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HFF Analysis of the September 2016 BLS Employment Report

Monday, October 10, 2016

HFF is pleased to report on the latest employment expansion statistics from September 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 rose by a slightly lower than expected 156,000 in September. Upward revisions were made to August (167,000 versus 151,000) and slight net downward revisions to July (252,000 versus 275,000). Payrolls have risen an average 178,000 this year, slowing from average gains of 229,000 in 2015 and 251,000 in 2014. Payroll creation has averaged 201,000 since October 2010. The labor force participation rate rose to 62.93 percent, a high since February 2014. The unemployment rate rose a 10th to five percent, and it’s now been at 4.9 percent, or five percent, in 11 of the past 12 months.

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.

Average Payroll Creation Since October 2010

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.

Annual Job Growth

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 (317,000) and Leisure & Hospitality (366,000) created approximately 683,000 jobs in the year ending September 2016, accounting for some 28 percent of the headline growth nationwide.

Retail Trade accounts for 75 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 582,000 jobs in the year ended September 2016. Fortunately, Temporary Staffing only accounted for 54,000 (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 608,000 jobs in the year ending September 2016, the highest of any major employment sector. Mining & Logging and Manufacturing continue to undermine headline growth with approximately 109,000 jobs being lost in the year ending September 2016.

Year over year change

Unemployment Rate

The Underemployment Rate augments the Unemployment Rate to include anyone marginally attached to the labor force that is either not employed or employed only part time.

Fortunately, the Underemployment Rate has descending from a recent high of a little more than 17 percent. However, the spread between the two rates is near an all-time high and shows no sign of rapid compression. The Underemployment Rate fell to 9.6 percent in June, the lowest level since April 2008, but ticked up to 9.7 percent in July, August and September.

Unemployment Rate

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 2.6 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).

Wage Growth

Sources: Bureau of Labor Statistics, HFF Research

 





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