The June United States nonfarm job level declined by 125,000.  The decrease reflected a 225,000 decrease in the number of temporary employees working on the 2010 Census.  The government sector decrease was offset by a private–sector payroll employment increase of 83,000.  The unemployment rate edged down from 9.7 to 9.5 percent. 

The unemployment rate drop is attributable to a labor force decline that outweighed the job decline.  The June labor force decline continues a decline from last month that is an offset to labor force gains in the previous four months.  In the past six months the labor force rose 1.7 million persons from the December 2009 low, then fell by about 1 million people in the last two months.  These imply that the current labor force level is still about 700,000 people above the cyclical low.  If it is true that the recent labor force increase was an unsustainable blip, then we might expect another labor force decline next month. 

If next month’s expected labor force decline were similar in magnitude to the employment decline, the unemployment rate would remain essentially unchanged.  One reason to expect an employment decline next month would be due to an ongoing contraction of temporary Census workers.  The remaining temporary Census worker count is roughly 250,000 jobs.  We expect the July labor force decline to outweigh the employment decline, but to less extent than this month, resulting in another unemployment rate decline.

The private-sector employment change was mostly driven by declines in Construction, Information, and Finance more than offset by gains in Manufacturing, Professional services, Education/Healthcare services, and Leisure/Hospitality services.  The gains and losses in Manufacturing and Information, respectively, are small and offset each other.   

The June gain in Professional services of 46,000 workers is welcome in this barely-a-recovery recovery.  These are helpful because they are typically well-paying positions that will benefit the recovery better than low-paying positions. The Leisure/Hospitality gain is the first significant gain in this sector thus far in this cycle.  This gain is dominated by amusements, gambling, and recreation, so aside from Casino cities, the gain may not be consistent with stabilization of rent and lease trends in most restaurants and hotels. 

Our back-of-the-envelope July job change projection would be driven by a presumed Census worker contraction of 230,000 that would be offset by private-sector gains of 80,000 resulting in an overall 150,000 non-farm job drop.  If the employment survey drop matched the job drop and the labor force contracted by 300,000 then the unemployment rate would be a bit over 9.4 percent in July.

The May labor market data are mostly disappointing, with 411 of the 431 thousand job gains due to temporary Census 2010 staff increases.  The raw data indicate that April SAAR job growth was 2.7 percent and May was 4 percent.  If we remove the temporary Census workers from the data, then the revised SAAR growth rates are 2.1 percent for April and 0.8 percent for May.  The 0.8 percent for May might be why the Dow Jones Industrial Average is down 244 points as of 12:15pm EST.

In other labor market indicators, long term unemployment levels rose from 6.72 million to 6.76 million people and the unemployment rate fell a bit from 9.9 to 9.7 percent.  From the establishment survey, we see that Construction, Retail Trade, Information, and Financial/Real Estate continue to lose jobs. 

This is exactly in line with our U.S. economic forecast.  Our forecast is weaker than consensus because we believe that fundamental weaknesses still remain.  The fundamental domestic weaknesses include: residential real estate, commercial real estate, banking, and household balance sheets.  There are also foreign weaknesses, especially in Europe.  Each of these job-losing sectors, except the Information sector, is related to the fundamental domestic weaknesses.  Unfortunately, we believe that a conservative economic forecast is the most accurate one.

Oregon April non-farm jobs increased 3,900 over March.  The April labor market update was posted by the Oregon Employment Department on Tuesday.  This is the largest month-on-month increase since October 2007.    Using the 3,900 jobs to calculate an annualized growth rate yields 3.0 percent, see the chart below. 

The 3,900 jobs gained comprised of 2,800 government jobs where 1,300 of these were Federal.  The Federal jobs, of course, were likely related to the Census effort that is underway.  That leaves 1,100 private sector jobs gained.  The annualized growth rate for non-farm private sector jobs is 1.0 percent.  These gains were brought by Personal & Maintenance Services (600 jobs), the Financial Services (400 jobs), Education & Healthcare (200 jobs), and Construction (100 jobs).  While the job gains in Education and Healthcare are nothing new in this cycle, the gains in the other three sectors are new.  Monthly data are intrinsically volatile.  We will wait for at least two more months of similar data before claiming that a trend of improvement for Personal & Maintenance Services, Financial Services, and Construction sectors are underway.

The April Oregon unemployment rate remained at 10.6 percent, unchanged from the May level.  This was driven by the fact that the labor force grew, which offset the jobs increase.  This phenomenon might continue in the next few months: a slowly recovering economy might bring sidelined workers back into the labor force, but job growth might not be strong enough to absorb all of them, keeping the unemployment rate high.  It is also possible that the unemployment rate might subside, but only slowly.  This is likely to be the pattern that exists for most of 2010.

April non-farm jobs rose by 290 thousand, greater than the consensus estimate of 200 thousand.  This was an improvement over 230 thousand in March and 39 thousand in February, which were revised up from original press releases.  At this rate of job improvement, year-on-year job growth will become positive in July, a welcome event indeed.

The labor force rose by 805 thousand persons in April, contributing to an increase of the unemployment rate from 9.7 in March to April’s 9.9 percent.  The seasonally-adjusted annualized quarter-on-quarter job growth rate increased from 2.1 to 2.7 percent and the April year-on-year job growth rate was a smaller decline than March, a 1.0 percent decline versus a 1.7 percent decline.

The number of persons who were unemployed for 27 weeks or longer, the long-term unemployed, increased from 6.7 million people in March to 7 million people in April.  The average duration of unemployment jumped from 31.2 weeks in March to 33 weeks in April. 

The increase in labor force is an interesting phenomenon given that the level of jobs is still lower than last year.  There could be a number of explanations for this including increased optimism as some analysts have mentioned.  While it is good to have increased labor supply, jobs are a matchup of employer and employee, so if the unemployment rate is going to subside, firms will need to pick up their rate of hiring.

The February United States jobs report sent the equity markets up this morning while respected commentators like Edmund Phelps, (Columbia, Economics Nobel in 2006), remark that they worry that the “recovery” might not have legs.

It always a bit odd to discuss growth that is less negative but that is the situation we are in as jobs have been falling since early 2008.  The year-over-year job decline measure improved by 50 basis points, from a decline of three to percent in January to a decline of two and a half percent in February.  This is indeed encouraging and continues a trend that started in September of 2009, where the year-over-year job declines have been moderating by at least 30 basis points per month.  At the rate of February’s improvement, year-over-year jobs would begin to grow by August 2010.  That is still quite a way off, and highlights that while the economy appears to be improving, it was a deep enough recession that robust job growth will not occur anytime soon. 

The other indicators from today’s Employment Situation report include long-term unemployed at 6.3 million persons.  February’s unemployment rate of 9.7 was unchanged from January.  The seasonally-adjusted non-farm job change was a decline of 0.3 percent, or a loss of 36,000 jobs.  Charts are included below.

Data released today reveal a United States economy that remains unsettled.

Mass Layoffs

The Bureau of Labor Statistics’ report shows a 2 percent uptick in January seasonally-adjusted mass layoffs from December.  The jump in mass layoff initial claimants for unemployment insurance was even larger at 19 percent over December. 

Gross Job Gains

This report, which describes gross job gains and losses rather than the net result of the two opposing forces, shows perhaps surprisingly that gross job gains rose in mid-2009.  However, gross job losses fell and fell enough to force the net jobs held to fall.  Gross job gains typically rise in recessions due to a turnover effect.  Comparing this recession to the recession of 2001 shows that the level of gross job gains is lower thus far compared with mid-2001, which makes sense given that this is a deeper recession. 

Consumer Confidence

The Conference Board’s measure of February’s consumer confidence fell to 46 from 56.5 in January and was lower than the consensus estimate of 55.  The measure is at its lowest level in 10 months, which was when the economy was contracting rapidly, indicating that the comfort level of the household sector remains low.

The January United States jobs report contains mixed results that, to us, provide hints of a recovery to come.  More on the recovery later.  The bad news from the jobs report first: long term unemployed persons, (those who have been unemployed for 27 weeks or longer), climbed by about 500,000 to just under 6.5 million persons.  Now for the good news:  year-over-year job declines have been moderating for five months in a row.  The declines peaked at five percent during July and August of 2009, and the January loss rate was only three percent.  This is an improvement of 2.8 million jobs.   The unemployment rate has been improving for three months now.   It peaked at 10.1 percent October 2009 and is now 9.7 percent, having dropped 30 basis points in just the most recent month.

Finally, a few months ago jobs were being lost in virtually all sectors, but in this release there are a variety of sectors that are up.  These include: Professional and Business Services, Retail Trade, and Durables Manufacturing, seasonally adjusted, from last month.  The upticks in Professional/Business and Durables Goods manufacturing are particularly good for the household sector and the economy since these are decent-paying jobs.

There were a number of data revisions in this release.  Contrary to some press reports, one should not worry too much about these revisions.  The establishment survey revision, which drives the non-farm jobs data in charts below, impacted data starting in April of 2008.  Our analysis of this data is based on relative changes either one month back or one year back and so do not go earlier than April of 2008.  I.e. there is no break in the data we are analyzing.  The household survey revision, which drives the unemployment rate data in charts below, impacted data starting in January of 2010.   This might impact our analysis of the change from December 2009 to January 2010.  However, the BLS uses the revised data and methodology to recalculate the December results, pages 6 and 7, and they find that the December unemployment rate estimate would not have changed and the implied change from December 2009 to January 2010 would not have changed.

We are tentatively encouraged by this press release.  While jobs are still being lost, and while the long-term unemployed continue to rise, other aggregate indicators have been improving for at least a few months now, in some cases improvements have been occurring for almost a half a year.  Keep in mind that jobs are still down from this time last year.  So while we speak of a job market that is improving we are not quite speaking about a recovery yet.  Recovery for us means job growth, which is not yet wide-spread.  However, it is encouraging to see the job losses slowing down.

The Oregon Employment Department’s Labor Market Information System released December 2009 jobs and employment data for Oregon’s counties today.  In most respects, Central Oregon’s labor market is not significantly changed from November, and very close to our forecast.

The Bend MSA (Deschutes County) seasonally-adjusted unemployment rate fell from 14.2 percent in November to 14 percent in December.  The Jefferson County unemployment measure fell from 14.4 to 14.1 percent, while the Crook County measure rose from 16.7 percent to 16.8 percent.  The declines are due to labor force declines, and not new jobs.

Year-on-year non-farm jobs changes were negative for each of the three counties, which was the case in November.  The year-on-year job declines moderated slightly for Crook County, from a 13.6 percent decline in November to a 11.1 percent decline in December.  The year-on-year job declines for Deschutes County and Jefferson County were unchanged at 2.5 percent declines and 3.2 percent declines, respectively.

In Crook County, the year-on-year job declines are in all sectors except Retail Trade and Leisure/Hospitality, which is counter to the trends in the State and the United States.  In Deschutes County, the year-on-year job declines are in all sectors except Leisure/Hospitality, Personal/Maintenance Services, and Government.  In Jefferson County the year-on-year job declines are in only six sectors, in contrast to the State and the Nation.  The non-declining sectors include: Construction, Wholesale Trade, Retail Trade, Technology, Education/Healthcare, Leisure/Hospitality, and Personal/Maintenance services. 

Central Oregon’s job resilience in Leisure/Hospitality is due to tourism and December tourism at least as evidenced by this jobs report, is providing support to the Central Oregon economy.  In part at least, this is due to better early-season ski conditions. Tourism will likely support the Central Oregon labor market for a few months yet to come, which is good news indeed.

We interpret the Central Oregon December jobs report as indicating the area is still “Bumping Along the Bottom”.  However, if the non-tourism sectors can begin a process of recovery, then along with the strength in Tourism, the area’s economy could begin a nice recovery.

Today’s Oregon jobs report for December shows mixed results in the State’s job market.  The OES’s Labor Market Information System provided the December estimates for the state this morning and will provide them for Oregon’s counties on Friday morning. 

The State’s Year-over-year job losses are improving a bit, from a loss of about five percent in November to a loss of 4.3 percent in December.  The seasonally adjusted unemployment rate rose about three tenths of a percent, from 10.7 percent to 11.0 percent.  The seasonally-adjusted non-farm job growth rate was actually up 0.2 percent in December, the first increase month-on-month in four months and one of only two cases of an increase during all of 2009. 

As with other areas that we cover, the year-on-year declines are in all sectors except (private) Education and Healthcare where this is being driven mainly by Healthcare.  For a variety of reasons, including overall population aging and inelasticity of demand, Healthcare has been somewhat resistant to the gale-force winds of this Great Recession.  The hardest-hit sectors in December were: Construction, Manufacturing, Retail Trade, Financial & Real Estate, Professional & Business, and Leisure & Hospitality.

We interpret the Oregon December jobs report as indicating the State is still “Bumping Along the Bottom”.  If the improvements in job growth continue then the status might change to “Recovery”.  Given the intrinsic volatility of monthly data, we will wait until a couple more months of data to verify that. 

The United States employment situation improved substantially in November.  The unemployment rate fell a bit and quarter-on-quarter job losses slowed dramatically, almost to zero.  This welcome news has been greeted with rises in equities and a fall in Treasury bonds.  I have attached four charts below.

Are we out of the woods?  No.  Is this an identifiable trend to recovery?  Not yet. 

From the charts, you can see that job levels are still 3.4 percent lower than they were at this time last year.  Also, the ranks of the long-term unemployed, those workers who have been unemployed for 27 weeks or longer, have grown to almost 6 million. 

You can also see that the unemployment rate fell in July, before rising by more than 50 basis points during the next three months.  Hopefully, this time, the unemployment rate will not rise in December, but continue falling. 

A key dynamic that has been going on for about a year now appears like it will continue at least through the middle of 2010, and that is the negative feedback from jobs to residential real estate.  This recession started in residential real estate with deflation of an over-leveraged housing bubble.  It then spread to virtually every other sector in the economy, and once job losses started, the negative feedback loop started.  Certain aspects of the housing correction were worsened by the job losses – especially foreclosures. 

With high unemployment rates, lots of long-term unemployed persons, and job-levels still relatively low this feedback will continue.  The most recent United States residential foreclosure rate data indicate that the foreclosure problem is worsening.  The most recent data on commercial real estate loan delinquencies also indicate a steadily worsening problem.

What drove jobs down?  One of the biggest factors was the tremendous fall in consumption during the second half of 2008.  Our interpretation of that fall was the household sector moved to correct over-leveraged balance sheets.  With ongoing real estate loan delinquency problems, we are not convinced the household sector will be motivated to increase their spending levels in the near term.