By Steven R. Drexel, President, and CEO of Cornerstone Staffing Solutions, Inc.
As an Economist and seasoned staffing industry professional, I’m regularly asked to participate in several monthly surveys and discussions that predict key elements of the Bureau of Labor Statistics’ (“BLS”) press releases describing The Employment Situation. The next release revealing September’s statistics will be out on Friday, October 6Th, (typically the first Friday of each month reporting on the previous month’s activity).
The BLS offers many statistics covering weekly, monthly, quarterly, and yearly data and comparisons. Insofar as I dive deep into the data (national, industry and company), this commentary shares my thoughts and observations directly related to predicting how July will perform compared to the recent past. Cornerstone’s stakeholders and other interested parties may find the following remarks helpful in assisting with business strategies and objectives for the near term.
September’s Expected Employment Highlights
September’s BLS report will be a bit of a throw-away since the survey week was dramatically distorted by Hurricane Harvey, just one of our nation’s recent natural disasters. No one is confident making predictions under these circumstances but the consensus calls for non-farm job growth of about 100,000 positions. This is down un-mistakenly from August’s, not particularly strong, 156,000 net new positions. The unemployment rate likely held firm at 4.4 percent during September.
Signs that the Hurricanes Took a Toll
Indicators that confirm that the Hurricane impacted the statistics included Initial Jobless Claims which had been in the 235,000 range prior to the storm but then moved up to as high as 298,000 after the Hurricane and remain elevated at around 270,000 initial claims during the most recent week. Industrial Production took a sizable hit as well, and in doing so, broke a strong seven-month run. Utilities were the largest sub-sector hit to Industrial Production confirming the storm effect. Retail Sales contracted and energy prices accelerated providing further evidence of a potent hurricane effect on statistical results that we expect to further influence the employment results.
Signs that the Labor Market remains Healthy despite the Natural Disasters
The weather impact notwithstanding, there are plenty of indications suggesting that beneath the turmoil, the labor markets remain healthy. The Beige Book, a collection of anecdotal reports from the twelve Federal Reserve Districts, reported that job gains persist at a slight to moderate rate across all units. The Manpower Employment Outlook Survey predicted continued positive hiring plans for the fourth quarter of 2017, consistent with the last four quarters. The Institute for Supply Management’s Manufacturing Index employment component reported a very solid improvement during September. The Conference Board’s Consumer Confidence Index remained firm during September and the differential between “jobs plentiful” and “jobs hard to get” was an encouraging net 14.5 during September. Moreover, the Texas, Kansas City, Richmond, and NY State Manufacturing Surveys employment sub-indices all improved during September. Further, the American Staffing Association’s Staffing Index was up half a percentage point during September and other private surveys that I participate in were positive as well.
The economic data released during the last month indicates that the hurricane took its toll — but the underlying demand and economic resilience are clearly evident.
September’s report will be closely followed as analysts look for signals regarding the sustainability of the expansion, inflation that may influence the Federal Reserve Board and long overdue wage growth.
There are no obvious economic imbalances that have emerged suggesting that the expansion is at risk. The expansion has persisted for a remarkably long period but is not yet out of gas. Inflation remains tame if not dormant and wage growth has stabilized at a benign 2.5 percent year-over-year pace (benign with respect to the longevity of the expansion, frustrating to workers).
Expectations for Q3 2017 and beyond.
It’s more of the same, slow but steady growth. Recent forecasts have improved very marginally which is helpful because although modestly so, the direction is positive and we are seeing three percent GDP growth during the stronger quarters. The labor markets are expected to continue growing through the end of the decade albeit at increasingly muted rates. The unemployment rate during this period will trend down to 4.0 percent or slightly less.
The expansion is aging but inflation as reflected in prices and interest rates remains remarkably mild and key economic sectors like the labor market, manufacturing, consumer net worth, corporate dividends, housing, and improving global growth are all positive and self-reinforcing. Average hourly earnings have ample room to improve as does the labor force participation rate, the share of unemployment that is long-term as well as the prime-age employment to population ratio. These metrics suggest that there is still capacity for further growth despite the historically low unemployment rate and the unusually long-running expansion. As the expansion continues grows longer in the tooth, there is a practical limit to the rate of growth. Expect jobs growth during 2017 to average about 175 000 positions per month while the unemployment rate trends slightly down. The risk of recession remains low given the absence of any signs of growing imbalances or a looming financial bubble — therefore, the general expansion should continue through 2020.
I invite you to share this commentary with your colleagues and professional network. Please call me to discuss further or ask any questions.