It’s jobs week. On Wednesday the market will digest ADP’s private sector estimate (April 2). The ADP report will then be followed by the most influential indicator of them all on Friday – the BLS’ Employment Situation Report. News stories this Friday and this weekend will, no doubt, surround employment growth, average wages, hours worked, the headline unemployment rate, and the details behind the broadly reported figures.
Overall, analysts expect the jobs number to come in close to +200K.
Labor market: Growth in job numbers
A +200K jobs number would mean a healthy acceleration of the job market growth from +175K in February, 129K in January, and 84K in December.
As some background on where the economy is in terms of recovery, here’s what some have called the “scariest chart ever.”
The figure shows the percentage change in employment from peak of a given employment cycle to the next peak.
The year represents the year in which the peak happened. The horizontal axis represents the number of months from initial labor market peak to the next peak.
As is likely no surprise, 2008 is the worst recession of the 10 shown, declining almost 6% from peak.
In addition to the terrible drop in employment, the recovery has been incredibly slow. As of February 2014, employment overall is still below its January 2008 peak of 138.365 million. The employment figure today is, interestingly, 666K below its previous peak (not sure if there will be any sign of the best in the Employment Situation Report this month).
The pertinent question of interest in regards to employment now is this – is there enough momentum to carry employment growth for a long time? If the labor market is to catch up to where it should be, this recovery would have to be the longest recovery on record.
Interestingly, a record-long employment growth period is what the market expects.
The exceptional as the baseline scenario?
In any event, the final figure that follows presents the same information as previously shown, with a row for each peak year.
The current recovery is now at 73 months (gray vertical line). At 73 months, the current recovery is less than a year away from the 83 and 84 months the 1974 and 2001 recoveries lasted.
In contrast, the 1981 and 1990 peaks were followed by 107 and 128 months of recovery (again, peak to peak).
In 1981, employment growth relative to peak at the 73rd month was 12%. The same 73rd month figure was 9% in 1990.
By contrast, it’s -0.4% today.
Even if the labor market lasts as long as the 1981 or 1990 peak to peak recoveries, it will never get close to the growth experienced back then.
In order to get to the 20%/21% of 1981/1990, the labor market would have to continue to grow another 10 years. Consistently.
A tall order for a labor market bent on becoming more like Europe than that of an entrepreneurial society.