October Jobs report bringing praise and concerns

It wasn’t quite the big-bang theory, but Friday’s Jobs Report for October, seemed to have brought home the bacon, for some economists and observers, eager to see that wages inched up to 3.1 percent - but those are the optimists. For those that saw the glass half empty, it was still not enough to see consumer confidence emboldened, or to prevent the cost of living that will eat up those few cents, that the cheerleaders were so eager to cheer about.

"I’m not seeing anything bad in this jobs report," said Jason Furman, the former head of the Council of Economic Advisers under President Obama.

"Strong hourly wage growth, even stronger weekly wage growth, higher labor force participation, lower broader underemployment, while job growth bounced back from last month and the unemployment rate remained low," he said on Twitter Friday.

The good news is that the increase is the first to have been seen since April of 2009, but those less sanguine can only say that there was really - after months and years of low wages, no way else was up.

Up, and that was the direction that was taken, with 250,000 jobs added to the U.S. economy, excelled in the bellwether indicator of ADP, that precedes the monthly report from private employers, from the Bureau of Labor Statistics, that also showed the unemployment rate at 3.7 percent, but as we have noted in the past, this is the marquee, or banner rate, that is less accurate than the broad number which is more accurate.

The BLS release showed this, rate known as u5, as well as broad and defines it as “the number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged at 4.6 million in October. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.”

What we have is a conundrum, of sorts: high unemployment, coupled with lower than desired wages, and against a strong dollar, but all of this aside we have a record streak of 97 straight months, and after the Great Recession of 2008, this is good news, nevertheless, the U.S. economy did grow at an annualized rate of 3.5 percent, and has some business leaders, busting forward in pride, and President Trump and the White House praising the numbers, and taking credit for them.

"Wow! The U.S. added 250,000 Jobs in October - and this was despite the hurricanes. Unemployment at 3.7%. Wages UP! These are incredible numbers. Keep it going, Vote Republican!" tweeted President Trump

It’s as common as snowfall in December that any president will take credit for job growth, but in this case it has really been the prior efforts of former Fed Chair, Janet Yellen and President Obama, that the credit can be attributed to.

The New York Times noted that the “modest monthly wage gain of 0.2 percent nonetheless produced a surprisingly big 3.1 percent jump in annual growth. That was partly because of an unusual drop in pay in October last year after hurricanes. Yet even if the year-over-year increase was somewhat inflated, the underlying trends point to a pickup in wage growth.”

But, will it be enough, seems to be the ever present question over the last several months.

One idea from Boeing is that to help meet production deadlines, they are bringing back on a temporary basis, retired employees, at its plant outside Seattle, reported the AARP Bulletin, in November.

"Paul Bergman, a Boeing spokesman, said the company plans to hire recently retired mechanics to help with “near-term airplane production requirements” at the plant in Renton, Wash. In August, the company reached an agreement with the International Association of Machinists and Aerospace Workers to bring back retirees for up to six months. Connie Kelliher, a spokeswoman for the union, said retirees will receive a $500 bonus for each month they work at the plant," they said.

“Trying to find workers, especially on a temporary basis, who understand the operations and can make contributions immediately is otherwise just about impossible,” says, Peter Cappelli, a management professor at the Wharton School of the University of Pennsylvania.

Fears of inflation are still strong, yet some do not see this as worrisome, and one of them is Michelle Girard, chief United States economist at NatWest Markets, who said, “I don’t think it’s something the Fed should worry about,” and added,. “Productivity growth is picking up, and workers should earn more. It doesn’t mean companies have to pass on higher wage costs to consumers. They can afford to pay them more.”

Another fear, unabated is that employers cannot find the necessary skills needed, and therefore many professional jobs go unfilled, with the attendant growth for low-skilled workers, often with only secondary school credentials.

“I speak to probably a thousand businesspeople a month,” said Rick Lazio, a former Republican congressman who is a senior vice president at Alliantgroup, a tax-credit consulting firm. Midsize manufacturers are turning down lots of business, he said, to the Times, “because they can’t find the people and they can’t get the equipment fast enough.”

Especially hurting are small business who “report record-high hiring expectations, while at the same time admitting some troubles filling open roles. Companies of all sizes are currently facing the pressures of a labor market at 3.9 percent unemployment and a booming economy, but small businesses may be particularly squeezed,” noted CNBC.

Taking a closer look we can see that “Small businesses with 50 or more employees are both the most likely to say they plan to increase their headcount in the next year and are the most likely to have open positions. More than half of small-business owners with 50 or more employees (55 percent) are planning to expand their teams, and 41 percent have roles open now.”

That gap between education and experience is particularly vexing to “the finance and insurance industries are the most apt to see education and training as the largest impediments to hiring: 63 percent single this out as the primary reason.”

Some also blame a poor employment history, or lack of social, or interpersonal skills as a reason for unfilled slots.

Drilling down even deeper we still see a lowered than desired labor participation rate --- still hovering at a low rate, and “Before the financial crisis, more than 66 percent of the population 16 or older was working or looking for a job. In recent years, that number — the labor-force participation rate — has rarely risen above 63 percent.”

Most economists and analysts cite the increased retirement of baby-boomers, those who know they have low skills, and those that are too disabled to join the ranks of the employed. And, there is less demand for some fields, such as IT who faces outsourcing and cloud-based work, versus the traditional bespectacled manager roaming the halls of corporate America.

Leading in the numbers were manufacturing which increased to 32,000, with the sector adding 296,000 jobs over the past year. Also, health care pasted on 36,000 jobs while transportation and warehousing gained 25,000 jobs last month.

Not to be outdone, employment in leisure and hospitality rose 42,000, while professional and business services added 35,000 in October, and 516,000 jobs over the past year. Some caution should be exercised with that last category as it is catchall for everyone from seasonal help, to office temps.

One area of surprise, from the Times report, is that “Women are coming back into the work force at a much faster rate than men, however. And over the past year, a net total of 1.4 million women have joined compared with 845,000 men. Drawing in even more women would require better child care, paid parental leave and more flexible hours, said Betsey Stevenson, an economist at the University of Michigan. “We know what to do for women,” she said. “We’re really at a loss as to what to do to induce more men back.”

Updated 23 November 2018