Labor Market Dynamics – Jobs. Trends. Insight.

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: Read more »

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. Read more »

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

IT Hiring Demand Maintains Growth Trend; Washington, DC Surpasses New York

By Charles Thibault on December 10, 2009 in Computer/Math/IT, Hiring Demand Indicators.

Hiring Demand for IT workers remained on trend in November, according to data from WANTED Analytics which tracks the number of online job ads on over 1,500 employment websites. On a seasonally adjusted basis, IT Hiring Demand is up 0.5%.

The end of November usually marks the start of a two month seasonal hiring slowdown. We were in fact expecting the number of job ads to fall slightly on a seasonally unadjusted basis, as shown in the graph below.

Source: WANTED Analytics

Those Pesky Revisions – The Effect of BLS Revisions on NonFarm Forecasts

By Charles Thibault on December 7, 2009 in BLS Nonfarm Employment.

There were two important pieces of information in this month's BLS Employment Situation Summary. First, Nonfarm Employment dropped by only 11,000 – much better than Consensus Estimate that sat at -100,000 and our forecast of -155,000. Second, employment drops from the two previous months were revised upwards: 80,000 fewer people were out of work in September than originally reported, and 79,000 fewer people were out of work in October than originally reported. Together, this month's employment contraction of only 11,000 workers and those two positive revisions of about 80,000 put the US economy much closer to employment growth than what was thought just last week.

That's great news for the economy at large, but bad news for professional forecasters. BLS revisions have a direct impact on "what our model would have said given this new information". Our forecast for November, given the revised data in this month's report, would have been a drop of 79,000 nonfarm workers instead of a drop of 155,000.

Most forecasting models will include lagged values of the dependent variable, in addition to any proprietary or public information forecasters have access to. WANTED's forecasting model, for example, includes Nonfarm Employment, Unemployment Insurance Claims, and our Hiring Demand Indicators (number of new online job ads posted on the internet).

The table below shows the information available at the time of our forecast, the information available in the most recent Employment Situation Summary, and our forecasts based on those two different sets of data:

Month	Available BLS Data	Revised BLS Data	Change
August	-154	-154	0
September	-219	-139	80
October	-190	-111	79
November WANTED Forecast	-155	-79	76

This "relative difference" in our forecast is almost exactly the same as the BLS's own revisions (76 vs. 79/80).

Preliminary report from BLS shows decline of 11,000 jobs in November (Updated)

By Juli Morris on December 4, 2009 in BLS Nonfarm Employment.

Employment fell by a mere 11,000 jobs in November, according to today's preliminary report from the Bureau of Labor Statistics, a much smaller loss than consensus estimates. The largest job losses were in construction, manufacturing, and information, while temporary help and health care added jobs. The economy has shed 7.3 million jobs since the start of the recession in December 2007.

Click chart to view full size

Along with the preliminary report for November, the BLS issued its Final Estimate of job losses for September at a loss of 139,000 jobs, up 80,000 from its revised estimate of -219,000. It raised its October preliminary estimate up 79,000 jobs for a revised loss of 111,000 jobs. One more revision for October may still occur.

The unemployment rate fell from 10.2 to 10.0 percent; consensus estimates had expected it to remain unchanged.

UI Claims Improving on Steady Hiring Demand Trend

By Charles Thibault on December 3, 2009 in Unemployment Insurance Claims.

The Department of Labor announced this morning another drop in the number of new UI claimants. This week, there were 5,000 fewer claims on a SA basis (seasonally adjusted). This comes after last week's impressive (or surprising) drop of 39,000 claimants.

Since new UI claims reached a peak in late March 2009, they have trended downwards 3% a month on average. Hiring Demand (the number of new online job ads) has improved at an average rate of 1% a month since then too.

Last week's report of a drop of 39,000 claimants came as a surprise. Some have suggested that the economic conditions we're in have "tricked" the seasonal adjustment factors. Bradford DeLong, for example, suggests that because there aren't as many construction workers employed now compared to historical levels, the seasonal increase in new UI claims that comes from them being laid off right before Thanksgiving didn't really happen this year.

Our data, however, confirms that last week's improvment of 39,000 UI claims was in fact "real". (The initial report was for 35,000). Over the past several years, the number of new online job ads usually drops about 24% during Thanksgiving week. This year, the drop was only 11.6%. In other words, given the seasonal patterns we've seen in our data over the past five years, the improvement in the UI Claims report make sense:

Year	% Change HDI, Thanksgiving Week
2005	-24.2%
2006	-27.0%
2007	-25.7%
2008	-21.1%
2009	-11.6%

What makes us think that there's any relationship between this lower than expected drop in new online job ads and the sudden improvement in new UI claims?
Read more »

November 2009 BLS Nonfarm Employment Forecast: Down 155,000

By Charles Thibault on November 20, 2009 in BLS Nonfarm Employment.

Based on improving labor market trends, WANTED Technologies predicts that the BLS will announce a drop of 155,000 Nonfarm workers in November.

This is a relative improvement of 35,000 job losses compared to October's drop of 190,000.

The BLS Employment Situation for November is scheduled to be released on Friday, December 4, 2009.

Click chart to view full size

Three of the four major labor market variables suggest slowing of job losses, but none of them provide the hope of job gains this month:

Over the 4-week period leading up to November 12th, there were 73,000 fewer new Unemployment Insurance Claims compared to the previous month. This variable yields a relative improvement of 43,000 job losses once it is entered into our econometric model. Last month the drop in new UI Claims was 88,000 which lead to a relative improvement of 29,000 in the Employment Situation Summary report.
Job losses have subsided at an average rate of 70,000 workers per month since January. The relative improvement in last month's report was only 29,000 workers (below trend).
Hiring Demand has been trending upwards since March, at an average rate of 2.1% per month. On the three major national job boards (Monster, CareerBuilder, Hotjobs), Hiring Demand has grown at an average rate of 1.4% per month since March as well. However, Hiring Demand did not grow significantly on a seasonally adjusted basis in October/November. Seasonal movements usually drive up Hiring Demand by 7% in October relative to its trend (which is how seasonal adjustment factors are calculated). This year, Hiring Demand stayed exactly on trend. Of all four labor market variables examined, Hiring Demand is the only one that produces a negative relative improvement compare to last month's report (-12,000).

Source: WANTED Analytics

There is still a gap between the number of people being hired and the number of people being separated from their jobs, according to the BLS' Job Openings and Labor Turnover Survey. 300,000 more people were separated from their jobs in September than were hired. That gap, however, has been shrinking at an average rate of 60,000 workers per month since March. Transposing that trend to November puts the 'hiring gap' at 180,000.

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