HFF Analysis of the November 2016 BLS Employment Report

Monday, December 5, 2016

HFF is pleased to report on the latest employment expansion statistics from November 2016. Our research team analyzes trends and data to give readers a better view into the current state of the economy and how employment is being affected.

Employment Expansion

U.S. job growth picked up in November as nonfarm payrolls rose by 178,000. September’s nonfarm payrolls were revised up to a gain of 208,000, and October’s down to 142,000, a net decrease of 2,000. Payroll creation has averaged 200,000 since October 2010. The labor force participation rate edged lower to 62.7 percent in November, from 62.8 percent the prior month and continues to hover near a four-decade low. The unemployment rate lowered to 4.6 percent last month from 4.9 percent in October. The 4.6 percent rate is the lowest reading since August 2007.

The current expansion cycle is similar to 1991 to 2000 and greater than the 2004 to 2007 expansionary period but only after a significantly delayed recapture of the nation’s previous employment peak.

Attractive Job Growth Cooling

The U.S. created 2.3 million jobs in 2015, the second highest level of expansion since 1999. The last five years’ job growth is on par with the expansionary period from 1992 to 1995.

In 2015, the U.S. created 2.7 million jobs, but nearly 42 percent of private-sector job gains came from construction, manufacturing, retailers, hotels, restaurants and temporary help agencies, all typically low-paying sectors. Combined, Retail Trade (223,000) and Leisure & Hospitality (293,000) created approximately 516,000 jobs in the year ending November 2016, accounting for some 23 percent of the headline growth nationwide.

Retail Trade accounts for 66 percent of the headline Trade, Transportation & Utilities growth. We can therefore assume continued broad-based growth in the retail and industrial property types as we progress deeper into the economic recovery. Professional Business Services, the industry sector most closely aligned with office using employment, experienced expansion of 571,000 jobs in the year ending November 2016.

Fortunately, Temporary Staffing only accounted for 56,000 (approximately nine percent) of these positions. Temporary Staffing is slowing, however, implying hesitance in hiring the lowest-cost employees companies can find in tentative expansions. Education & Health Services, which has performed well throughout the downturn being a recession-resistant industry, expanded by 581,000 jobs in the year ending November 2016, the highest of any major employment sector. Mining & Logging and Manufacturing continue to undermine headline growth with approximately 89,000 jobs being lost in the year ending November 2016.

Unemployment Rate

The Underemployment Rate augments the Unemployment Rate to include anyone marginally attached to the Labor Force who is either not employed or employed only part time. Fortunately, the Underemployment Rate has descending from a recent high of just over 17 percent. However, the spread between the two rates is near an all-time high and shows no sign of rapid compression.

The unemployment rate dropped to 4.6 percent, its lowest level in nine years. The underemployment rate fell to 9.3 percent in November, the lowest level since April 2008.

Wage Growth

As the labor force approaches “full employment,” much attention has been cast to wage growth. The past three recessions were preceded by a period of FOMC tightening. Average hourly earnings growth exceeded four percent in each of these periods, as overall economic activity became reflected in strong wage growth. With the current year-over-year percent wage growth registering approximately 2.5 percent, one could argue overall economic activity has not yet reached levels that precede recessionary periods (often accompanied if not triggered by FOMC tightening to counter inflationary forces).

Source: Bureau of Labor Statistics, HFF Research 

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