October 2016 Jobs Report

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Market Reporting that Matters

October 2016 Jobs Report

No October Surprise for U.S. Job Gains

Monday, November 7, 2016

This month’s job gains were not an October surprise. The final figure before the Nov. 8 U.S. presidential election came in at a moderate 161,000 jobs, according to initial estimates from the U.S. Bureau of Labor Statistics (BLS). That was lower than consensus forecasts of about 175,000 jobs, but consistent with levels over the past few months.  

August’s job-gain figure of 167,000 was revised up to 176,000, while September was revised from 156,000 to 191,000 -- a net increase of 44,000 jobs during the previous two months. With these revisions, October was the lowest of the most recent three months and the second-lowest October gain since the Great Recession.

Annual job growth returned to 1.7% from September’s revised rate of 1.8% and was 30 basis points (bps) lower than the October 2015 rate. Annual job gains were 2.357 million, about 460,000 fewer jobs than the previous 12-month period.

Average hourly earnings (wages) for privately-employed workers rose 2.8% on an annual basis in October, as widely reported. This is the highest annual wage increase rate since June 2009, but the average annual increase has been about 2.6% for all of 2016.

The headline unemployment rate decreased to 4.9% in October, according to the Current Population Survey. Both the civilian labor force participation rate and employment-population ratio decreased by 10 bps from September to 62.8% and 59.7%, respectively. The number of unemployed (and looking for work) decreased by 152,000, and the “not in labor force” figure increased from 94.2 million to 94.6 million.

The number of part-time workers for economic reasons decreased by just 5,000 from last month, and the U6 unemployment rate, which includes these part-timers and marginally attached workers, dropped to 9.5%, its lowest level since April 2008.

In addition, the number of long-term unemployed (27 weeks or more) increased by only 5,000 from September, but is 153,000 lower than October 2015. The number of multiple jobholders increased by 430,000 from October 2015 to 8.1 million, but the number of discouraged workers not in the workforce fell by 178,000 to 487,000 from one year ago.

Job openings decreased to 5.4 million from the previous month’s revised level of 5.8 million, according to the BLS’s Job Openings and Labor Turnover Survey. The largest decreases in available jobs were in the Professional & Business Services (-223,000), Trade, Transportation & Utilities (-50,000), Manufacturing (-42,000), and Construction (-41,000) sectors. Hiring was down by 48,000, and separations were down 37,000 from the previous month.

Industry Focus

The not seasonally adjusted unemployment rate for the oil and gas extraction industry continued to decline from one year ago, dropping to 5.8% in October from 9.4% in October 2015. The rates for Manufacturing (+30 bps), Information (+110 bps), Financial Activities (+30 bps), and Professional & Business Services (+10 bps) each were up from last October. All other industries had lower or unchanged unadjusted unemployment rates than October 2015.

The Education & Health Services (+52,000) and Professional & Business Services (+43,000) supersectors added the most jobs in October. Only two industries lost jobs: Manufacturing (-9,000) and Mining & Logging (-2,000). The remaining industries gained a moderate number of jobs.


  • The Education & Health Services supersector had strong gains in health care (+30,500), particularly in ambulatory health care services (+18,500) and hospitals (+12,700). The education sector added an additional 13,500 jobs, and social assistance contributed 8,600 jobs.
  • The Professional & Business Services supersector gained 16,900 higher-paying professional and technical services jobs, primarily from computer systems design (+8,300). Administrative and waste services added another 22,000 jobs.
  • Government (+19,000) gained 12,000 Federal jobs, 4,000 local government jobs and 3,000 state government jobs.
  • Financial Activities’ 14,000 jobs gained came primarily from the finance and insurance (+8,800) and real estate (+4,400) sectors.
  • In the Trade, Transportation, & Utilities supersector (+13,000):
    • Transportation and warehousing added 7,500 jobs, and wholesale trade added 6,300 jobs in October.
    • Retail trade’s 1,100 jobs lost resulted from setbacks in electronics and appliance stores (-10,900) and clothing stores (-15,600). Those were offset by gains in general merchandise stores (+9,800), motor vehicles and parts dealers (+5,200) and miscellaneous stores (+3,500).
  • The Construction industry gained 11,000 jobs in October and again had strong contributions from specialty trade contractors (+6,700), especially nonresidential contractors (+4,100).
  • Leisure & Hospitality’s net gains of 10,000 came from 9,900 new jobs in the food services and drinking places subsector.
  • The Other Services industry (+6,000) benefited from gains in the repair and maintenance (+4,700) subsector.
  • Information (+4,000) had positive contributions in October from motion picture and sound recording industries (+8,600), with losses in telecommunications (-4,500) and publishing (-1,600). See the September 2016 Jobs Report for a discussion of the motion picture subsectors’ seasonal hiring patterns.
  • The Mining & Logging industry lost only 2,000 jobs in October while Manufacturing’s 9,000 jobs lost were almost equally divided between durable goods (-5,000) and nondurable goods (-4,000).

Top Job-Gain Metros Remain the Same

The metropolitan areas among the 120 in our Jobs Report adding the most jobs in the 12 months ending in September (the latest metro-area figures available) were largely the same as they were in August, though one new metro climbed into the top 10 and several changed positions.

New York and Dallas retained the top two spots, while Atlanta moved up from No. 4 to No. 3. Los Angeles slid one spot to No. 4, and Washington, DC and Seattle remained at Nos. 5 and 6.  Orlando and Boston switched the Nos. 7 and 8 positions, while Phoenix returned to the top 10 at No. 9, moving Chicago to No. 11. Denver stayed at No. 10.

Despite these shifts, the top 12 markets from August remained the same in September. Together, the total jobs created in the 12 months ending in September for these metros were almost the same as the 12-month total for August (785,800 vs. 794,300), but the top eight that returned from last month slowed (607,500 vs. 620,000).

Houston is continuing to improve, moving to No. 35 in September from No. 48 in August. Overall, not seasonally adjusted annual job gains in the top 10 metros underperformed September 2015’s pace, with 701,600 total jobs added among these metros, compared to 712,400 last September.

Annual job growth slowed in six of the top 10 markets in September:

  • Phoenix (-106 bps)
  • Los Angeles (-63 bps)
  • Dallas (-38 bps)
  • New York (-33 bps)
  • Denver (-13 bps)
  • Atlanta (-3 bps)

Job growth was up in:

  • Washington, DC (+66 bps)
  • Orlando (+39 bps)
  • Seattle (+32 bps)
  • Boston (+19 bps)

The energy and manufacturing markets of Odessa, Tulsa and Pittsburgh remained in the bottom five list in September with Syracuse, NY returning as well. Salinas, CA cracked the bottom five because of losses in Professional & Business Services and Leisure & Hospitality.

Please contact us if you have any questions.

Jay Denton
Senior Vice President
 
KC Sanjay
Sr. Real Estate Economist
 
Chuck Ehmann
Real Estate Economist

Productivity Gains Remain Low

Nonfarm business sector labor productivity as measured by the Bureau of Labor Statistics (BLS) decreased on an annual basis for the previous three quarters and actually turned negative in the second and third quarters of 2016.

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all people, including employees, proprietors and unpaid family workers. Productivity Growth is measured by dividing the change in output over time by the change in inputs over time.

Since exiting the recession in 2009, annual productivity has averaged about 1.0%, more than a full percentage point below its long-term average. The graph below shows the annual growth in productivity over the past 65 years (blue line). As mentioned above, it has slipped to -0.03% in 3Q16. The long-term average is 2.1%, although the series has been very volatile over time. 

Also plotted in the chart is the annual change in seasonally adjusted real Gross Domestic Product (GDP) growth over the same period (red line). GDP growth is one of the key measures of the economy’s health, although our annual change-in-GDP calculation is not the annualized quarterly change methodology the Bureau of Economic Analysis uses. Still, annual GDP change tracks rather closely with productivity changes.

There are several theories as to why labor productivity has been weak since the end of the Great Recession:

  • Gains in productivity from technological advancements (i.e. computers, software and the internet) have reached a sort of saturation point and future gains will be more incremental.

  • Mismatch of skills and education of upcoming workforce participants for available positions.

  • Lack of business investment in new information technology, systems and software.

  • Real labor productivity gains are not accurately measured. 

Much like labor productivity, GDP growth has been weak since the recession compared to historical norms. Annual growth in GDP has averaged a little less than 2% since 2009, while it has averaged more than 3% since 1948. So far in 2016, annual GDP growth has averaged just 1.5%, less than half the long-term average.

Many economists believe that:

  • Low labor productivity can hurt GDP growth.

  • Low productivity can lead to poor wage growth.

  • In turn, poor wage growth can lead to weaker consumption in the U.S. economy.

  • Poor consumption can negatively affect consumer-related segments of the economy such as retail sales, consumer staples, and consumer discretionary spending.

Job gains have been relatively solid, but the types of jobs created have been predominantly low-paying. This, coupled with lower productivity and wage growth, has been a drag on economic and GDP growth. If these trends continue, we are in for a prolonged period of moderate and unspectacular economic growth.


Initial Jobless Claims Drop to Lowest Level in 43 Years

The advance figure for seasonally adjusted initial claims was 265,000 for the week ending Oct. 29, an increase of 7,000 from the previous week’s revised level. This marked the 87th consecutive week in which initial claims were less than 300,000, the longest streak since the 1970s. In order to smooth out some of the volatility in the weekly data, the chart below graphs the rolling four-week average for initial claims.

Although the four-week average ticked up to 257,750 in late October, the average for the week of Oct. 8 was 249,500, the lowest level of initial claims since Nov. 3, 1973, when the labor force was almost half of today’s level.

Continued claims (those applying for their second week or more of unemployment insurance) is essentially a coincident indicator of the labor market’s health and direction. Continued claims for the week ending Oct. 22 totaled 2.026 million, down 14,000 from the previous week. The four-week average for continued claims was 2.043 million that week, down 9,000 from the week before. Continued claims are also lower than before the Great Recession and are about at the level they were in 2000.

As leading and coincident indicators, initial and continued jobless claims for unemployment insurance point to an improving labor market, although some would argue that there are still issues with skills mismatching, low labor-force participation rates, the quality of jobs being created and weak wage growth to contend with.


Access the latest permit trends tables in Excel format here.Higher productivity leads to higher wages and corporate profits as well as an increased standard of living.An initial claim is filed by an unemployed individual after separation from an employer. When an initial claim is filed with a state, the claimant’s eligibility for unemployment insurance is determined. The count of initial claims for unemployment insurance is considered a leading economic indicator because it is a measure of conditions and trends in the country’s labor market.

By the Numbers

The following table shows September 2016 (the latest data available) metropolitan-area job gain and job growth, some grouped by state or region.

 
 
 
 
 

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