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 July’s statistics will be out on Friday, August 4th, (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.
July’s Expected Employment Highlights.
I expect that July produced 190, 000 net new jobs and a stable unemployment rate at 4.4 percent. July’s employment related economic releases suggest that the labor market remains healthy — but employment growth will be slower than the outsized increase reported last month. The average monthly rate of job growth so far this year has been about 180,000 jobs. I believe that July will be stronger than average, but below the 200,000 threshold that has been breached four times during 2017. Indications suggest that demand remains strong but supply is increasingly restrained (as signaled by the low unemployment rate). The current expansion remains consistently slow but remarkably long-running. The cumulative impact of this long-running expansion is a tightening labor market and gradually, but not yet evident, increasing wage pressure. More detailed evidence and statistics follow to support my findings.
July’s report will be closely followed as analysts look for signs of wage inflation as well as an indication of business and worker confidence. The Federal Reserve is tapping on the breaks to dampen anticipated, but not yet evident, wage inflation. Moreover, economic forecasts have been trimmed recently in response to a slower roll-out of the promised business-friendly legislative agenda. So far, slower progress in Washington, DC has not depressed current activity or confidence. The employment report is an important release because decisions made relative to the labor market reflect the mood and expectations of huge segments of the economy.
Positive or neutral employment-related economic indicators related to July’s activity included the following:
- Initial Jobless Claims and Continuing Jobless Claims were flat to slightly improved during July. Both metrics have been on a profound long-term favorable trend, recent results suggest that July’s employment growth should remain strong.
- The Conference Board’s Consumer Confidence Index improved during July and the differential between “jobs plentiful” versus “jobs hard to get” was a net 16.1 during July, up from 13.6 during June. July’s differential was the highest reading since 2001.
- The American Staffing Association’s Monthly Index was flat to slightly down during July compared to June suggesting another strong but not stronger month.
- Regional Federal Reserve Surveys with employment sub-indexes that improved during July included the following:
- Kansas City Fed Manufacturing Survey;
- Richmond Fed Manufacturing Survey; and
- Texas Manufacturing Outlook Survey.
- The Wall Street Journal’s March Economic Survey of 72 leading economists forecast of employment growth for 2017 was flat during July.
- The private employment surveys that I participate in continued to suggest growth in demand during July although meeting the demand with an increasingly limited workforce is challenging.
Employment indicators that were down with respect to July employment included the following:
- The Institute for Supply Management’s Manufacturing employment diffusion sub-index dipped during July to 55.2 from 57.2 in June.
- Regional Federal Reserve Surveys with employment sub-indexes that deteriorated during April included the following:
- Philadelphia Fed Manufacturing Business Outlook Survey; and
- NY Empire State Manufacturing Survey.
Expectations for Q3 2017 and beyond.
The expansion is aging but inflation is mild and key sectors like the labor market, industrial production, retails sales, corporate profits, housing, and improving global growth are all positive and sustaining. The risk of recession remains low given the absence of any signs of overheating or any looming financial shocks — therefore, the general expansion should continue through 2019. Average hourly earnings have 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 expansion despite the low unemployment rate. And yet, as the expansion ages, there is a natural limit to the rate of growth. Expect jobs growth during 2017 to average about 180,000 positions per month while the unemployment rate trends slightly down during the next three years settling at just below 4.0 percent by year-end 2019.
I invite you to share this commentary with your colleagues and professional network. Please call me to discuss further or ask any questions.
More about Cornerstone Staffing Solutions
Cornerstone Staffing Solutions ranks among the top largest staffing firms in America and received Inavero’s Best of Staffing® Client Award in 2016 and 2017. Since 2003, Cornerstone has grown from a neighborhood staffing provider to a $100 million national firm that employs thousands of people at hundreds of companies from coast to coast. Providing candidate searching and job placement for administrative, industrial, technical, sales and transportation positions, Cornerstone truly is where talent and jobs meet. Contact us today!