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BRIEFING - JANUARY EMPLOYMENT SITUATION

February 01 2008

  • Temp job losses continue
  • Nonfarm sees first loss since 2003
  • BLS restates history
  • Place and search hiring uptick?

Temp job losses continue
Temporary help payrolls fell by 9,000 jobs in January, roughly in keeping with the average such loss over the last twelve months. Temporary help payrolls have declined for 12 of the last 13 months. On a year-over-year basis, temporary help payrolls were down 3.3%, the largest year-over-year drop since 2002. Temporary help penetration slipped to 1.86%.

Early company reports for the fourth quarter also suggest a weak temporary staffing market. Revenue at Kelly's Americas Commercial segment was down 6% and Manpower reported U.S. revenue down 7.6%. On the other hand, industrial bellwether Labor Ready reported roughly flat same-store sales versus the year earlier, a better result than current weakness in goods-producing employment might have suggested.

Nonfarm sees first loss since 2003
Nonfarm payrolls fell by 17,000 jobs in January, the first such loss in four years. The goods-producing sector cut 51,000 jobs, on the high side of its usual range of losses. Construction and manufacturing each accounted for about half of the decline. The service-providing sector contributed 34,000 jobs, about 100,000 jobs short of the level it has averaged over the previous twelve months. The two biggest swing factors were professional and business services, which lost 11,000 jobs, and government, which lost 18,000 jobs. Leisure and hospitality generated 19,000 jobs, but that too was short of its usual level. Apart from the education and healthcare sector, which performed at its accustomed level, underperformance was widespread.

It's notable, however, that the job losses reported by the BLS are in sharp contrast to estimates released earlier in the week by Automatic Data Processing (ADP), in its ADP National Employment Report. This report, which is published in advance of the BLS numbers, puts job creation in January at 130,000 jobs. The report adds "Small- and medium-size businesses, defined as those employing fewer than 500 workers, added 122,000 jobs. Employment among larger companies with 500 workers or more increased 8,000."

Despite the disappointing job creation numbers, unemployment fell by 0.1 percentage points to 4.9% in January. Unemployment among college graduates also fell slightly, to 2.1%.

BLS restates history
Once a year, just to remind everyone that its numbers are statistically contrived estimates subject to change, not actual headcounts, the BLS adjusts its data according to an annual benchmarking process. According to these new estimates, the nonfarm payrolls were 376,000 smaller, temporary help payrolls were 19,000 smaller and the number of people covered by PEOs was 53,000 larger. Reflecting a new NAICS hierarchy, the BLS also introduced the NAICS category 561312, executive search services, which is now a sub-component of 56131, employment placement agencies. Executive search consulting services had formerly been categorized under category 541612, Human Resources and Executive Search Consulting Services.

Place and search hiring uptick?
The restated BLS numbers for payroll in employment placement agencies tell a somewhat different story than its previously reported numbers. According to the new data, things are getting better for this sector, not worse. Following a year of slight year-over-year declines in employment agency payroll, the number of jobs in this sector was up slightly versus the year earlier. That's a positive sign, if you believe it. But it would be more comforting if the BLS's data didn't change so radically in these restatements. In any case, other good news for this sector was the down tick in unemployment among college graduates, which slipped back to 2.1%. Historically, college level unemployment rates of less than 2.0% have been correlated with strong growth in place and search, but as such rates exceed the 2.0% mark, place and search growth becomes less certain. All this apparent good news aside, at least through the end of the third quarter the direct hire business was in rapid deceleration, according to data from our Staffing Industry Benchmarking Consortium. At this point, particularly given weakness in the economy, we think it unlikely that deceleration has abated. 

EMPLOYMENT IN DETAIL
The umbrella employment services category (NAICS 561300, which combines temporary help, professional employer organizations and employment placement agencies) dropped by 3,700 workers, or 0.1%, in January from December, seasonally adjusted. The workforce stood at 3.6 million, down 120,500 or 3.3% from January 2007. 

The number of employees in employment placement agencies (NAICS 561310, not seasonally adjusted) decreased by 2,400 (or 0.8%) in December from November, and was down 1,700 or 0.5% since December 2007. Employment at temporary help services (NAICS 561320) fell by 9,000 (or 0.3%) to 2.6 million. Since January 2007, temporary help services had shed 87,000 employees (or 3.3%). Payrolls at professional employer organizations (NAICS 561330) dropped by 7,200 or 1.0%, in December from November (not seasonally adjusted) to 683,500. The category has displaced 48,900 workers (or 6.7%) since December 2007. In the human resources consulting service category, which includes executive search services (NAICS 541612), employment rose by 1,700 or 2.2% in December from November to 80,100 (not seasonally adjusted). Employment in this sector has increased 13.1% since December 2007.

Education and health services and leisure and hospitality jobs helped spur the job growth within service-providing industries' in January. In the goods producing sectors, construction and manufacturing continue to shed employees.

TOTAL EMPLOYMENT IN DETAIL
Education and health services payrolls grew its payrolls by 47,000 (or 0.3%) in the past month. It had added more than half a million payrolls (553,000 or 3.1%) in the past year. These gains represent the largest volume of payroll increases at the monthly and annual sector levels across all industries. Healthcare and social assistance increased by 30,900 (or 0.2%) payrolls in the past month. This accounts for the largest volume of payroll increases at the monthly and annual subsector levels across all industries. It has risen by 462,700 (or 3.1%) in the past year. Healthcare employment rose by 27,100 employees (or 0.2%) in January and 366,700 (or 2.9%) in the past 12 months. Educational services gained 15,700 payrolls (or 0.5%) in the past month and gained 90,200 (or 3.1%) since January 2007.

Leisure and hospitality payrolls rose by 19,000 (or 0.1%) in the past month and by 363,000 (or 2.7%) in the 12 months. Accommodations and food services increased by 13,600 (or 0.1%) payrolls since December; employment had risen 312,700 (or 2.8%) in the past 12 months. Arts, entertainment and recreation payrolls gained 5,000 employees (or 0.2%) in the past month and by 50,000 (or 2.5%) in the past year.

Trade, transportation and utilities payrolls rose by 1,000 (or 0%) since December and by 176,000 (or 0.7%) since January 2007. Retail trade gained 11,200 employees (or 0.1%) in past 30 days and by 64,900 (or 0.4%) in the past 365 days. Within retail trade, nonstore retailers experienced the largest dip in monthly payrolls across all subsectors, down by 2.2%.

Utilities dipped by 2,000 payrolls or (0.4%) in the past month, but rose by 6,300 (or 1.1%) in the past year. Transportation and warehousing fell by 2,800 (or 0.1%) since December, but rose by 2,900 (or 0.1%) in the past year. Wholesale trade payrolls declined by 5,000 (or -0.1%) in the past month, but improved by 101,900 (or 1.7%) in the past year.

Financial activities payrolls dropped by 2,000 (or 0%) in January since December and by 92, 000 (or 1.1%) in the past year. Within the sector, real estate and rental and leasing dipped by 900 (or 0%) in the past month and by 29,800 (or 1.4%) in the past year. Within this sector, lessors of nonfinancial intangible assets experienced the largest monthly percentage gain across all subsectors, rising by 2.3%. Finance and insurance lost 1,300 workers (or 0%) since December and 61,700 (or 1.0%) since January 2007.

Professional and business services employment, which includes the staffing workforce, dropped by 11,000 payrolls (or 0.1%) in January. This sector had contributed 290,000 new payrolls (or 1.6%) since January 2007. Professional and technical support gained 11,100 (or 0.1%) payrolls in the past month and 322,800 (or 4.3%) in the past 12 months. Employment services continued to displace workers, by 3,700 (or 0.1%) in January, and by 120,500 jobs (or 3.3%) in the past year. Temporary help services fell by 9,000 (or 0.3%) in the past month and by 87,000 (or 3.3%) in the past year.

In other service-providing industries, government payrolls fell by 18,000. Within the governments category, state government education lost the largest volume of payrolls in the past month at the subsector level, down by 26,000. The information sector fell by 1,000 workers in the past month. Within information sector, other information services experienced the largest annual percentage increase of payrolls at the subsector level across all industries, measuring in at 9.6%.

In the goods-producing sector, natural resources and mining increased by 4,000 (or 0.5%) in January and by 37,000 (or 5.2%) in the past year. For the second month in a row, natural resources and mining experienced the largest percent growth of monthly and annual payrolls at the sector level across all industries. Mining activities gained 4,300 workers (or 0.6%) in the past month and 38,700 (or 6.0%) since January 2007. Construction continued to shed jobs, by 27,000 (or 0.4%) in the past month and by 278,000 (or 3.6%) and in the past year. Construction experienced the largest sector decrease in payrolls at the annual volume as well as the monthly and annual percent change. Within this sector, residential specialty trade contractors, down by 153,600 workers since January 2007, experienced the largest annual percent change decrease across all subsectors. The manufacturing sector hemorrhaged 28,000 payrolls (or 0.2%) since December and has displaced 269,000 workers (or 1.9%) since January 2007. This represents the largest loss in monthly payrolls across all sectors. Durable goods fell by 12,000 (or 0.1%) and nondurable goods dropped by 16,000 (or 0.3%) since January 2007. Within nondurable goods, textile mills experienced the largest annual decrease in payrolls across all subsectors, down by 10.1%.

Average hourly earnings of workers increased 4 cents in January to $17.75, following a gain of 7 cents in December.

PAYROLL CHANGES: Past Month Change, Month-over-Month Change and Year-over-Year Change

(The first number is the actual change in January from December, the second is the percentage change in January 2008 from December 2007 and the third number is the percentage change in January 2008 from January 2007. All are seasonally adjusted.)

 Service-producing Industries

  • Education and health services: 47,000, 0.3%, 3.1%
    • Healthcare and social assistance: 30,900, 0.2%, 3.1%
      • Healthcare: 27,100, 0.2%, 2.9%
    • Educational services: 15,700, 0.5%, 3.1% 
  • Leisure and hospitality: 19,000, 0.1%, 2.7%
    • Accommodations and food services: 13,600, 0.1%, 2.8%
    • Arts, entertainment and recreation: 5,000, 0.2%, 2.5%
  • Trade, transportation and utilities: 1,000, 0%, 0.7%
    • Retail trade: 11,200, 0.1%, 0.4%
    • Utilities: -2,000, -0.4%, 1.1%
    • Transportation and warehousing: -2,800, -0.1%, 0.1%
    • Wholesale trade: -5,000, -0.1%, 1.7%
  • Information: -1,000, 0%, -0.5%
  • Financial activities: -2,000, 0%, -1.1%
    • Real estate and rental and leasing: -900, 0%, -1.4%
    • Finance and insurance: -1,300, 0%, -1.0%
  • Professional and business services: -11,000, -0.1%, 1.6%
    • Professional and technical services: 11,100, 0.1%, 4.3%
      • Administrative and waste services, -19,500, -0.2%, -0.5%
        • Administrative and support services: -21,500, -0.3%, -0.7%
          • Employment services: -3,700, -0.1%, -3.3%
            • Temporary help services: -9,000, -0.3%, -3.3%
  • Government: -18,000, -0.1%, 0.8%

 Goods-producing Industries 

  • Natural resources and mining: 4,000, 0.5%, 5.2%
    • Mining: 4,300, 0.6%, 6.0%
  • Construction: -27,000, -0.4%, -3.6%
  • Manufacturing: -28,000, -0.2%, -1.9%
    • Durable goods: -12,000, -0.1%, -1.9%
    • Nondurable goods: -16,000, -0.3%, -2.0%

WORKER STATISTICS

  • Manufacturing workweek: flat at 41.1 hours
    • Manufacturing overtime: flat at 4.0 hours
  • Average hourly earnings: +3.7% year-over-year
  • Average weekly earnings: +3.4% year-over-year
  • Average workweek for all hourly employees: down by 0.1 hour to 33.7 hours, seasonally adjusted

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