The September 2013 Bureau of Labor Statistics Employment Situation Report shows 148,000 net new jobs, a number lower than most forecasts. The report summary uses the word “unchanged” seven times, emphasizing the extent to which this month repeats themes evident in August. As in August, the September unemployment rate fell a tenth of a point, from 7.3 percent to 7.2 percent. This decline occurred despite the fact that net job creation fell substantially short of equaling growth in the working age population. The explanation of how this is possible is an increase in the number of people not participating in the workforce, up 136,000 in September. Someone leaves the workforce when they have not taken minimum steps to find a job in the past four weeks. September job creation is below the 12 month average of 185,000, and does not reflect an employment level impact from the federal government shutdown.
Job Market Information Uncertainties
The weak September job report will likely have a greater than normal influence on employers, investors and policy makers. The October Beige Book from the Federal Reserve, released before today’s report, captured the tone of the market in its summary, “Employment growth remained modest in September. Several Districts reported that contacts were cautious to expand payrolls, citing uncertainty surrounding the implementation of the Affordable Care Act and fiscal policy more generally.” The survey results that are the bases of this month’s numbers were gathered in mid-September, before the federal shutdown. The October surveys and results will be delayed a week and will reflect the job market impact of shutdown. Further muddying the waters are recent unemployment insurance application statistics, where both federal workers and California software problems are distorting trends. When seasonal considerations are added to the mix, commentators speak of the delayed September reports as the last “clean” view of the job market until the January report is released. Accordingly, this job reports will influence economic thinking disproportionately over the months to come. Continue reading →
The US IQNdex, an index of temporary worker rates in the United States, rose 0.3 points to 104.2 in August, after four months of flat readings. While overall US hiring was dismal in August according to the BLS report last Friday, there was some positive private-sector hiring, in addition to a resumption of hiring in the temporary-help sector after four months of largely flat employment there.
Delving into the IQNdex values for the US regions and job sectors, the gains in the IQNdex were very spotty, and reflected upticks specifically for Professional/Managerial rates in the South region (led by increases in Non-IT Business Analyst job title) and Office/Clerical rates in the Midwest region (led by gains for Administrative Assistants).
On the downside, Light Industrial rates have trended down for the last 3 months, and went down in all four regions in August.
Dr. Pissarides’ Equilibrium Unemployment Theory recognizes the frictions in the hiring miring that arise from the job-search costs by both the firm and the individual. While classic economics assumes that all information is known by all participants in a transaction, there are asymmetries of information in the job-search process because of the diversity and continually-changing aspects of both the available jobs and the available candidate pools.
These asymmetries lead to search costs and time to find information on jobs and candidates, which generates ongoing unemployment even if there are enough qualified candidates to fill a job. This insight led to the Nobel Prize last year along with Peter Diamond from MIT and Dale Mortenson from Northwestern University; when announcing the joint laureates, the Nobel Committee said the award was for analysis of markets with search frictions.
In his talk and over lunch afterwards, Dr. Pissarides discussed the unique characteristics of temporary jobs, which are used primarily to handle temporary requirements for additional work, to gain access to skills not available in the employee base, and to reduce risk of employee hiring via “try before buy”.
He also showed an analysis of the impact of country regulations on temporary labor hiring – some countries have more restrictive regulations than others – and their corresponding levels of temporary worker usage. Interestingly, his conclusion was that firms in the United States, with fewer regulations than almost all countries on temporary labor, should utilize temporary labor much more than it does currently.
Also, he predicted that search costs and frictions will continue to rise overall up as jobs continue to get more specialized, which would obviously fuel growth for staffing and search firms worldwide.
Fortune magazine today published an article about the new “Permanent Temporary” worker. What is most interesting to me (based on not only this article but a discussion I attended a few weeks back at the SIA Executive Forum in Miami) is that there are two very different camps. The first camp consists of a growing number of 1099 or “independent contractors” who want to work for themselves (even in a climate where the government is passing record amounts of legislation to recover tax dollars). The second camp is made up of “involuntary temps;” people who would prefer permanent employment but are unable to make the transition from temporary to permanent. According to this report, 8 million people are in the involuntary temp category (based on assumptions that most of the part-time population in the US are contingent workers). Very different situations, both part of the same growing trend….
So is this a good thing? I think so. Though the benefits issue (or lack of benefits for temporary workers) is problematic, there seems to be more positive than negative impacts of this trend. Pay rates of “non regular” are increasing (per the IQNdex released by us last month), so much so that they are rivaling that of their “regular” counterparts. Hiring temporary workers can be mutually beneficial. Temporary assignments make it is easier for people to quickly gain new opportunities, experiences and skills, while employers find the flexibility valuable in today’s (still) potentially volatile economy.
Additionally, VMS tools like IQNavigator enable companies to source, track and manage this population like never before.