Economic Recovery – Jobs. Trends. Insight.

Forbes List of "America's Fastest-Recovering Cities" – Not a Good List for Job Seekers

By Charles Thibault on December 1, 2009

Forbes Magazine released an article of "America's Fastest-Recovering Cities" on November 19th, also producing a ranked list of America's 100 fastest recovering cities.

Unfortunately for Forbes readers, the list contains methodological issues which limit its usefulness in determining the "fastest recovering cities".

The most outstanding issue is the use of "levels" of economic indicators to measure recovery, as opposed to their changes. For example, the author uses the unemployment rate in the ranking system. The current unemployment rate has nothing to do with how quickly the labor market situation has improved, which is more accurately reflected by changes in the unemployment rate. Low unemployment rates might be a good measure of the "most stable cities", but not the "fastest recovering".

Let's compare two cities to see how using "levels" of economic variables is not that informative. Omaha's "Unemployment Rank" was No.1 in Forbes' list, with a 5.3% unemployment rate, while Wichita's "Unemployment Rank" was No.42, with an 8.6% unemployment rate. This indicates that Omaha's economy was not wrecked by the recession, which is great for Omaha. But that has nothing to do with how quickly the economy has improved, as suggested by article's "Fastest-Recovering" title.

You can see from the table below that Wichita, KS had higher unemployment than Omaha, NE before the recession even started, but its labor market situation has improved more dramatically since – in both absolute terms and relative terms. Wichita's unemployment rate is down 1.4 percentage points since July, while Omaha's unemployment rate is only down 0.5 percentage points. Relative to their respective July unemployment rates, Wichita's drop represents a 14% improvement, but Omaha improved only 9.4%. So, which city improved the fastest?

State	Date	Unemployment Rate	Absolute Change	Relative Change
Omaha, NE	OCT 2008	3.5%	-	-
Omaha, NE	JUL 2009	5.3%	+1.8%	+51%
Omaha, NE	OCT 2009	4.8%	-0.5%	-9.4%
Wichita, KS	OCT 2008	4.3%	-	-
Wichita, KS	JUL 2009	10.0%	+5.7%	+132%
Wichita, KS	OCT 2008	8.6%	-1.4%	-14.0%

What matters is: what's the unemployment rate in Omaha now, compared to before the recession; what's the unemployment rate in Wichita now, compared to before the recession; and how do those two differences compare to each other? In statistics, this method is called the "difference-in-difference estimator", which factors out local market particularities, for example the fact that Wichita had systematically higher unemployment than Omaha before the recession even started.

We use our own proprietary Hiring Demand Indicators, which is the count of new online job ads posted during a month, to rank the US cities based on their "actual recovery rates". The "recovery rate" is the average monthly growth in the number of online job ads, over the past 9 months. WANTED Technologies covers more than 1,000 employment-specific job boards.

WSJ Economists Predict Gain of 200,000 Jobs over Next Twelve Months

By Juli Morris on September 11, 2009 in Labor Market Dynamics.

Economists surveyed by the Wall Street Journal in September predict that the U.S. economy will gain an average of 17,000 jobs per month over the next twelve months. This is the first forecast of average monthly job gains since March 2008, and follows last month's forecast of average monthly losses of 27,000 jobs over the next twelve months. Despite the forecasted gains, the outlook for the unemployment rate has not improved for 2009. This month's survey showed an increase from in the unemployment rate from 9.9 percent to 10 percent for December 2009, and then subsequently a decrease from 9.4 percent to 9.3 percent for December 2010.

Even though the recession may have ended, on average the economists expect the jobless rate, at 9.7% in August, to peak at 10.2% before slowly declining next year. While the economists forecast that the economy will add jobs over the next 12 months, the net increase is seen at a modest 200,000 over that period and the unemployment rate still is expected to be at 9.3% in December 2010.When asked about the biggest risk to the economy right now, 10 of the economists highlighted the weak jobs market.

This month's Wall Street Journal survey of economists was conducted from September 4-8. Each month the WSJ asks economists to estimate the average monthly change in nonfarm payrolls over the next twelve months. That is, the monthly changes the BLS reports each month, for the next twelve months, divided by twelve.

WSJ Job Loss Forecast Improves – Unemployment Rate Forecast Remains Bleak

By Juli Morris on August 19, 2009 in Labor Market Dynamics.

Economists surveyed by the Wall Street Journal in August predict that the U.S. economy will lose an average of 27,000 jobs per month over the next twelve months, significantly better than the 70,000 average monthly losses they forecast for July. This is the fifth consecutive survey predicting declining monthly losses. Despite the declining losses, the outlook for the unemployment rate has improved only slightly, from 10 percent to 9.9 percent for December 2009, and from 9.5 percent to 9.4 percent for December 2010.

A better-than-expected employment report for July, where employers cut 247,000 jobs and the jobless rate fell for the first time in 15 months, suggests the worst is over. The unemployment rate is still expected to rise to 9.9% by December, but economists forecast that the economy will shed far fewer jobs over the next 12 months than they had forecast last month.

This month's Wall Street Journal survey of economists was conducted from August 7-11. Each month the WSJ asks economists to estimate the average monthly change in nonfarm payrolls over the next twelve months. That is, the monthly changes the BLS reports each month, for the next twelve months, divided by twelve.

UI Claims Data Allows for Cautious Optimism

By Charles Thibault on August 14, 2009 in Unemployment Insurance Claims.

Combined with slowing job losses and increases in Hiring Demand (which are a leading indicator), this week's Unemployment Insurance Claims report cements the idea that an economic recovery is on the horizon. After 9 weeks of almost uninterrupted improvements this week's data allows for cautious optimism.

On a seasonally adjusted basis, the 4-week moving average of new jobless claims rose by 8,500 claims. However, this slight increase does not put at risk the recent trends in labor market data.

Professor Hamilton has much discussed how the National Bureau of Economic Research (NBER) has identified the 8th week after the peak in UI claims as the start of recovery. The 4-week moving average of new UI claims peaked on April 4th, when there were 658,750 claims. That was 18 weeks ago. UI claims dropped consistently for several weeks but picked up again May, which was matched in our Hiring Demand Indicators. On May 30th, there was a "local maximum" for UI claims, at 632,250 claims. That was 9 weeks ago. Professor Hamilton figures that there's 85% chance that April 4th will be identified as the peak.

On a seasonally unadjusted basis, there were 13,000 more claimants this week as the number of new job ads fell by 56,000. The week before, new claims had fallen by 45,000 claims as job ads rose by 14,000. The following time series plot new UI Claims and the number of new job ads, on a seasonally unadjusted basis. The UI claims axes has been inverted to facilitate analysis.

Click chart to view full size

Hiring Demand up 2.4% in July and Trending Upwards

By Charles Thibault on August 13, 2009 in Hiring Demand Indicators.

Hiring Demand improved 2.4% in July on a seasonally adjusted basis. There were 132,000 more new job ads in July, which now total 1,433,000.

With the exception of a three week period in June, Hiring Demand has been growing an average of 0.8% a week since March, or 3.6% a month for the past 4 months. This corresponds to the rally in the stock markets.

Improvements are spread across most sectors of the US economy. Seven of the top eight Metropolitan Areas improved, as did 19 of 23 broad Occupational groups covered by the Bureau of Labor Statistics.

Four weeks ago, Hiring Demand was down 29.5% on a year-over-year basis. Hiring Demand is now down only 27.1% compared to last year. This relative improvement of 2.4% controls for seasonal fluctuations.

Source: WANTED Analytics

Unemployment Insurance Claims Still Signaling Some Weakness

By Charles Thibault on July 23, 2009 in Unemployment Insurance Claims.

The Department of Labor announced this morning that new Unemployment Insurance claims rose by 30,000 from last week's level on a seasonally adjusted basis, pointing to some continued weakness and volatility in the US labor market. There were 554,000 new UI claims last week.

Continued claims dropped by 88,000 claimants to 6,225,000. Two weeks ago, new claims had dropped by 45,000, which lowered last week's continued claims. We can expect seasonally adjusted continued claims to increase following this week's jump in new UI claims.

The 4-week moving average of new UI claims dropped by 19,000 claimants. This points to a somewhat improving economy, but an increase in new UI claims to a level above 617,000 in next week's report would change the trend in the 4-week moving average.

Click chart to view full size

Fortune 1000 Hiring Demand Remains Flat

By Charles Thibault on July 20, 2009 in Fortune 1000.

Hiring Demand by Fortune 1000 companies remained consistent with the prior month, according to data from WANTED's Fortune 1000 report. WANTED's report measures new job ads for America's largest corporations. A month ago, the Fortune 1000 showed a year-over-year drop of 24.6% in Hiring Demand.

247 of the 1000 largest US corporations showed improvements in Hiring Demand, unchanged since last month.

On a Sector basis:

- Hiring Demand of "Wholesale Trade" companies (NAICS 42) is up by thirty-seven percentage points, posting a 24% year-over-year increase compared to last month's year-over-year drop of 13.2%.

- Health Care is the only sector to show consistent and robust growth in Hiring Demand. Health Care sector Hiring Demand is up 26.8% compared to last year. Last month, Hiring Demand was up 34.6% on a year-over-year basis.

- Hiring Demand of "Professional, Scientific, and Technical Services" companies (NAICS 54) dropped by twenty percentage points, going from -13.2% to -33.9% on a year-over-year basis.

The following table summarizes the sector highlights:

Source: WANTED Fortune 1000 Report

UI Claims Drop as Economy Settles

By Charles Thibault on July 16, 2009 in Unemployment Insurance Claims.

We reported last week that Hiring Demand was poised for upward trending. Reductions in new weekly unemployment insurance claims, as announced this morning by the Department of Labor, support this interpretation.

On a seasonally adjusted basis:

- Initial claims dropped by 47,000 new claims to 522,000.

- The 4-week moving average of new claims dropped by 22,500, a substantial drop. This is the third drop in a row, and the second "substantial" drop in the 4-week moving average. Recall that the National Bureau of Economic Research usually signals the start of an economic recovery 8 weeks after the peak in the moving average of weekly unemployment claims.

On a seasonally unadjusted basis:

- Initial claims jumped, as expected (from seasonal coefficients) and presaged by a substantial drop in weekly new job ads last week. Indeed, weekly new job ads had dropped by 120,000 new ads to 635,000.

The graph below shows the historical relationship between new job ads, posted on a weekly basis, and seasonally unadjusted new UI claims. The UI Claims axes has been inverted to facilitate interpretation – as the number of new job ads falls, businesses cannot support new employees, and more workers are forced to register unemployment insurance claims.

Click chart to view full size

There has been talk that the "timing" of automotive factory closing is causing an artificial drop in the weekly unemployment insurance claims. However, slowing drops in total employment, improvements in UI claims data, and Hiring Demand that is inching its way back up to consistent month-over-month growth all point to a stabilizing situation, with the start of a recovery "just a matter of time".

WSJ Job Loss Forecast Slightly Better – Unemployment Rate Forecast Remains Bleak

By Juli Morris on July 14, 2009 in Labor Market Dynamics.

Economists surveyed by the Wall Street Journal in July predict that the U.S. economy will lose an average of 70,000 jobs per month over the next twelve months, less than the 86,000 average monthly losses they forecast in June. This is the fourth consecutive survey predicting declining monthly losses. Despite the declining losses, the outlook for the unemployment rate looks increasingly dire:

On average, the economists forecast an unemployment rate of at least 10% through next June, with a decline to 9.5% by December 2010. "The mother of all jobless recoveries is coming down the pike," said Allen Sinai of Decision Economics. But he doesn't favor more stimulus now, saying "lags in monetary and fiscal policy actions" should be allowed to "work through the system."

This month's Wall Street Journal survey of economists, conducted July 2-7, reveals that economists' view of the employment outlook has again improved over the past month. Each month the WSJ asks economists to estimate the average monthly change in nonfarm payrolls over the next twelve months. That is, the monthly changes the BLS reports each month, for the next twelve months, divided by twelve.

June '09 Hiring Demand Outlook: Slippage, but Poised for Upward Trending

By Charles Thibault on July 8, 2009 in Hiring Demand Indicators.

Last month we reported that National Hiring Demand was improving in relative terms – year-over-year percent changes improved from -32.6% in April 2009 to -28.4% in May of 2009. Hiring Demand has slipped slightly since last month, with year-over-year percentage changes moving from -27.2% in May to -30.1% in June. (Slight revisions to data cause minor variations in Hiring Demand percent changes when compared to previously published results).

This month's slippage is particularly due to a robust month of May – on a seasonally adjusted basis May's Hiring Demand was up 10% compared to April. Because of May's increase in Hiring Demand, in combination with improving month-over-month declines in Nonfarm Payroll Employment (the revised drop for May was -322,000, whereas April's final number was -519,000), WANTED had forecast an optimistic drop of 260,000 in Nonfarm Payroll Employment. Despite the slight slippage this month, Hiring Demand has moved from "being flat" to starting to show signs of a possible uptrend.

The two time-series charts of new online job ads, one weekly series and one monthly series, show that since the drop off in December, Hiring Demand has been slowly inching up. (Usually the series "bounces back" in January, but, given the recession, new job ads did not come back to the previous calendar year's level.) This corresponds to slightly improving UI claims data and slowing in the month-over-month drops in US Employment.

Source: WANTED Analytics 2.0

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