Massachusetts Unemployment and Job Estimates for January 2020; URate 2.8%; YoY payrolls 33,400

This just in from the Executive Office of Labor and Workforce Development:

BOSTON, MA (March 13, 2020)– The state’s January total unemployment remained unchanged at 2.8 percent for the sixth consecutive month following on the Bureau of Labor Statistics’ annual revisions, the Executive Office of Labor and Workforce Development announced Friday.

The Bureau of Labor Statistics’ preliminary job estimates indicate Massachusetts added 11,800 jobs in January. Over the month, the private sector added 11,100 jobs as gains occurred in Trade, Transportation, and Utilities; Education and Health Services; Professional, Scientific, and Business Services; Financial Activities; Leisure and Hospitality; Other Services; Information; Construction; and Manufacturing.

From January 2019 to January 2020, BLS estimates Massachusetts added 33,400 jobs. 

The January unemployment rate was eight-tenths of a percentage point lower than the national rate of 3.6 percent reported by the Bureau of Labor Statistics.

"Following year-end revisions, BLS now estimates Massachusetts added 33,400 jobs over the year. In addition to those job gains, the labor force increased by 27,000 from last year’s level, with 39,400 more residents employed and 12,300 fewer residents unemployed," Labor and Workforce Development Secretary Rosalin Acosta said.

The labor force increased by 1,900 from 3,834,300 in December, as 2,300 more residents were employed and 400 fewer residents were unemployed over the month.

Over the year, the state’s seasonally adjusted unemployment rate dropped three-tenths of a percentage point.

The state’s labor force participation rate – the total number of residents 16 or older who worked or were unemployed and actively sought work in the last four weeks – remained unchanged at 67.9 percent. Compared to January 2019, the labor force participation rate is up two-tenths of a percentage point. 

The largest private sector percentage job gains over the year were in Information; Education and Health Services; Professional, Scientific, and Business Services; and Construction.

Annual revisions to the job estimates show growth was greater than previously published for 2018 and less in 2019.  In 2018, 42,700 jobs were added over the year.   In 2019, estimates indicate 26,100 jobs were added over the year.  BLS annually updates job estimates for each state with the most up-to-date information supplied by employers.

Annual year-end revisions show the unemployment rates were slightly lower than the previously published estimates for August 2019 through November 2019. The labor force estimates were lower than previously published estimates for 2015 to 2019.

January 2020 Employment Overview

Trade, Transportation and Utilities added 3,400 (+0.6%) jobs over the month. Over the year, Trade, Transportation and Utilities gained 2,900 (+0.5%) jobs.

Education and Health Services added 2,000 (+0.2%) jobs over the month. Over the year, Education and Health Services gained 11,700 (+1.4%) jobs. 

Professional, Scientific and Business Services added 1,600 (+0.3%) jobs over the month. Over the year, Professional, Scientific and Business Services gained 7,000 (+1.2%) jobs.

Financial Activities added 1,100 (+0.5%) jobs over the month. Over the year, Financial Activities gained 1,300 (+0.6%) jobs.

Leisure and Hospitality added 800 (+0.2%) jobs over the month. Over the year, Leisure and Hospitality gained 2,100 (+0.6%).

Other Services added 800 (+0.6%) jobs over the month. Over the year, Other Services are up 100 (+0.1%) jobs.

Information added 600 (+0.6%) jobs over the month. Over the year, Information gained 3,600 (+3.9%) jobs.

Construction added 500 (+0.3%) jobs over the month. Over the year, Construction has added 1,000 (+0.6%) jobs.

Manufacturing added 300 (+0.1%) jobs over the month. Over the year, Manufacturing lost 1,500 (-0.6%) jobs.

Government added 700 (+0.2%) jobs over the month. Over the year, Government gained 5,200 (+1.1%) jobs.

Labor Force Overview

The January estimates show 3,729,900 Massachusetts residents were employed and 106,200 were unemployed, for a total labor force of 3,836,100. The unemployment rate remained steady at 2.8 percent. The January labor force increased by 1,900 from 3,834,300 in December, as 2,300 more residents were employed and 400 fewer residents were unemployed over the month. The labor force participation rate, the share of working age population employed and unemployed, remained unchanged at 67.9 percent. The labor force was up 27,000 from the 3,809,100 January 2019 estimate, with 39,400 more residents employed and 12,300 fewer residents unemployed.

Detailed labor market information is available at www.mass.gov/lmi.

New NBER Working Paper: "Work of the Past, Work of the Future" by David Autor

From a new NBER Working Paper, "work of the Past, Work of the Future," by David Autor 

Abstract:

Labor markets in U.S. cities today are vastly more educated and skill-intensive than they were five decades ago. Yet, urban non-college workers perform substantially less skilled work than decades earlier. This deskilling reflects the joint effects of automation and international trade, which have eliminated the bulk of non-college production, administrative support, and clerical jobs, yielding a disproportionate polarization of urban labor markets. The unwinding of the urban non-college occupational skill gradient has, I argue, abetted a secular fall in real non-college wages by: (1) shunting non-college workers out of specialized middle-skill occupations into low-wage occupations that require only generic skills; (2) diminishing the set of non-college workers that hold middle-skill jobs in high-wage cities; and (3) attenuating, to a startling degree, the steep urban wage premium for non-college workers that prevailed in earlier decades. Changes in the nature of work—many! of which are technological in origin—have been more disruptive and less beneficial for non-college than college workers.

Gated copy here.

September 2018 ADP National Employment Report : +230,000 nonfarm private sector jobs

ADP National Employment Report | September 2018

Robert Gordon revisits the Phillips Curve

"Friedman and Phelps on the Phillips Curve Viewed from a Half Century's Perspective" a new NBER working paper by Robert J. Gordon.

Abstract:

In the late 1960s the stable negatively sloped Phillips Curve (PC) was overturned by the Friedman-Phelps natural rate model.  Their PC was vertical in the long run at the natural unemployment rate, and their short-run curve shifted up whenever unemployment was pushed below the natural rate.   

This paper criticizes the underlying assumption of the Friedman-Phelps approach that the labor market continuously clears and that changes in unemployment down or up occur only in response to "fooling" of workers, firms, or both.   A preferable and resolutely Keynesian approach explains quantity rationing by inertia in price and wage setting.  The positive correlation of inflation and unemployment in the 1970s and again in the 1990s is explained by joining the negatively sloped Phillips Curve with a positively sloped dynamic demand curve.  For any given growth of nominal GDP, higher inflation caused by adverse supply shocks implies slower real GDP growth and higher unemployment.  

This "triangle" model based on inflation inertia, demand, and supply worked well to explain why inflation and unemployment were both positively and negatively correlated between the 1960s and 1990s, but in the past decade the slope of the short-run Phillips Curve has flattened as inflation exhibited a muted response to high unemployment in 2009-13 and low unemployment in 2016-2018.   

It remains to be seen whether a continuation of low unemployment will cause a
modest and fixed extra amount of inflation, thus reviving the stable Phillips curve of the early 1960s, or whether inflation will continuously accelerate as Friedman and Phelps would have predicted.

Gated version available here. 

Cowen: "Are wages rising slowly because of a pool of reserve labor?"

Tyler Cowen

I look at it this way: measured wages for male labor near the median haven’t gone up much in decades, and this is poorly understood (you may or may not think the same is true for actual real wages, and for women the story is somewhat more complicated).  So if measured wages for non-supervisors are not going up much now, that is hardly a huge shock.  The fact that we don’t understand it well doesn’t mean some remaining particular hypothesis — in this case about the size of reserve armies — has to be the true one.

Who works the hardest?

You will find more infographics at Statista

The Lack of Wage Growth and the Falling NAIRU; "Underemployment reduces wage pressure."

From an NBER Working Paper by David N.F. Bell and David G. Blanchflower released today

Abstract:

There remains a puzzle around the world over why wage growth is so benign given the unemployment rate has returned to pre-recession levels.  It is our contention that a considerable part of the explanation is the rise in underemployment which rose in the Great Recession but has not returned to pre-recession levels even though the unemployment rate has.  Involuntary

part-time employment rose in every advanced country and remains elevated in many in 2018.

In the UK we construct the Bell/Blanchflower underemployment index based on reports of whether workers, including full-timers and those who want to be part-time, who say they want to increase or decrease their hours at the going wage rate.  If they want to change their hours they report by how many.  Prior to 2008 our underemployment rate was below the unemployment rate.  Over the

period 2001-2017 we find little change in the number of hours of workers who want fewer hours, but a big rise in the numbers wanting more hours.  Underemployment reduces wage pressure.

We also provide evidence that the UK Phillips Curve has flattened and conclude that the UK NAIRU has shifted down.  The underemployment rate likely would need to fall below 3%, compared to its current rate of 4.9% before wage growth is likely to reach pre-recession levels.  The UK is a long way from full-employment.

A gated version of the paper is available here. 

What happened to U.S. manufacturing employment?

New Perspectives on the Decline of US Manufacturing Employment by Teresa C. Fort, Justin R. Pierce and Peter K. Schott   

Abstract:

We use relatively unexplored dimensions of US microdata to examine how US manufacturing employment has evolved across industries, firms, establishments, and regions.  We show that these data provide support for both trade- and technology-based explanations of the overall decline of employment over this period, while also highlighting the difficulties of estimating an overall contribution for each mechanism.  Toward that end, we discuss how further analysis of these trends might yield sharper insights. 

A gated copy of the paper is available here. 

Demographics and Automation (as in Robots!)

From a new NBER Working Paper by Daron Acemoglu and Pascual Restrepo.

Abstract:

We argue theoretically and document empirically that aging leads to greater (industrial) automation, and in particular, to more intensive use and development of robots.  Using US data, we document that robots substitute for middle-aged workers (those between the ages of 36 and 55).  We then show that demographic change--corresponding to an increasing ratio of older to middle-aged workers--is associated with greater adoption of robots and other automation technologies across countries and with more robotics-related activities across US commuting zones.  We also provide evidence of more rapid development of automation technologies in countries undergoing greater demographic change.  Our directed technological change model further predicts that the induced adoption of automation technology should be more pronounced in industries that rely more on middle-aged workers and those that present greater opportunities for automation.  Both of these predictions receive support from country-industry variation in the adoption of robots.  Our model also implies that the productivity implications of aging are ambiguous when technology responds to demographic change, but we should expect productivity to increase and labor share to decline relatively in industries that are most amenable to automation, and this is indeed the pattern we find in the data. 

Gated NBER Working Paper #24421 available here. 

ADP Private Employment for February 2018: +235,000

Women are catching up in the high skills jobs market

The "End of Men" and Rise of Women in the High-Skilled Labor Market
by Guido Matias Cortes, Nir Jaimovich, Henry E. Siu 

Abstract:

We document a new finding regarding changes in labor market outcomes for men and women in the US.  Since 1980, conditional on being a college-educated man, the probability of working in a cognitive/high-wage occupation has fallen.  This contrasts starkly with the experience for college-educated women:  their probability of working in these occupations rose, despite a much larger increase in the supply of educated women relative to men. We consider these facts in light of a general neoclassical model of the labor market.  One key channel capable of rationalizing these findings is a greater increase in the demand for female-oriented skills in cognitive/high-wage occupations relative to other occupations. Using occupation-level data, we find evidence that this relative increase in the demand for female skills is due to an increasing importance of social skills within such occupations.  Evidence from both male and female wages is also indicative of an increase in the demand for social skills.

More at NBER.

Notes on today's U.S. payrolls number and unemployment rate: +200,000 jobs; 4.1 percent

OVERVIEW

• The unemployment rate remained at 4.1 percent for the fourth consecutive month in December while payrolls expanded by 200,000, according to the Bureau of Labor Statistics.
• The Labor Force Participation (LFP) remained at also remained at 62.7 percent for the fourth straight month. The employment-population ratio was unchanged at 60.1 percent for the third straight month. 
• Construction added 36,000 jobs in January. 
• Employment in food services and drinking places added 31,000 jobs while employment in health care added 21,000 with 13,000 of those jobs in hospitals. 
• The manufacturing sector added 15,000 jobs continuing a trend.  In the past 12 months, the sector has added 186,000 jobs.
• Employment in the other major sectors— mining, wholesale trade, retail trade, transportation and warehousing, information, financial activities, professional services and government —changed little over the month. 
• The November 2017 number was revised downward from 252, 000 to 216,000 and the December 2017 payrolls number was revised up from 148,000 to 160,000.

ANALYSIS

After a disappointing December print, the labor market picked up in January. After revisions to earlier reports, job gains averaged 192,000 months for the past three months. A survey of Wall Street Journal economists expected an increase of 177,000 jobs. According to an ADP report earlier this week, private sector employment increased by 234,000 jobs in January.  Also, this past week saw a Labor Department report showing that initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 230,000 for the last week of the month. According to Reuters this represents the 152nd week of claims settling below the 300,000 threshold associated with a strong economy.  Wage growth underscores the tight labor markets.  This wage growth is the fastest since the Great Recession.  However, the labor force participation rate remains low by historical standards; the rate only declined by one-tenth of a percentage point since last January.  In addition, the broader measure which includes discouraged workers, the U-6 rate increased to 8.2 percent. The decline in African-American workers proved to be a bump. After falling to 6.8 percent in December, the rate for black workers rose to 7.7 percent last month. Despite the recent wage increases overall, the lower-wage food services and drinking places sector grew faster than higher wages sectors such as professional and technical services over the past 10 years. (See chart below.)  

ADP for January 2018: +234,000 private sector jobs

The latest from ADP payroll report for January 2018

Another China Shock: Economists: "When work disappears"

Another formidable paper by the noted economist David Autor, David Dorn and Gordon Hanson: "When Work Disappears: Manufacturing Decline and the Falling Marriage Market Value of Young Men." 

Abstract: 

We exploit the gender-specific components of large-scale labor demand shocks stemming from rising international manufacturing competition to test how shifts in the relative economic stature of young men versus young women affected marriage, fertility and children’s living circumstances during 1990-2014. On average, trade shocks differentially reduce employment and earnings, raise the prevalence of idleness, and elevate premature mortality among young males. Consistent with Becker’s model of household specialization, shocks to male relative stature reduce marriage and fertility. Consistent with sociological accounts, these shocks raise the share of mothers who are unwed and share of children living in below-poverty, single-headed households.

Hat tip to David Warsh over at Economic Principals.

Rent control: the law of unintended consequences at work

"The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco," a new NBER Working Paper by Rebecca Diamond, Timothy McQuade and Franklin Qian

Abstract:

We exploit quasi-experimental variation in assignment of rent control to study its impacts on tenants, landlords, and the overall rental market. Leveraging new data tracking individuals’ migration, we find rent control increased renters’ probabilities of staying at their addresses by nearly 20%. Landlords treated by rent control reduced rental housing supply by 15%, causing a 5.1% city-wide rent increase. Using a dynamic, neighborhood choice model, we find rent control offered large benefits to covered tenants. Welfare losses from decreased housing supply could be mitigated if insurance against rent increases were provided as government social insurance, instead of a regulated landlord mandate. 

Contact NBER to get a copy of the paper.

Comment on the BEA report on Massachusetts GDP state

OVERVIEW

• Real gross domestic product (GDP) state increased in 43 states and the District of Columbia where real gross domestic product (GDP) increased in the first quarter of 2017, according to statistics on the geographic breakout of GDP released by the U.S. Bureau of Economic Analysis.
• The Massachusetts economy grew by 1.1 percent in the first quarter of 2017. This was slightly below the 1.2 national average. 
• The growth rate was slower than the annual rate for 2016 which posted at 2.0 percent but was an improvement over the first quarter of 2016 which contracted by 2.0. 
• Real GDP by state growth in the first quarter ranged from 3.9 percent in Texas to -4.0 percent in Nebraska. See Chart 1 from the BEA. 
• As a region, the six states of New England only grew by 0.9 percent. The Southwest — Texas, New Mexico, Arizona and Oklahoma — grew the largest for Qtr1-2017 at 3.3 percent nearly three times the adjusted-for-state comparison U.S. rate of 1.2 percent. 
• The current dollar size of the Massachusetts GDP by State is $519.9 billion. 

ANALYSIS 

GDP-State is the market value of goods and services produced by labor and property (or capital) in a state. The sum of GDP for all states released this week (1.2 percent for Qtr1-2017) differs from the national GDP number (1.2 percent)* since outputs like military and overseas activity can’t be attributed to any one state.  The Massachusetts economy comprises 2.7 percent of the total U.S. economy according to the BEA update. New England, as a region comprises one of the smallest at 5.4 percent outpacing the Rocky Mountain states which accounts for 3.4 of the national total. 

Real Estate and Rental and Leasing, Mining and Durable Goods Manufacturing were the leading contributors nationally. In Massachusetts, the leading contributions to the percent change were: Real Estate and Rental and Leasing, Construction, Health Care and Social assistance, Durable-goods Manufacturing, Wholesale Trade, Nondurable-goods Manufacturing, and Administrative and Waste Management Services. (See Table 1 p. 2.) 

Massachusetts ranked 25th in growth during the first quarter.  How did Massachusetts rank in this latest BEA report compared with its high-technology competitors?  The state of Washington grew by 2.7 percent, Virginia by 2.0 percent while the Utah economy grew by 1.9 percent. Meanwhile, California slowed to 0.1 percent, Colorado by 0.4 percent; North Carolina grew by 0.7 percent as Minnesota contracted by 0.3 percent. 

*Revised figure from 7/28 GDP press release; The originally reported figure was 1.4 percent.

Analysis of US EMPSIT U-Rate 4.4%; Jobs added: 220,000;

OVERVIEW

• The unemployment rate rose to 4.4 percent in June while payrolls expanded by 222,000, according to the Bureau of Labor Statistics.
• The Labor Force Participation (LFP) rate rose by 0.1 percentage point to 62.8 percent for June. The employment-population ratio was little changed at 60.1 percent.
• Health care added 37,000 jobs and social assistance added 23,000 jobs.
• Employment in the other major sectors— construction, manufacturing, wholesale trade, retail trade, transportation and warehousing, information and government —were unchanged.
• Employment in the financial activities sector rose by 17,000 in June after stalling in May.
• In June, average hourly earnings for all employees increased by 4 cents to $26.25, representing a 2.5 percent year over year increase.
• In June, employment in the professional services sector rose by 35,000.
• The April employment situation report was revised up from 174,000 to 207,000 and the change from May was also revised up from the 138,000 to 152,000.  The two-month revisions accounted for 47,000 jobs that were previously not identified.
• The average workweek for all employees rose by 0.1 hour to 34.5 hours.

ANALYSIS
The payroll employment report highlighting 220,000 new jobs exceeded the Wall Street consensus of 170,000 jobs.  The new number arrived as a pleasant surprise. According to an ADP report earlier this week, private sector employment increased by 158,000 jobs from May to June. According to the BLS, employment growth has averaged 180,000 per month thus far this year — slightly below the 2016 average monthly gain of 187,000.   

The positive news in today’s report underscores that since January, the unemployment rate and the number of unemployed are down by 0.4 percentage point and 658,000. The rolling three-month average with the new revisions indicate job gains of 194,000 a month. 

However, the LFP rate continues to plague the jobs recovery; it has changed little from 62.8 percent and shows “no clear trend over the past year.” The number of persons employed part-time (but who would like more hours), was little changed at 5.3 million. In June, 1.6 million persons were marginally attached to the labor force, down by 197,000.  

The BLS estimates that 1.1 million persons marginally attached remain out of the workforce for reasons such as family responsibilities and school attendance. Teen-age unemployment has trimmed down from 15.9 percent last June to 13.3 percent in June 2017. 

Relative to the growth in jobs, wage gains remain weak. The report "is another illustration that the real economy is in good health," said Paul Ashworth, chief U.S. economist at Capital Economics. "The only disappointment is that wage growth still shows few signs of accelerating."

PDF version of this Research Note

Quick take on today's jobs numbers: U-Rate: 4.3%; Jobs: +138,000

OVERVIEW

• The unemployment rate declined to 4.3 percent in March while payrolls expanded by 138,000, according to the Bureau of Labor Statistics.
• The Labor Force Participation (LFP) rate declined by 0.2 percentage point to 62.7 percent for May. The employment-population ratio also declined by 0.2 percentage point to 60.0 percent.
• Employment rose in mining and health care, +7,000 and +24,000 respectively. 
• Employment in the other major sectors— construction, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, financial activities and government —were unchanged. 
• In May, average hourly earnings for all employees increased by 4 cents to $26.22, representing a 2.5 percent year over year increase. 
• In May, employment in the professional services sector remains strong keeping up with the average gains for 2016. 
• The March employment situation report was revised down further to 50,000 from 79,000 originally reported. April’s increase in jobs was also revised downward from 211,000 to 174,000.  Over the past three months, job gains averaged 121,000. 
• The average workweek for all employees was unchanged at 34.4 hours.


ANALYSIS


The payroll employment report fell well below Wall Street consensus of 180,000 jobs and below the 12-month average of 181,000. The BLS private sector employment reported 123,831 private sector jobs. According to an ADP report earlier this week, private sector employment increased by 253,000 jobs from April to March. The number of persons employed part-time (but who would like more hours), was little changed at 5.2 million suggesting the growing jobs market isn’t matching worker needs. Employment in mining, (which covers the oil and gas extraction industries) has increased by 47,000 since October 2016. Employment in food and drinking places also continued to move upward. In the last 12 months, this sector has added 267,000 jobs. The battered retail sector appeared to stem previous losses; job payrolls showed little change since April. The heavily government-funded health care sector continued to grow with hospitals adding 7,000 jobs. However current year to date average monthly growth is down at 22,000 per month compared to 32,000 for 2016. "This report is clearly soft in every material respect relative to expectations and relative to last month. That's a disappointment," said Eric Winograd, U.S. economist at Alliance Bernstein. However, he added, "I don't think it's soft enough to cause a fundamental rethink of the economic outlook."  Economists will now wait for the Federal Reserve Bank to weigh the new payrolls number as it adjusts monetary policy.

The nation's health care sector grows even during recessions.