Although this month, I did spend a little more time looking at seasonally adjusted data and total employment including government workers.
For the month of January 2016, non seasonally adjusted total U.S. private employment was 119.2 million, which is up 2.5 million, or 2.2% from January 2015.
The good news is that the US economy added 151,000 jobs, using seasonally adjusted total employment, in the month of January, which is what everyone is talking about. Looking at seasonally adjusted private employment (excluding government workers), the US added 158,000 jobs. It appears we lost 7,000 government jobs in the month of January – hard to believe.
But viewing non seasonally adjusted private employment, the US economy actually lost 2.5 million jobs in the month of January. This is not a surprise as we always lose jobs between December and January. That’s why most people like to use seasonally adjusted data to compensate. But I prefer to look at the real data in order to make up my own mind about the seasonal impact. Although we always lose jobs in January, this year was a little worse than prior years. The last time we lost this many jobs was back in 2008, 2009, and 2010.
Take a look at the table below:
|Total Private Employment Growth|
|Employment in 000’s||Year-Over-Year Growth||Year-Over-Year Growth %|
If you look closely at the year-over-year growth % in the table above, you will see that the growth rate actually peaked last February 2015, and the most recent month, January 2016 was the lowest growth rate we have seen since then.
In other words,
The employment growth rate is on a downward trend.
Although the January numbers aren’t drastically down, they are declining, and the impact results in 400,000 fewer jobs added each month.
For even more perspective, look back at the data over the past 30 years and you can see some very interesting trends.
As I discussed in a prior article, you can clearly see from the chart, over the past 30 years, we have had three periods where total private employment growth was negative:
- 12/90 – 3/92 (16 months)
- 7/01 – 11/03 (29 months)
- 4/08 – 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 – 4/89 (19 months)
- 3/94 – 6/95 (16 months)
- 3/97 – 5/97, 9/97 – 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. A growth rate of 2.5% appears to be the new ceiling.
If you look more recently, since we emerged into positive territory in Aug 2010, we have been hovering in the 2% growth range every month since. We are in one of the longest periods of sustained year-over-year job growth in history. We saw the peak in February last year and have been trending downward ever since.
Recently, I have been involved with a networking group focused on finding employment opportunities for senior level financial types. One of the common themes I hear from this group is how difficult the job market is becoming.
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Based on a number of anecdotal perspectives, I would say we are slipping towards a significant downturn in the economy. Employment is down, the stock market has started off the year with a significant correction, oil prices are at the lowest levels in years, and we have political instability with the upcoming 2016 Presidential election.
I have my own crystal ball about where I think the economy is headed, but I would like to hear from other folks on this topic.