Jobs Outlook Improving: 'Hiring Activity Has Picked Up'
Amid all the gloom and doom about unemployment, there are growing signs that things may actually be getting better.
The drop in weekly unemployment claimsto 2008 levels is one of a handful of indicators that is pointing to a slightly improving employment picture.
A gain in small business hiring, a pickup in online job advertising and an increase in job openings all indicate things are getting better on the employment front though still far from the level of hiring needed to make a dent in unemployment.
Thursday’s weekly jobless claims report of 366,000 was the lowest reading since May, 2008, and the four-week moving average of 388,000 is the lowest since July, 2008. Economists warn claims can be volatile at this time of year, but the numbers nonetheless suggest improving employment gains.
“The claims combined with these better hiring indicators points to improvement in payroll growth,” said Goldman Sachs economist Andrew Tilton in a phone interview.
Tilton wrote in a note that the alternative job openings and hiring indicators he watches imply that “hiring activity has picked up to the best rate so far in the economic recovery, though it remains well below pre-crisis levels.”
The biggest risk to the improved hiring picture, and the economy, would be if Europe does not manage to contain its sovereign debt problem and it worsens. Some economists argue another risk would be if Congress does not extend the payroll tax cuts or the extended unemployment benefits, which are estimated to put a combined $160 billion into the economy.
“If you’re in an environment where corporate profits are still going up, we’ll probably see better jobs creation in the year ahead. The good news is at the same time we’re seeing fewer layoffs. We’re seeing commodities prices coming down. This is unusual to have both of these things happening at the same time,” said Gary Thayer, chief macro strategist at Wells Fargo Advisors.
“I’m very encouraged that next year, if we’re correct on our GDP forecast, that we’ll probably see better jobs numbers. It won’t be strong employment, but we’ll get some months where jobs will surprise on the upside,” said Thayer.
Thayer said he’s encouraged that hiring has been broad-based, though there was a high concentration of retail jobs in the November jobs report. That report showed the creation of 120,000 jobs, 50,000 of which were in retail. But he said over several months, there has been hiring across a range of industries. The unemployment ratealso improved to 8.6 percent from 9 percent in November.
Tilton said the December jobs report could be roughly the same or slightly better than November, and one area that could show improvement is the construction sector. “I think that’s an area where you might see some improvement over time but from a low base,” he said. “We think house prices are near a bottom. We think construction levels are very low.”
The hiring indicators Tilton watches include the Manpower survey of hiring intentions, which at a positive 9, had its best reading since 2008 this week. The low was negative 2 during the crisis, but the all-time high was in late 2000 when it was at 25, and the average reading since 1975 is 15.
Also encouraging was the National Federation of Independent Business monthly survey this week that showed hiring intentions by small businesses doubled. The NFIB says that while still at weak levels, its employment indicators delivered a significant positive signal and that could mean the unemployment rate should improve a few tenths of a point if these readings continue and more job creation follows.
The NFIB reported that 14 percent of the owners it surveyed added an average of 3 workers over the past few months and 12 percent reduced their worforce by 2.9 workers. Forty-seven percent hired or tried to hire.
It said a seasonally adjusted net 7 percent of the business owners it surveyed plan to create new jobs over the next three months, up 4 percent, and the highest reading in 38 months.
“The small business survey was notably better. That’s generally been an area where things have been incredibly weak for a long time,” said Tilton.
He notes that online job advertising also perked up. When seasonably adjusted, Monster.com shows a pickup in online job advertising, and the Conference Board survey of online job advertising, which dropped during the summer, appears to have stabilized, he said.
The Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, released this week, shows an upward direction in the rate of job openings across the economy, Tilton says, but hiring rates have remained relatively steady.
The release of the survey Tuesday showed that the number of job openings in October was 3.3 million, nearly flat with the 3.4 million in September. That is 35 percent above the trough in July, 2009. At the same time, the number of hirings was 4 million in October. For perspective, this compares to a high of 5 million in December, 2007 and a trough of 3.6 million in October, 2009.
Tilton also watches consumer perception of jobs in the Conference Board’s confidence survey. That showed the share of consumers who see jobs as plentiful, minus the consumers who see jobs as “hard to get” was minus 36.3 percent but that was a seven point improvement from October and the best reading since 2009.
Follow Patti Domm on Twitter: @pattidomm