According to ADP, the largest payroll processer in the US, the total number of private sector jobs made up the net loss in the last official recession last month. In January 2008 the total number of jobs stood at 116.0 million in January 2008, falling to 107.2 million by February 2010. The net loss of 8.8 million jobs was finally regained in March 2014 when we hit 116.1 million total. That includes 491 thousand gained so far in 2014.
If that’s not a good reason for a party, what is?
The graph above tells the entire story. It took two years to lose the 8.8M jobs and four years to gain them back. It doesn’t put us back to full employment quite yet because the workforce has expanded by 1.7M workers since then. It will take three more years for us to catch up at this rate, helped in large part by the wave of retirement that will take people out of the workforce as the Baby Boom ages.
Along with this data comes a considerable amount of fudge, of course. There is a “seasonal adjustment” that evens out the net loss of jobs that comes every January when construction stops and workers hired for the holiday shopping season are let go. But given the symmetry of the ups and downs, all occurring in the depths of Winter, those effects come out in the laundry for the purposes of declaring a small victory.
It’s also worth noting that while it took four years to gain the jobs back, the S&P500 took only three years to reclaim its losses from this period, showing that there is a solid year lag between a return of corporate profits and a wave of hiring. While the net gains of over 190k jobs every month have been consistent and good, the decisions being made this year are based on the success of the last year.
Given how high corporate profits are, we can expect the hiring wave to continue, if not accelerate in 2014. We should see more than 200k jobs gained per month by this summer.
This is important because we now know that Janet Yellen is tightly focused on jobs to determine the benchmark Fed Funds Rate. By any reasonable measure the Fed is running a rather hot stimulus right now, targeting a net zero rate even after the bond purchase “taper” hits zero by summer. A good guess as to where it would be otherwise is about 1.5%. But Yellen is, rightly, concerned by the stubbornly high rates of long term unemployment and part-time work (U6 unemployment).
Those numbers come out after this piece is posted, in the more volatile Bureau of Labor Statistics employment report – which comes out on Friday. Most of the reporting on that will focus on the headline unemployment rate (U3), which I predict will fall to 6.5% or even less. It will be a good thing, but one number never quite tells the whole story. There is still a lot of work to be gained.
What matters most is that the grave concerns by a few weak jobs reports have in fact been cast aside as employment continues to gain. Bad weather, which was blamed for a lot of the slowdown seen from December on, apparently has not been much of a factor. As Spring comes we should see a net increase in the number of jobs gained each month as the wave of hiring picks up more steam.
And don’t forget corporate profits, which are still very strong by any measure. There is money to be made by companies that are wiling to take a chance and staff up for an improving, growing economy. This is not a time for the timid, and hopefully companies that take on new workers will be rewarded by the stock market ahead of those who cut jobs. That would be a big reversal for Wall Street, but it is the right way to look at the situation.
The worst of the downturn is over. Jobs have returned. If the rate of job growth starts to accelerate this year we will know that the great launch into the next economy, due around 2017, is well underway. There are still many reforms needed in government and on Wall Street to make this a strong recovery, but private businesses have been doing their part and hiring. Let’s hope it keeps up.
Meanwhile, hoist a beer or the beverage of your choice to the economy – it didn’t stay down forever!