What's Ahead For Employment?

April 23, 2014

Many economic discussions - especially those following the Great Recession - have focused on the short-term or immediate economy, particularly in regard to the labor market.

However, longer term issues regarding investments, hiring and other business decisions cannot be lost in our thinking about the economy and its direction.  While most of us don't necessarily think or plan 10 years out, it remains vitally important to economists, retailers, policymakers and the consuming public to think about the future while creating budgets, plans or sales projections.

Fortunately, the U.S. Bureau of Labor Statistics provides information about the future with its Employment Outlook report that it issues every two years with a 10-year projection of employment and output.

Since the last BLS report, the economy has notably improved and is now poised for more sustained growth.  As the economy expands, long term patterns of growth and industry activity can be more readily observed and the BLS' estimates and projections become valuable to retailers and others who need to make decisions about the future economy, employment and consumer spending.

So where will eht jobs be 10 years from now?

In the coming decade, BLS projects that the "retail trade" sector is expected to increase by more than 1 million jobs to a total of about 16 million jobs by 2022.  In fact, retail is projected to be one of the top three domestic industries for future employment opportunities - behind only construction and health care.

 

The projected growth in the retail industry - pegged at 0.7 percent annually - reflects the healthier pace of consumer spending at 2.6 percent (higher than the 1.8 percent of the last decade) and a strengthening economic recovery.  BLS assumes that the economy will grow by 2.6 percent per year, unemployment will drop to 5.4 percent and productivity gains will increase 2 percent a year (idealistic for sure but feasible).

Demographic Changes Abound

While the retail industry's jobs increase isn't as dramatic as those in construction and health care (retail already has a large employment base), the three growth sectors are all inter-related.

As housing and residential construction increases to accommodate a growing population, construction will continue to gather steam.  Increases in new units built and the replacement of old housing should pay dividends to retailers who will help buyers fill those homes - think appliances, furniture and garden supplies.

America's rapidly aging demographic - baby boomers - are also spurring job growth in medical service fields.  An aging population and expanded medical insurance coverage (Obamacare) are factors the BLS incorporated into its projections.  Again, retailers - especially those selling health and personal care products - will play a critical role in that demand.

What is readily apparent from a review of the BLS report is the important role demographic changes are making in the economy.  While demographics have always played an important role in economic decisions, they are now becoming a centerpiece for discussion.

One of the most dominate changes is that the labor force participation rate among older workers is expected to continue its decline.  As the baby boomers (those born between 1946 and 1964) head into their retirement, fewer will be part of the American labor force, lowering the participation rate and slowing labor growth and economic activity.

This demographic change - while anticipated - is especially important for retailers.  As an individual ages, purchases change.  Retailers should take some time to prepare for these changes and remain ever-vigilant and responsive.

Source:National Retail Federation

Widespread Labor Shortages Ahead For The U.S.

May 1, 2014

American workers have endured six years of depleted wealth, stagnant wages, and general insecurity.  But their fortunes are about to change, according to a surprising new study from The Conference Board.  'From a Buyer's Market to a Seller's Market' predicts unemployment in the United States - currently 6.7 percent and falling rapidly - will reach its "natural rate" of 5.5 percent by late 2015.  The decline will continue well past this benchmark; over the next 15 to 20 years, U.S. unemployment may even dip below 3.8 percent, the lowest rate recorded since the 1960s.

"While our conclusions may seem unlikely today, they rest on a simple fact: nearly all baby boomers will be out of the job market by 2030," said Gad Levanon, Director of Macroeconomic Research at The Conference Board and a co-author of the report.  "As woriking-age population expansion slows to a crawl, even modest job growth should steadily tighten the labor supply and force wages higher.  In the short run, this will be good news for workers.  But it could also become a major handicap on U.S. growth and competitiveness, which we must prepare for now."

Among the report's other key findings:

• Most of the millions who left the active job market during the Great Recession are unlikely to return.  Many are retired or disabled, while "skill erosion" has made others uncompetitive in the eyes of employers.  Thus the official unemployment rate is a broadly accurate measure of slack in the labor market, not misleadingly low as many commentators argue.
• Since 2009, unemployment decline has outpaced previous recoveries even as GDP growth lags behind.  Meanwhile, wage growth, voluntary quit rate, and employers' difficulty in filling positions are all trending up, suggesting the transition to labor shortages is underway.
• As baby-boomer retirement mounts, wage pressure will form a growing constraint on corporate profits and, ultimately, economic growth.  Seeking to increase productivity and reduce costs, companies may raise prices and move operations to cheaper areas.
• Impacts will vary widely across industries.  Those in which older workers are concentrated - and which attract few skilled immigrants - will be at highest risk of labor shortages.  These include law enforcement, plant operations, and rail and water transport.  Conversely, relatively high numbers of young and foreign entrants should mitigate the effects on high-growth and technology fields.
• Immigration and productivity are open factors in general - a surge above trend growth for either could offset much of the demographic pressure currently projected.

Source: The Conference Board

The Conference Board Employment Trends Index Increases In March

April 7, 2014

The Conference Board Employment Trends Index increased in March.  The index now stands at 117.52, up from 117.01 (an upward revision) in February.  This represents a 5.1 percent gain in the ETI compared to a year ago.

"The increase in the Employment Trends Index in the first quarter is signaling solid job growth in the coming months," said Gad Levanon, Director of Macroeconomic Research at The Conference Board.  "With GDP forecasted to average 2.5 to 3.0 percent through the end of this year, there is little reason to expect employment growth to slow any time soon."

March's increase in the ETI was driven by positive contributions from four of its eight components.  In order from the largest positive contributor to the smallest, these were: Initial Claims for Unemployment Insurance, Industrial Production, Number of Temporary Employees, and Real Manufacturing and Trade Sales.

The Employment Trends Index aggregates eight labor-market indicators, each of which has proven accurate in its own area.  Aggregating individual indicators into a composite index filters out "noise" to show underlying trends more clearly.

The eight labor-market indicators aggregated into the Employment Trends Index include:

• Percentage of Respondents Who Say They Find "Jobs Hard to Get" (The Conference Board Consumer Confidence Survey)
• Initial Claims for Unemployment Insurance (U.S. Department of Labor)
• Percentage of Firms With Positions Not Able to Fill Right Now (National Federation of Independent Business Research Foundation)
• Number of Employees Hired by the Temporary-Help Industry (U.S. Bureau of Labor Statistics)
• Ratio of Involuntarily Part-time to All Part-time Workers (BLS)
• Job Openings (BLS)
• Industrial Production (Federal Reserve Board)
• Real Manufacturing and Trade Sales (U.S. Bureau of Economic Analysis)

Source: The Conference Board 

Labor Market Improving, Together With A Little Catch Up

April 4, 2014

The economy generated a gain of 192,000 jobs in March.  Undoubtedly, there was some catch up in hiring following the inclement weather this winter.  Still, the underlying hiring trend is encouraging, with more good news expected this spring and summer.  This confirms the signals from The Conference Board's Consumer Confidence Index and Leading Economic Index for the U.S.  More jobs means more pay checks, lifting sentiment and resulting in more consumer buying.  If demand is improving, business will respond by investing so as to supply the goods and services in demand.  The key, as always, is sustained job gains in the service sector including health and education.  If these numbers continue, the much-anticipated strengthening of the economy may materialize sooner rather than later.

Source: The Conference Board

Labor Market Holding Up At A Reasonable Rate

March 7, 2014

The economy generated a gain of 175,000 jobs in February.  Whether that is enough to dissipate uncertainty about where the economy is headed this year remains the big question.  Even though the number of workers unable to report to work due to inclement weather increased strongly, and average weekly hours declined, the number of construction jobs continued to increase at a moderate rate.  Going forward we see things improving as many of the underlying fundamentals of the economy have continued to improve.  The Conference Board Leading Economic Index and the latest reading from the survey of purchasing managers point to strengthening conditions over the next few months.  Catch up from weather-delayed plans could push job gains over 200,000 per month.  And more jobs mean more paychecks, lifting consumer confidence and sending consumers out shopping once the weather improves.  If demand is improving, business will respond by investing so as to supply the goods and services in demand.  In sum, we look for a spring thaw to warm up the economic readings, including most notable employment and housing indicators.

Source: The Conference Board

The Conference Board Employment Trends Index Increases In February

March 10, 2014

The Conference Board Employment Trends Index (ETI) increased in February.  The Index now stands at 116.39, up from 115.99 (a downward revision) in January.  This represents a 4.4 percent gain in the ETI compared to a year ago.

"February's job report and the ongoing improvement in the Employment Trends Index should provide some relief for those concerned about weakness in the U.S. economy and labor market," said Gad Levanon, Director of Macoreconomic Research at The Conference Board.  "The majority of the ETI's components have been steadily rising in recent months, suggesting solid job growth will continue in the coming months."

February's increase in the ETI was driven by positive contributions from six of its eight components.  In order from the largest positive contributor to the smallest, these were:  Number of Temporary Employees, Job Openings, Real Manufacturing and Trade Sales, Industrial Production, Consumer Confidence Survey Percentage of Respondents Who Say They Find Jobs "Hard to Get," and Ratio of Involuntarily Part-time to All Part-time Workers.

The Employment Trends Index aggregates eight labor-market indicators, each of which has proven accurate in its own area.  Aggregating individual indicators into a composite index filters out "noise" to show underlying trends more clearly.

The eight labor-market indicators aggregated into the Employment Trends Index include:

• Percentage of Respondents Who Say They Find "Jobs Hard to Get" (The Conference Board Consumer Confidence Survey)
• Initial Claims for Unemployment Insurance (U.S. Department of Labor)
• Percentage of Firms With Positions Not Able to Fill Right Now (National Federation of Independent Business Research Foundation)
• Number of Employees Hired by the Temporary-Help Industry (U.S. Bureau of Labor Statistics)
• Ratio of Involuntarily Part-time to All Part-time Workers Job Openings (BLS)
• Job Openings (BLS)
• Industrial Production (Federal Reserve Board)
• Real Manufacturing and Trade Sales (U.S. Bureau of Economic Analysis)

Source: The Conference Board