Macroeconomics

Employment statistics cannot be interpreted in a vacuum.

Employment statistics cannot be interpreted in a vacuum inasmuch as other economic indicators do determine employment growth. There are many nuances that require attention to detail. Indeed, details on June’s 2015 report on labor market are twofold. First, mining related industries –including utilities- started to adjust to low oil prices, as well as low demand for several manufacturing goods tempered high expectations risen before summer season. Likewise, spring low levels of investment on residential construction realized a decrease on employment for the summer. Second, Professional Business and Services continues to lead job creation in United States. In other words, oil prices do continue to affect the economy, though the industry started to adjust; strong dollar dragged international demand for U.S. metals products thereby affecting employment in manufacturing; third, low levels of investment in construction are taking a toll in employment creation.

Employment level June 2015.

Employment level June 2015.

Since Construction Investment slowed down in the spring, employment in the industry drops in the summer:

The latter factor should worry the most labor economist. Given that oil prices and exchange rates are beyond strictly control of United States institutions, and are also well known phenomena, investment in construction should call the attention of economic policy leaders. Since the beginning of the summer of 2015, when the statistics about GDP 2015Q1 were released, economists started to look at Investment in non-residential and residential structures. This sector is key for the seasonal employment since, as soon as weather allows for, construction and outdoor activities rebound. However, early in the spring 2015, this was not the case. Total residential construction put in place for the month of April 2015 decreased to $353,086 billion of dollars from 360,826 billion put in place the same month 2014, which equals 2 percent decrease over the year.

Residential Construction Put in Place, April 2015.

Residential Construction Put in Place, April 2015.

So, it should not surprise anyone that construction-contractors cut back employment as they see investment dropping. That very fact shows up in employment statistics astonishingly. Data from BLS show construction did not contribute significantly to augment employment levels nationally. Instead, 6.1KResidential construction building workers were dismiss from work; 5.6K Nonresidential specialty trade contractors were also cut from duty. That makes up to roughly 12K seasonal jobs that are crucial for year-round labor statistics.
These statistics are relevant for economics given that construction of new homes has many job spillovers in manufacturing industries. Another way to say the same is that whenever a new home is built, new sofas, TV’s, Kitchens, furniture, so on and so forth, are needed. Furthermore, the housing market was the sector that initiated the Great Recession, and construction as a sector was the latest in joining the path to recover. This issue helps to introduce the other weak flank of the current employment situation: manufacturing.

Manufacturing feels the spillover of strong dollar and low local demand:

The other drop in employment levels for June 2015 was seen in manufacturing, more precisely on metal related products which decreased employment level by 4.5K persons. In this case, apparently, it is not only internal demand which is cutting back employment levels, but also international demand for U.S. manufacture goods. In other words, last six months of strong dollar reduced the demand for U.S. manufacturing thereby affecting employment locally. Several sources have noted the extent to which the exchange rate is affecting negatively U.S. competitiveness and employment. Especially for metal products. Recent data on Current Account –Exports and Imports- released by the Bureau of Economic Analysis showed that during the first quarter of 2015 Goods exports decreased to $382.7 Billion from $409.1 billion. The drop in manufacture exports was mostly driven by a decrease in industrial supplies such as Petroleum, Chemicals and…. Metals products. This effect obviously spills over employment levels nationally. Once again, it is not a surprise.

Unemployment rates, June 2015.

Unemployment rates, June 2015.

The surprise:

Finally, what really happens to be a surprise is the revision of employment levels for the months of April and May 2015. The Bureau of Labor Statistics corrected its initial estimates on those figures by stating that April’s 2015 employments added were 187,000, and May’s employment added were 254,000. At first glance, April statistic fell below the threshold of 200,000 jobs per month, which should worry analysts to begin with. Then, when computed, the total amount of jobs not realized statistically amounts to 60,000. Thus, the monthly average for job gains is 221,000, which is slightly above the 200,000 threshold.

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