Labor Market Dynamics – Jobs. Trends. Insight.

Preliminary report from BLS shows loss of 36,000 jobs in February

By Juli Morris on March 5, 2010 in BLS Nonfarm Employment, Labor Market Dynamics.

Employment fell by 36,000 jobs in February, according to today's preliminary report from the Bureau of Labor Statistics, citing severe winter storms as a factor in reducing payroll employment. Consensus estimates had predicted a loss of 50,000 jobs. The largest job losses were in construction and information, while temporary help again added jobs. The economy has shed 8.4 million jobs since the start of the recession in December 2007.

Along with the preliminary report for February, the BLS issued its Final Estimate of job losses for December at a loss of 109,000 jobs, up 41,000 from its revised estimate of 150,000. It lowered its January preliminary estimate down 6,000 jobs for a revised loss of 26,000 jobs. One more revision for January may still occur.

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The unemployment rate held steady at 9.7 percent; consensus estimates had expected it to climb slightly to 9.8 percent.

BLS Nonfarm Employment Forecast: +5,000

By Charles Thibault on February 22, 2010 in BLS Nonfarm Employment.

WANTED Technologies expects the BLS will report a small gain of 5,000 nonfarm workers when it releases its Februrary 2010 Employment Situation on Friday, March 5, 2010, at 8:30 a.m. (EST).

Hiring Demand has stabilized and changes in employment will fluctuate around zero. The following graph tracks new online jobs, daily, over the past 4 months. Notice the periodic weekend dip when workers aren't at their office to post jobs. Jobs have been trending upward at a steady rate, about 0.5% a week.

There were 10,700 more online job ads on major US national employment websites on February 15th compared to January 14th (Monster, CareerBuilder, HotJobs), a 2.4% increase in Hiring Demand. The growth rate did flatten compared to last month, but at least it has been positive/above zero for last the 4 months – labor demand is growing.

New UI Claims are flat compared to last month. However, they were on a fairly aggressive downward trend before growing for two consecutive weeks. The S&P 500 Index also fell 4.5% during that period. Continued Claims fell by about 50,000 compared to two weeks ago, suggesting that there has been at least some absorption of unemployed workers in the past month.

Preliminary report from BLS shows decline of 20,000 jobs in January

By Juli Morris on February 5, 2010 in BLS Nonfarm Employment.

Employment fell by just 20,000 jobs in January, according to today's preliminary report from the Bureau of Labor Statistics. Consensus estimates had predicted no change. The largest job losses were in construction and transportation and warehousing, while temporary help and retail trade both added jobs. The economy has shed 8.4 million jobs since the start of the recession in December 2007.

Along with the preliminary report for January, the BLS issued its Final Estimate of job losses for November at a gain of 64,000 jobs, up 60,000 from its revised estimate of 4,000. It lowered its December preliminary estimate down 65,000 jobs for a revised loss of 150,000 jobs. One more revision for December may still occur. These revisions were also affected by Annual Benchmark Revisions, which restate the history of US employment.

The unemployment rate unexpectedly fell from 10.0 to 9.7 percent; consensus estimates had expected it to climb slightly to 10.1 percent.

January 2010 Employment Forecast – Withheld

By Charles Thibault on January 26, 2010 in BLS Nonfarm Employment.

Under exceptional circumstances, WANTED Technologies will withhold its forecast of US Total Nonfarm Employment for January 2010, as reported by the Bureau of Labor Statistics.

Every year, the BLS revises the entire history of US employment in what it calls "Annual Benchmark Revisions". These revisions create a break in the data series: forecasts of month-over-month changes aren't particularly useful when there isn't a 'next month' in the series, or when the data series is only a month old. This is what happens when the BLS revises its US employment time series – the old series ended, and a new, restated one begins.

Additionally, annual revisions are released at the same time as the monthly Employment Situation Summary report which contains the data we're forecasting. In other words, not only would we be forecasting a number for a series that's no longer being used, we'd be forecasting the future values of a dataset we don't have access to.

Additionally, we are expecting substantial revisions to 2009 employment numbers because of the volatility in the US economy over the past 16 months.

In combination, these three factors, have prompted us to withhold our monthly forecast:

The additional forecast standard error introduced by the annual Benchmarking process is 56,000 workers per month (estimated over the past 8 years). Revisions are greater during economically volatile periods: for the previous recession (2002) the benchmarking related forecast standard error was 107,000 workers per month.
The annual benchmarking revision process creates a dataset which we don't have access to but whose future value we must predict. It would be possible to forecast employment changes if we had access to the revised series before the release of the Employment Situation report; unfortunately revisions are released concurrently with the Employment Situation Summary.
Employment gains are "within two standard errors" of our forecast. When changes are around zero, there's a qualitatively different interpretation of changes in employment. For example, we wouldn't interpret two competing forecasts of -50,000 and +50,000 the same as we would two competing forecasts of +450,000 and +550,000 – even though both sets of forecasts are 100,000 workers apart. When exiting a recession, 'which side of zero' you are on is more important than your 'number', creating an asymmetric penalty response function to a forecast.

The BLS will release the January Employment Situation on February 5th, 2010, at 8:30am ET.

Several internal BLS data elements are revisited in detail during the Annual Benchmark Revisions:

UI Claims Rise by 11,000 as Employers Skip Normal January Hiring Spree; Next Week Critical

By Charles Thibault on January 15, 2010 in Unemployment Insurance Claims.

New Unemployment Insurance Claims rose by 11,000 in this week's Department of Labor Report. Employers missed their usual January rendez-vous with job seekers – Hiring Demand fell by 7% or 15,000 new online job ads** last week on a seasonally adjusted basis. Employers can make it up next week, however.

December and January employment data is highly volatile in terms of seasonal fluctuations. Job ads usually drop heavily during Christmas-time and then pop back up in January.

What's more, there's something we call "the January bounce" – not only does January Hiring Demand come back from the Holiday slump, it usually jumps above previous December levels. New budgets are usually the source of this "January Bounce" – there's a sort of pent-up demand for labor that's waiting for a new budget cycle to kick in.

During the last week of December, UI Claims benefited from a smaller than expected seasonal dip in Hiring Demand (UI claims improved by 22,000). This week, however, UI Claims suffered from a smaller than expected January rebound in Hiring Demand.

The two tables below show historical December/January seasonal fluctuations, compared to what we've seen so far this year.

BLS reports loss of 85,000 jobs in December, but Gain of 4,000 for November; Construction and Business Services Industries below Growth Trend

By Juli Morris and Charles Thibault on January 8, 2010 in BLS Nonfarm Employment.

Employment fell by 85,000 in December, according to today's preliminary report from the Bureau of Labor Statistics. This loss was worse than consensus estimates: major stock market indices lost 0.25% in the first two hours of trading today but stabilized after that.

The unemployment rate held at 10.0 percent — consensus estimates had expected it to rise to 10.1 percent.

The economy has shed 7.4 million jobs since the start of the recession in December 2007.

Along with the preliminary report for November, the BLS issued its final estimate of 127,000 job losses for October, a worsening of 16,000 from its revised estimate of -111,000. It revised its November preliminary estimate up 15,000 jobs to report gains of 4,000 jobs, which is the one piece of good news from the report. One more revision for November is in the works.

The "culprits" this month were deviations from trends in the Construction industry and in the "Professional and Business Services" industry. Employment losses in the Government sector also contributed to this month's employment declines.

The table below shows how the Construction industry slipped in December, and how employment in the Professional and Business Services industry also fell below trend:

Good News from UI Claims Report as Hiring Demand Jumps; Forecast of -18,000 for Next Week

By Charles Thibault on December 31, 2009 in Unemployment Insurance Claims.

The Department of Labor released some good news this morning: there were 22,000 fewer new Unemployment Insurance claims compared to the prior week, a 4.8% drop. Our forecast was for a drop of 6,000 so the news is better than we had expected. This improvement in the UI claims report comes as the number of online job ads jumped 8.6% in a single week on a seasonally adjusted basis.

This news also confirms our expectation that the Bureau of Labor Statistics will announce increases in levels of US employment for December.

The correlation between the number of new online job postings (Hiring Demand) and unemployment insurance claims has been -0.72 over the past 4 years. As more new online job ads appear on the internet, more people can find work, and fewer must file for unemployment insurance – hence the <negative> sign on the correlation coefficient. What's more, the correlation improves to -0.80 when looking at the one-week lagged value of Hiring Demand, supporting the hypothesis that Hiring Demand leads UI claims by a week. (Remember that the "best correlation" possible is -1.0 when two variables move in opposite directions).

Given the strength and robustness of this relationship, we can forecast changes to UI Claims data using the number of new online job ads. WANTED Technologies predicts that new UI Claims will fall by 18,000 on a seasonally adjusted basis for the week ending January 2^nd.

December BLS Nonfarm Forecast: up 75,000

By Charles Thibault on December 28, 2009 in BLS Nonfarm Employment.

The number of new online job postings continued on its positive trend in December, supporting continued improvements in the labor market situation. Based on improving Hiring Demand and positive signals from several different labor market variables, WANTED Technologies expects the BLS will announce December Nonfarm Employment gains of 75,000 workers. The BLS will release the Employment Situation Summary on Friday, January 8^th at 8:30am.

This would be the employment gain since the recession started 23 months ago. Last month, the BLS estimated that nonfarm employment shrunk by only 11,000 workers. The graph below shows year-over-year percent changes in Hiring Demand (new online job ads) and month-over-month changes in US employment (nonfarm). The blue dot represents this month's forecast from WANTED:

Click chart to view full size

Our forecast of an improvement of 75,000 in Nonfarm Employment is based on the following:

UI Claims Rise; Forecast of -6,000 for Next Week

By Charles Thibault on December 18, 2009 in Unemployment Insurance Claims.

The Department of Labor announced this morning that new UI claims increased by 7,000 for the week ending December 5^th. This corresponds to the movements we've seen in Hiring Demand: improving greatly in October/November but softening during this first half of December.

The correlation between the number of new online job ads (Hiring Demand) and unemployment insurance claims has been -0.72 over the past 4 years. As more new online job ads appear on the internet, more people can find work, and fewer must file for unemployment insurance – hence the <negative> sign on the correlation coefficient. What's more, the correlation improves to -0.80 when looking at the one-week lagged value of Hiring Demand, suggesting that Hiring Demand leads published measures of labor market dynamics. (Remember that the "best correlation" possible is -1.0 when two variables move in opposite directions).

Given the strength and robustness of this relationship, we can forecast movements in the seasonally adjusted value of new Unemployment Insurance Claims: WANTED Technologies predicts that new UI Claims will fall by 6,000 on a seasonally adjusted basis for the week ending Dec.19.

The following graph shows the historical relationship between the number of new online jobs and new Unemployment Insurance Claims, on a seasonally unadjusted basis.

Click chart to view full size

UI Claims Rise as Job Ads Fall Slightly

By Charles Thibault on December 11, 2009 in Unemployment Insurance Claims.

The Department of Labor announced this week a rise of 17,000 new UI claims, on a seasonally adjusted basis. This matches the slight fall we saw in our Hiring Demand Indicators .

This week, Hiring Demand grew only 3.9% on a seasonally unadjusted basis. Over the past 5 years, the first week of December usually sees a little bit of a rebound in Hiring Demand. This year's "post-Thanksgiving rebound" was the lowest we've seen in 5 years. This is what drove new UI claims upward. Even last year, when the economy took a huge hit, the first week of December saw Hiring Demand rebound almost 25% after Thanksgiving.

Table: Week-over-Week % Growth, Hiring Demand Indicators, First week of December

Date	Growth Compared to Prior Week
12/3/2005	6.1%
12/2/2006	16.0%
12/8/2007	6.5%
12/6/2008	24.6%
12/5/2009	3.9%

The graph below shows the historical relationship between Hiring Demand Indicators (the number of new online job ads) and seasonally unadjusted Unemployment Insurance claims. The UI claims axes has been inverted: as new job ads appear online, fewer people must file for unemployment insurance. The correlation between the two variables, over the past 4 years, has been -0.72. What's more, the correlation between new UI claims and the one-week lagged value of Hiring Demand improves to -0.78, suggesting that Hiring Demand leads new UI claims.

Click chart to view full size

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