February 8, 2011
U.S. jobless claims show positive trend
The U.S. initial jobless claims report for the latest week ending January 29 dropped to 415,000 from 457,000 the week before.
With a couple of exceptions, possibly due to some severe winter weather in southern states, the new jobless claims figure has settled down between 400,000 and 420,000 in four of the past six week.
That’s a huge improvement versus most of 2010 when the number was almost always above 450,000. Above 500,000, job growth isn’t just slow; it slips into reverse, with the number of layoffs likely to be more than the number of new hires.
It appears there will be acceleration in jobs improvement in the period ahead.
During the latest reporting week, the largest declines in first-time unemployment insurance applications occurred in California (minus-3,775), Pennsylvania (minus-7,897), New York (minus-5,613), Indiana (minus-5,396) and Florida (minus-4,712). Perhaps more impressive than some of those volume changes, however, was the fact there were declines in 46 states and territories and increases in only seven.
The latest ADP (Automatic Data Processing, Inc.) survey on U.S. employment indicated an increase of 187,000 jobs in January versus December. If verified, this will be a substantial rise. ADP was subject to some criticism when it projected a 297,000 increase in jobs in December.
The official government report for December recorded a more modest increase of 103,000. In fact, however, that was the number from the Bureau of Labor Statistics (BLS) payroll survey.
The BLS also conducts a household survey, from which the unemployment rate is derived. The payroll survey is more comprehensive and covers a wider population. It is usually considered to be more accurate. What’s interesting, however, is that the December increase in employment according to the household survey was plus-297,000, exactly the same figure that ADP arrived at.
The manufacturing purchasing managers’ index (PMI) of the Institute of Supply Management (ISM) for January was a strong 60.8%, the highest since May 2004. Such a reading indicated an 18th straight month of advance in the manufacturing sector and over 6% growth in GDP.
The ISM’s non-manufacturing index for January was also high, 59.4%. The ISM says economic activity in non-manufacturing areas (primarily services) improved for the 14th straight month.
Similar to the manufacturing index, the non-manufacturing measure is a composite based on several diffusion indices (positive minus negative responses on a range of business issues). A reading above 50% means the non-manufacturing sector is growing; below 50%, contracting.
Covering much the same period as these jobs reports, the latest U.S. productivity numbers highlight where a problem still exists for those out of work and looking for positions. The growth in output per man-hour in the fourth quarter (plus-2.6% annualized) was higher than expected.
Companies continued to be reluctant to hire back workers, often choosing instead to increase production with the staff on hand. There is a fast-approaching point in the recovery when this course of action will become no longer viable. Firms will need to bulk up on manpower.
The inelasticity of employment growth so far in the recovery has been very much on the minds of officials in Washington. President Obama has appointed a blue-ribbon council headed by General Electric’s CEO, Jeffrey Immelt, to examine ways to speed up job creation, while also “promoting growth, competitiveness and innovation” in the U.S. business community.
This august body will operate under the auspicious name, The President’s Council on Jobs and Competitiveness.
Alex Carrick is chief economist with CanaData. His regular articles appear in the Economic Outlook section of Daily Commercial News. Check out his blog at www.dailycommercialnews.com/economicsblog
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