The Labor Market Continues To Improve

Summary

• The January jobs report handily beat expectations, with a gain of 296K private sector jobs vs. expectations of 175K.
• Public sector jobs as a percent of total jobs now stand at the lowest level since 1957.
• The labor force participation rate (the ratio of those working or looking for work relative to the total number of people of working age) has ticked higher for the first time in many years.

The January jobs report handily beat expectations, with a gain of 296K private sector jobs vs. expectations of 175K. Considering all the disruptions (weather, government shutdown) and despite a big drop in consumer confidence, the numbers appear solid enough to say that the labor market continues to improve.

Here is a small collection of charts that I find most interesting:

Chart #1

Chart #2

Chart #1 shows the monthly change in private sector jobs, while Chart #2 shows the percentage gain over 6- and 12-month periods (which is important in order to filter out the notorious month-to-month volatility of this series). The growth rate of jobs bottomed in September 2017 at 1.5-1.6%, and it now stands at 2.1%. That's a meaningful increase, and it likely accrues to both Trump's tax cuts and his frontal assault on regulatory burdens.

Chart #3

Chart #3 compares private sector jobs to public sector jobs. Here we see that there has been ZERO growth in public sector jobs for the past 10 years! Public sector jobs as a percent of total jobs now stand at the lowest level since 1957. Wow. If you believe, as I do, that public sector workers are less efficient than private sector workers (and less productive), then this means that the underlying productivity of the U.S. workforce has increased meaningfully in the past decade.

Chart #4

As Chart #4 shows, part-time employment has also been flat for the past decade. Relative to total private sector employment, part-time employment has shrunk impressively over the course of the recent expansion.

Chart #5

As Chart #5 shows, the labor force participation rate (the ratio of those working or looking for work relative to the total number of people of working age) has ticked higher for the first time in many years. People who were "on the sidelines" are now beginning to reenter the workforce. If this continues, it means the economy has lots of upside potential.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

Comments

[Lance Brofman]

..Our view was and is that an important reason for the failure of the participation rate to recover was the large number of dubious and possibly fraudulent claims being filed. In our report, we noted that labor force participation historically has behaved cyclically within a gently declining trend. Participation consistently tended to fall during recessions and rise during economic recoveries as job prospects improved. In this most recent business cycle, while the participation rate fell as expected during the recession phase, it continued falling with the onset of recovery.

Many analysts sought to rationalize this movement by pointing to the aging population and changes in societal norms, such as women's roles in the workplace. These are undoubtedly factors. However, our report suggested that another factor may have been at work, namely a huge increase in the numbers applying for disability benefits and thus leaving the labor force. In our report, we noted a CBS "60 Minutes" segment that quoted employees of the Social Security Administration and their administrative law judges who asserted that millions of people were being recruited by attorneys to make fraudulent claims. One such judge stated that "if the American public knew what was happening, half would be outraged and the other half would apply for benefits."

One precipitating factor may have been the failure of Congress to extend jobless benefits at the end of 2013. Many whose benefits were exhausted may have responded to a multitude of advertisements from attorneys urging potential beneficiaries to apply for benefits on dubious and fraudulent bases. At the time the government had to effectively accept any claim while it was also government's responsibility to remit legal fees to attorneys of those who filed for disability and appealed any adverse decision. It is plausible that those who went from unemployment to disability may have instead re-entered the workforce since unemployment insurance requires beneficiaries to actively seek employment or retraining..."
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[jprizzuto]

two thumbs up for reducing regulatory burdens and lower taxes. now, what we need for the next stage of economic growth is fair and competitive trade policies as a runway for u.s. innovation and a safe immigration policy to fill the extraordinary employment opportunities of of healthy u.s. private sector...

[Petrarch]

CPB you should go to BLS to look at productivity stats
the 1990s saw a shift upward
otherwise it is pretty much trend since the 1950s
last decade has been more of the same maybe a little flatter than previous

https://bit.ly/2y7dMYB

why do people print stuff that is not true? why?

[wclark8622]

The leading category of jobs created was Leisure and Hospitality. If that’s an improvement to have the leading category of jobs created to be food service and housekeeping then you are right.

[dmarilley]

The guy on that gladiator show got six of those jobs for himself.

[bbro]

" If you believe, as I do, that public sector workers are less efficient than private sector workers (and less productive)"

Baloney....Teachers,Police Protection.Fire Protection etc etc etc are so much more productive to our society especially when compared to a
retired economist from a fixed income money management firm...

[jprizzuto]

@bbro... please spare me that garbage. yes we need police, fireman and all the other govt services that public employment provides. but by far, the private sector is much more efficient, more productive and more innovative then public employees... and that's the way it should be or everybody would race to the bottom of guaranteed work for life at lower wages with little threat of competition. (Edited)

[Ruffdog]

@bbro you may be right but I was surprised at the number of federal employees that were complaining that they could not live without one pay check. Anyone it that financial condition needs to know how to explain that to their landlord or banker and ask for leniency and then change their priorities and spending habits.

[Ruffdog]

@jprizzuto firemen and police were not federal employees that missed a pay check.

[BlaBlub12]

nice graphics, thanks for the overview!