Friday’s top-line employment number came in at +248K, about 38K above what analysts were expecting.
The report led some Wall Street economists to label it “the perfect employment report.”
Was it? Here’s a review of the labor market in 10 charts.
Monthly Growth in Jobs
Friday’s net new jobs number of +248K makes it 9 months out of the past 12 of above-200K jobs. The growth in the 3Q was one of the best in a long time, representing only a slight drop from the very strong Q2 2014 numbers (gray horizontal lines represent the average growth for the given quarter).
Labor market – Year over Year Growth in Jobs
The monthly jobs numbers are the most often quoted, but generally are less indicative of broad economic trends. Here’s a look at the year-over-year (Y/Y) jobs growth figures.
In September, Y/Y jobs growth accelerated to 1.9%, closing in on the 2% threshold.
The acceleration belays some analysts’ concerns that the labor market was ready to decelerate. In fact, the labor market troughed in February 2014 at 1.6%, and has since accelerated throughout the remainder of 2014.
Labor market – How Does the Current Employment Situation Compare to Past Business Cycles?
The M/M and Y/Y employment growth figures beg the question: How does the current recovery compare to past recoveries?
The following graphic has that comparison.
Overall, the current recovery that began in 2008 is the slowest in at least the past 60 years.
An oft-discussed aspect of the current recovery is the moderate condition of wage growth. The issue is that at this point of the economic recovery wage growth should be closer to 3% Y/Y growth as opposed to the current 2%.
Interesting, September’s numbers provided no evidence of wage growth expanding beyond 2% anytime soon.
The current recovery has been weak by many measures, including part-time employment.
The following looks at part-time employment by business cycle. Overall, although part-time employment since January 2008 declined to 45% in September from 48% in August, it’s still 45%. That’s 45% more part-time workers than there were in January 2008!
In connection with the part-time employment numbers is the full-time picture.
The full-time employment picture is much less positive than other indicators, with the total count of full-time workers still about 1% fewer than there were in January 2008. That’s 6 1/2 years and full-time employees are still below where they were at the housing peak.
On the one hand this certainly points to a potential for lots of room to grow.
On the other hand, this should pose some analysts to question whether the U.S. economy has gone through some structural changes, such as a shift to part-time employment because of pernicious incentives provided through Obamacare.
The following graphic inspect the unemployment rate by economic cycle.
Overall, although the unemployment rate declined to 5.9%, the lowest level since July 2008, the current recovery is still one of the slowest on record, besting only the 1974 recovery at this point.
In terms of where the unemployment rate is relative to where it was in the previous peak, the unemployment rate is still 20% higher than where it was in January 2008.
Labor Force Participation Rate
The next graphic inspects labor force participation by economic cycle.
Overall, the jump in the “Not in the Labor Force” number from August to September explains the better-than-expected unemployment rate.
The number of individuals not in the labor force grows naturally with the aging and expanding of the population base.
The issue is that it is, according to some, growing too fast.
If the rapid increase in individuals not in the workforce is due to parents choosing to spend time with children, then that’s probably a good thing for the future of the American workforce.
On the other hand, if it’s people unable to find work, or simply not satisfied with the available work, then that’s a different signal.
So far, the statistics point to some of both.
Employment by Firm Size
The final of the ten graphics is job growth by firm size.
The following is the ADP numbers.
Overall, as indicated, small and medium sized businesses have generally been on a decelerating trend for fourth months now, while large firms are accelerating hiring.
Economy-watchers and investors will certainly need to pay attention to this trend and consider the consequences should this trend continue.