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What to Look For in the Last Jobs Report Before the Election Last Pre-election Jobs Report Shows Healthy Growth and Higher Wages
(about 3 hours later)
One more for the road. Friday’s jobs report is the last major snapshot of the economy before Election Day, and could serve as a Rorschach test for each side to offer its own distinct narratives of the economy’s performance and prospects. The government, delivering the last major snapshot of the economy before Election Day, reported on Friday that employers added 161,000 workers in October, a performance that suggests a healthy outlook for the months ahead.
So far this year, job growth has averaged 178,000 a month, less than 2015’s monthly average of 229,000, but more than the number needed to match the demands of a growing population. Wall Street is looking for a gain of about 175,000 jobs when the Labor Department releases the latest report at 8:30 a.m. Eastern time. The official unemployment rate dropped to 4.9 percent.
The unemployment rate, which has been flip-flopping between 4.9 and 5 percent all year, is expected to tick back down to 4.9 percent. Average hourly earnings rose 2.8 percent year over year, a level not reached since July 2008.
This is what you should watch for in the report: For the presidential campaign, the latest employment report serves as a Rorschach test allowing each side to offer its own distinctive narrative of the economy’s performance and prospects.
Nagging anxiety about the economic future has been called responsible for a surge of voter anger and discontent that helped propel Donald J. Trump to the top of the Republican ticket. Yet in these final weeks, the presidential campaigns seemed focused on almost everything but that issue. Friday’s report may refocus attention — at least for a moment — on the key bread-and-butter issue: jobs. “This is right down the middle of the fairway,” said Vincent Reinhart, chief economist at Standish Mellon. “The main message is from the payroll report: Jobs are being created and earnings are going up.”
Absent a bombshell upswing or plummet, however, this latest jobs report is unlikely to alter the dynamics of the race much. Nagging economic anxiety has been called responsible for a surge in voter anger among the white working class that helped propel Donald J. Trump to the top of the Republican ticket. And while the final weeks of the presidential campaign seemed to be preoccupied with everything but the economy, Friday’s report from the Labor Department refocused attention — at least briefly — on the crucial bread-and-butter issue: jobs.
Several recruiters and online job sites said that October was surprisingly busy. Tom Gimbel, chief executive of LaSalle Network, a recruiting and staffing firm based in Chicago, had expected the imminent expansion of mandatory overtime pay to temper hiring, but that wasn’t the case. “I’m seeing companies continue to hire” across the board, he said, with “a ton in technology, permanent and temporary.” Mr. Trump has argued that jobs have been disappearing, highlighting the continuing loss of well-paid manufacturing jobs as production moves to other countries. The Democratic candidate, Hillary Clinton, has emphasized the progress President Obama made in digging the country out of the recession, pointing to the creation of roughly 15 million additional jobs since 2010.
He speculated that many managers may be hoping that new overtime regulations will be delayed or overturned by court challenges. A strong pickup in higher-wage hiring could indicate that concerns about the cost of overtime are not deterring employers from taking on more staff. The data on Friday showed that more jobs were created in August and September than previously estimated as well. The revisions showed 44,000 more positions had been created in those months. Over the last three months, job gains have averaged 176,000 a month.
More than seven years after the recession ended, employment growth has remained steady and hourly earnings have gone up in recent months. The Labor Department has reported there are 5.4 million job openings. Nonetheless, for many Americans, the recovery has failed to deliver the wage gains and sense of security that have traditionally girded the middle class. More than seven years after the recession ended, employment gains have been remarkably steady, finally leading to a rise in earnings in the last couple of years. But overall economic growth has remained modest and despite the recent improvements, the recovery has failed to deliver to many Americans the sense of job security and steady advancement that traditionally girds the middle class.
The type of jobs created is one reason. “Where we are creating jobs is in service areas, which are not as productive as manufacturing and lower paying,” said Vincent Reinhart of Standish Mellon. “So we’ve got a problem.” The type of jobs created is one reason. “Where we are creating jobs is in service areas, which are not as productive as manufacturing, and lower paying,” said Mr. Reinhart of Standish Mellon. “So we’ve got a problem.”
In other words, it’s not just the number of jobs that matters, but what kind and what they pay. At the same time, many employers complain about a shortage of qualified workers.
A rising unemployment rate might be good news — if it were mostly a result of sidelined workers being enticed to rejoin the labor force. The overall participation rate has been stuck below 63 percent, much below the most recent peak of 66.4 percent in early 2007. “It has been tough to hire good people,” especially near cities like Baltimore, Washington and Philadelphia, said Scott Nash, the founder and chief executive of Mom’s Organic Market, which operates 17 grocery stores between Virginia and New Jersey, and employs more than 1,000 people. Mr. Nash offers a starting wage of $12 an hour, significantly above the mandated minimums in the areas where his stores are. He said he planned to hire an additional 200 workers, from cashiers to managers, over the next 12 months.
Over the last five years, monthly gains averaged more than 200,000 as the economy clawed back lost ground. A recent report from the Federal Reserve Bank of San Francisco explained that this “pace is likely to slow,” as the jobless rate falls. As the recession has receded, the definition of what economists consider a strong or weak employment report has shifted. So what now should be considered normal growth?
So what now should be considered normal growth? Taking into account population growth and aging, economists at the San Francisco Fed estimated the “break-even” point — growth that is sufficient to keep the jobless rate from rising — to range between 50,000 and 110,000 jobs a month. Additional jobs would most likely push the unemployment rate further down, while fewer could lift it. Last month, when the government reported that in September, 156,000 additional jobs were created and the unemployment rate was 5 percent, Mr. Trump labeled it “terrible.” By contrast, some members of the Federal Reserve Board argue that the labor market is already close to the goal-post — the lowest level of unemployment that a healthy economy can sustain without igniting inflation.
Taking into account population growth and an aging work force, economists at the San Francisco Fed estimated the “break-even” point — growth that is sufficient to keep the jobless rate from rising — now ranges from 50,000 to 110,000 jobs a month. Additional jobs would most likely push the unemployment rate further down, while fewer could lift it.
Record low participation rates in the labor force, however, suggest that a sizable number of people might be lured back into the work force for the right job at the right wage.
Ian Siegel, chief executive of ZipRecruiter, which distributes job postings primarily from small and midsize businesses, said he saw a substantial jump in listings last month. “There are more middle-skill jobs at higher salaries,” Mr. Siegel said. His assumption is that rather than seeking talent at the top of the skills ladder, employers are increasingly willing to train new employees. “It’s a great time to be a job seeker,” he said.
ZipRecruiter defines middle-skilled jobs as those that require vocational training, related on-the-job experience or an associate degree.
Mr. Siegel also expects to see a large upswing in temporary hiring of low-skilled workers by retailers and related industries, like parcel delivery, as businesses gear up for the holiday season.
Uncommon Goods, an online retailer located in Brooklyn, plans to add hundreds of temporary employees to its 170-person work force by the end of the year, said Dave Bolotsky, the founder and chief executive. Over the next year, he expects to create 20 to 30 full-time positions, with a starting wage of $14 an hour. “If you can pay above market rate, it’s a sign of appreciation or respect,” said Mr. Bolotsky, who supports an increase in the mandated minimum wage.
As for high-skilled workers, Tara Sinclair, an economist at Indeed, a jobs listing website, noticed a decline in postings for technology jobs, a closely watched sector that makes up a relatively small portion of the overall labor market.
“It seems there’s a little bit more caution that what we were seeing nine months ago,” Ms. Sinclair said. “For a while every company needed a data scientist, thinking ‘I don’t know what it is, but I want one.’ Now they may be asking ‘What is going to be the business value of hiring these people?’”
This week, the Fed announced it was once again holding off on any increase in its benchmark interest rate, but indicated a December bump was likely. In its statement, the policy-making committee noted that inflation still remained below the target long-run goal of 2 percent annual growth.
Ted Wieseman, an economist at Morgan Stanley, noted the employment picture showed plenty of signs of resilience. “Unemployed workers have been dropping out of the labor force in smaller numbers, and there’s been a pickup in formerly discouraged workers starting to look for work again,” he said in his employment report preview. The rate of workers being fired has also remained low this year.