Category: Talent & Market Insights

The Labor Department released its October jobs report which shows 250,000 jobs added to the U.S. economy. The pace of hiring was strong, and the unemployment rate remained at 3.7 percent, the lowest point since 1969. The unemployment rate held steady because the number of people working or looking for a job increased by 711,000, nudging the labor force participation rate up to 62.9 percent, from 62.7 percent a month earlier. U.S. employers have added to payrolls for 97 straight months, extending the longest continuous jobs expansion on record.


The Numbers

250,000: The economy added 250,000 jobs in October.
3.7%: The unemployment remained to 3.7 percent.
3.1%: Wages increased 3.1 percent over the last year.

The Good

Wage growth climbed 3.1 percent from one year ago, on an hourly basis, exceeding 3 percent for the first time since the recession. On a weekly basis, wages grew at an even stronger rate at 3.4 percent. The economy has added 2.1 million jobs so far in 2018, which puts it on track to be the third best year for job growth since the recession. This year is 89,000 jobs behind the pace of 2015 and 322,000 jobs behind the pace of 2014. The overall increase in those participating in the labor pool is an indicator of the continuing strength of the job market.
For those ages 25 to 54, 82.3 percent are participating in the labor force and 79.7 percent have jobs. Both figures are now at their highest levels since the recession and its immediate aftermath. The biggest sectors for job growth continued to be professional services and health care, and the construction and manufacturing industries have also had solid gains over the last year.

The Bad

Not everyone is reaping the same benefits from the strong job market. The unemployment rate for workers with high school education or less climbed in October. Workers without a high school degree face triple the unemployment rate of those who finished college. Education level is not the only determining factor, as Bloomberg reports:
“Ten years after the Great Recession, 25- to 34-year-old men are lagging in the workforce more than any other age and gender demographics. About 500,000 more would be punching the clock today had their employment rate returned to pre-downturn levels. Many… say they’re in training. Others report disability. All are missing out on a hot labor market and crucial years on the job, ones traditionally filled with the promotions and raises that build the foundation for a career.”

The Unknown

With unemployment at record lows, a critical question is how many of those still on the sitting on the sidelines outside of the labor force can be coaxed back in to fill the current and future open positions. Commenting on the strong job statistics for 25- to 54-year-olds noted above, Neil Irwin in the New York Times writes:
“The proportion of prime-working-age adults — those between 25 and 54 — who were working in October soared to 79.7 percent, up from 79.3 percent in September and easily the highest of this expansion.
Strikingly, though, there is still room to run on this measure compared with the last two economic peaks. That figure was 80.3 percent in January 2007 and 81.9 percent in April 2000.
Does the economy still have the potential to reach those levels, or reach still higher ones? If so, there’s no reason this kind of job growth can’t continue for at least a few more years.
If, on the other hand, some of those who have left the labor force won’t be pulled in no matter what, the economy will be hitting a simple constraint of not having enough workers — all the more so given more stringent policies limiting immigration.
So celebrate the latest jobs numbers, while hoping that this proves to be the middle of a nice boom rather than the beginning of the end.”

The Australia Bureau of Statistics released its September Labour Force Key Statistics showing 5,600 jobs added to the economy and the lowest unemployment rate in more than six years.

The Numbers

5,600: The Australian economy added 5,600 jobs in August.
5.0%: The Australian unemployment rate fell to 5.0 per cent.
65.2%: Labour force participation fell to 65.2 per cent.
+6: According to the NAB, the business confidence index rose to +6 index points.

Upside

Australia’s unemployment rate fell to 5.0 per cent in September, the lowest rate since April 2012. The number of unemployed Australians decreased by 37,200 to 665,800, which is the lowest number since February 2013. The composition of the net change was an increase of 20,300 in full-time employment and a decrease of 14,700 for those in part-time employment.  Since September 2017, full-time employment increased by 217,500 persons, while part-time employment increased by 63,400 persons. The Australian Business Confidence Index rose to +6.0 after falling to a two-year low in August.

In seasonally adjusted terms, the largest increase in employment was in Victoria (up 20,000 persons), followed by Western Australia (up 3,100 persons) and New South Wales (up 2,800 persons).

Downside

The small increase in overall employment was accompanied by a drop in the size of Australia’s labour force which fell from 65.7 per cent in August to 65.4 per cent in September. While this is still a relatively healthy percentage, not all Australians are reaping the benefits of the strong job market. The Sydney Morning Herald reports the following:

“Work in Australia is changing. People are working longer and retiring later. Some do this because they want to, but most do it because they have to.

Work is becoming more casual. For the first time, less than half of all Australians are in full-time work. About one in four are working casually. And as the economy changes, some jobs are disappearing altogether.

One group is bearing the brunt of these changes more than any other – people looking for low-skilled, entry-level jobs. Anglicare Australia’s Jobs Availability Snapshot, released on Thursday, shows what the job market is really like for this group. These are people who are looking for work, but who might not have education or recent work experience.

Our research shows two clear trends. First, low-skilled jobs have been drying up. The government’s own figures show that they have halved as a percentage of job advertisements since 2006. At the same time, more and more jobs are being aimed at people with advanced skills. In the month of our Snapshot, 39 percent of vacancies called for a degree or at least five years’ work experience.

And second, there are just not enough of these jobs for those who need them. We found that for every low-skilled job at the entry level, there are at least four job seekers who might be competing for them.”

Unknown

In its latest World Economic Outlook (WEO), the IMF said the global economy would grow 3.7 per cent this year, the same as in 2017 but down from the 3.9 per cent it was forecasting for 2018 in July. According to the report, Australia will hit 3.2 per cent growth this year before falling to 2.8 per cent next year. In April, the IMF was forecasting 2.9 per cent for Australia next year.

As the Australian Financial News reports “The downward revisions to the 2019 growth forecast for Australia and Korea relative to the April 2018 WEO partially reflect the negative effect of the recently introduced trade measures,” the IMF notes.” Without guaranties of stability with Australia’s major trading partners, the nation’s economic health including the strength of its job market, is far from certain.

The Office for National Statistics released its October Labour Market Bulletin which reports on the three months of June, July and August 2018. The bulletin reports 83,000 jobs were added in those three months with the unemployment rate holding steady at 4.0 per cent. The report shows that average weekly earnings for employees in the UK in nominal terms increased by 3.1 per cent over the last year.

The Numbers

83,000: The economy added 83,000 jobs over the June-August 2018 period.
4.0%: The unemployment rate remained unchanged from the previous bulletin at 4.0 per cent.
3.1%: Wages increased 3.1 per cent over the last year.

The Good

Increased competition for workers pushed wage growth to the highest level in the UK since the recession ten years ago. The UK hasn’t seen 3.1 per cent wage growth since the final three months of 2008, the period when the government had to bail out UK banks following the collapse of Lehman Brothers.

There were 1.36 million unemployed people which is 47,000 fewer than for March to May 2018 and 79,000 fewer than for a year earlier. The unemployment rate at 4.0 per cent has not been lower since February 1975. Of people 16- to 64-years-old, 75.5 per cent were working in the UK, up from 75.1 per cent a year earlier.

For June to August 2018, the unemployment rate for those aged from 16 to 24 years was 10.8 per cent, the lowest youth unemployment rate since comparable records for unemployment by age group began in March to May 1992.

The Bad

There were some signs of weakness in the report, with employment falling slightly from the previous report and for the first time since the autumn of last year. And while wage growth has started to pick up, the Financial Times reports, “The past decade has been the worst for UK real incomes since the mid-19th century and, on current trends, real wages will not double until 2099, the Resolution Foundation noted in a report published on Tuesday. In the period from 1945 to 2002, real wages doubled on average every 29 years.”

Due primarily to concerns over Brexit, Great Britain fell to two places to number 8 on the World Economic Forum’s Global Competitive Index. As The Guardian reports, “Britain has dropped two places to eighth in an influential global competitiveness index, with the risk of Brexit further damaging its international standing…While Britain remains the fourth most competitive economy in Europe behind Germany, Switzerland and the Netherlands, the WEF suggested that it could slip further behind because Brexit stood to damage its attractiveness to international buyers and sellers of goods and services.”

“Brexit … will by definition weaken the United Kingdom’s markets component as integration with the EU is rolled back,” the report said.

“The WEF said Britain had slipped in the 2018 ranking due to a deterioration in domestic labour mobility, which measures the extent to which people move between the different regions of a country to find work.”

The Unknown

Uncertainty over Brexit terms continues with some economists warning of the possibility of no formal deal being agreed to before the exit deadline of March next year. As The Economist notes, “the timetable is slipping, and there is a growing risk of no deal at all. The main reason is that Theresa May, Britain’s prime minister, has rejected a key part of the EU’s draft withdrawal agreement, a planned backstop to ensure that, no matter what happens to a future trade deal between Britain and the EU, there is no hard border with physical customs controls between Northern Ireland and the Irish Republic.

The issue of the Irish border has bedevilled talks from the start. The EU’s guidelines for negotiations, published in March 2017, made it one of three points that needed to be settled in the withdrawal agreement before talks could begin on future trade relations (the other two were settling how much Britain owed for outstanding EU obligations and enshrining the rights of EU citizens in Britain to stay). Last December Mrs. May agreed with the EU that, while the intention was to avoid frontier controls through a comprehensive free-trade deal, a backstop solution was needed to ensure no hard border in any circumstances. The problem is that the two sides have different views on how such a backstop should be legally designed.”

The Labor Department released its September Jobs report which shows 134,000 jobs added to the U.S. economy. U.S. employers have added to payrolls for 96 straight months, extending the longest continuous jobs expansion on record. The unemployment rate remained steady at 3.7 percent, the lowest rate recorded since 1969.


The Numbers

134,000: The economy added 134,000 jobs in September.
3.7%: The unemployment decreased to 3.7 percent.
2.8%: Wages increased 2.8 percent over the last year.

The Good

The unemployment rate in September was the lowest in nearly half a century. Notable job increases were posted in transportation and warehousing, construction, manufacturing and healthcare. These sectors have shown significant growth over the last year: transportation and warehousing has added 174,000 jobs; construction has increased by 315,000 jobs; manufacturing has gained 278,000 jobs; and health care jobs have increased by 302,000.

The Bad

The 134,000 jobs added fell short of Wall Street analysts’ expectations. These job gains are less than half of the 270,000 jobs which were added in August based on revised figures. The comparatively modest job increases may mark the start of a slowdown of job increases.
The year-over-year wage gains fell 0.1 percentage points to 2.8 percent. This slight decrease has temporarily put on hold the start of a continuing trend of increased wages brought about by the tight job market. Slow wage growth is perceived to be the source of the current high rate of voluntary turnover. CNBC reports that compensation appears to be a major reason why workers are quitting their jobs at the highest rate since 2001 and notes that workers voluntarily leaving their jobs are making a smart move when it comes to increasing their income:
Andrew Chamberlain, chief economist at job site Glassdoor [stated] “We’re seeing high worker confidence in their ability to strike out and find a better job opportunity elsewhere,” says Chamberlain. “For many, it’s a smart move, as there’s a clear advantage to increasing your earning potential by switching jobs.”
According to Brian Kropp, vice president at research firm Gartner, the average increase in compensation for a worker who quits their old job for a new one is about 15 percent. “You’re never going to get that 15 percent [increase] by staying at your current job,” he tells CNBC Make It. “That’s just not going to happen.”

The Unknown

Hurricane Florence may have been a factor in the less than stellar job numbers in September as Bloomberg reported:
“The reason for the fuzzy September numbers? Big storms wreak havoc on a region’s workforce. Some people flee the area and businesses close down days before the wind starts to howl. Others, like utility and construction companies and their employees, work overtime preparing for damage, cleaning up and rebuilding. So the latest wages and hours-worked figures were probably skewed by the weather.”
The median forecast in a Bloomberg survey of economist calls for a 2.8 percent gain in average hourly earnings from a year earlier, slightly weaker than the August advance of 2.9 percent – which was the biggest jump since mid-2009. The hurricane effect, however, may render any actual number on worker pay a short-term blip.
“Hurricane Florence is poised to impact not only the pace of job creation in September” but also to “temporarily distort average hourly earnings and the average length of the workweek, as well,” according to Bloomberg economists Carl Riccadonna, Yelena Shulyatyeva and Tim Mahedy.”

Statistics Canada released its September 2018 Labour Force Survey which shows a gain of 63,300 jobs for the Canadian economy which drove the unemployment rate down to 5.9 per cent, down from 6.0 per cent in August. Contributing to the drop in unemployment was a gain of 80,200 part-time positions.


The Numbers

63,300: The economy gained 63,300 jobs in September.
5.9%: The unemployment rate fell to 5.9 per cent.
2.2%: Weekly wages increased 2.2 per cent over the last year.

The Good

September’s job gains, fueled by the increase in part-time employment reversed the job losses from the previous month. The report shows that in Ontario, employment increased by 36,000, the third increase in four months. Employment in British Columbia increased by 33,000, driven by gains in full-time work (+26,000). In the third quarter, employment increased by 54,000, following a decline over the first half of 2018.
In September, more Canadians worked in construction; finance, insurance, real estate, rental and leasing; public administration and agriculture. Compared with September 2017, employment was up 222,000 or 1.2 per cent, entirely the result of gains in full-time work (+224,000). Over the same period, total hours worked increased 0.7 per cent.

The Bad

The Canadian economy lost 16,900 full-time jobs in September. At the same time, employment fell in information, culture and recreation and business, building and other support services.  Employment increased in Ontario and British Columbia while it was little changed in the remaining provinces. Statistics Canada reported that the number of self-employed Canadians declined by 35,000 after recording an almost equal total increase over the past twelve months.
The monthly labour force survey also found that all of the job gains in September were made by workers in the core 25-to-54 age range with virtually no change in youth employment. September’s youth unemployment rate stood at 11.0 per cent, up by 0.1 percentage points from the previous month and more than 5 percentage points higher than the working population as a whole.

The Unknown

Canada agreed to a new trade deal with the United States and Mexico to replace the North American Free Trade Agreement (NAFTA). The CBC notes that as “details of the newly renegotiated deal (the United States-Mexico-Canada Agreement or USMCA) emerge, some questions remain about what Canada’s signature guarantees in terms of protections, and what concessions were made…”
While the Canadian dairy industry will have new barriers imposed in the new agreement, the Canadian auto industry appears to be a winner in the USMCA, but these wins may not be lasting.  The CBC report continues, “Canada seems to have escaped..Section 232 national security tariffs — which would slap 20 to 25 per cent duties on cars and auto parts imported into the U.S… no hard limit will be placed on Canadian auto exports to the U.S., though if the U.S. moves forward with the imposition of worldwide 232 tariffs on autos, those would also apply to Canada.”

The Australia Bureau of Statistics released its August Labour Force Key Statistics. The 44,000 net new jobs added beat analyst expectations. Of those, 33,700 were full-time positions. The jobless rate held steady at 5.3 per cent because more people joined the labour force. The release also included quarterly data on underemployment and underutilisation. In seasonally adjusted terms, the underemployment rate fell by 0.3 percentage points to 8.1 per cent. Underemployment refers to people who are working but would like to be working more hours. The underutilisation rate, which is a sum of underemployment plus the unemployment rate, decreased 0.4 percentage to 13.4 per cent.

The Numbers

44,000: The Australian economy added 44,000 jobs in August.
5.3%: The Australian unemployment rate remained at 5.3 per cent.
65.7%: Labour force participation increased to 65.7 per cent.
+4: According to the NAB, the business confidence index fell to +4 index points.

Upside

The increase in labour force participation demonstrates that the strong job market is motivating more Australians to look for work. Unlike months when job gains were mostly bolstered by part-time jobs, the August increase was driven by full-time employment. This good economic news is underscored by the drop in the underutilisation rate, which declined to a five year low.

New South Wales led the nation with an employment increase of 43,200 and a 0.2 percentage drop in the unemployment rate to 4.7 per cent. Victoria’s jobless rate also fell 0.2 percentage points to 4.8 per cent while Tasmania’s rate dropped an impressive 0.5 percentage points to 5.8 per cent.

Downside

The Australian Business Confidence Index fell to a two-year low. At 4.0, this rate is also below the index’s long-term average. One likely contributor to the plunge in confidence was Australia’s political leadership changes. The survey was conducted shortly after the Australian Liberal Party voted in Scott Morrison as its new leader and Australian prime minister. The decrease in the business confidence index was in striking contrast to the Business Conditions Index which saw a healthy increase in August.

Queensland saw a 0.2 per cent increase in its unemployment rate which rose to 6.4 per cent. Western Australia had 0.4 percentage point rise to 6.4 per cent.

Unknown

Prospects for significant wage growth in the near future are unclear. Based on the premise that an increased demand for workers in a diminishing talent pool drives pay growth, a key variable is the level of labour supply excess. As the Financial Review reports:

“Using up this excess supply of labour is a prerequisite for a meaningful rise in wage growth,” Capital Economics chief Australia economist Paul Dales said. “Progress is clearly being made, but there is a long way to go yet.”

Stubbornly elevated readings on underemployment over recent years have defied a steady decline in the headline jobless rate and contributed to uncertainty around the degree of slack in the labour market.

“The ongoing decline in underemployment, particularly in Victoria, is something we are watching closely as it could be signalling a turning point for wage inflation,” Westpac senior economist Justin Smirk said.

The Office for National Statistics released its September Labour Market Bulletin which reports on May, June and July 2018. In those three months, 3,000 jobs were added to the UK economy with the unemployment rate holding steady at 4.0 per cent. The report shows that average weekly earnings for UK employees in nominal terms (that is, not adjusted for price inflation, minus bonuses) increased by 2.9 per cent over the last year.

The Numbers

3,000: The economy added 3,000 jobs over the May-July 2018 period.
4.0%: The unemployment rate remained unchanged from the previous quarter.
2.9%: Wages (excluding bonuses) increased 2.9 percent over the last year.

The Good

Wages rose faster than prices in the last three months, which beat analyst expectations. Wages, excluding bonuses, were up 2.9 per cent, against an inflation rate of 2.5 per cent, according to labour market statistics. The number of people working rose by 3,000 in the past three months to 32.4 million. Over the same time period, the number of job vacancies rose to 833,000. This is the highest number since these records began.

The number of unemployed people in Britain fell by 55,000 to 1.36 million, keeping the jobless rate at 4 per cent which is the lowest in more than 40 years.  Compared to the same time last year, 261,000 more people in the UK are working. Youth unemployment has declined to the lowest rate on record.

The Bad

Despite the recent wage growth, average weekly wages are still lower than the 2008 levels achieved before the financial crisis, remaining £31 below the pre-crisis average. The annual rate of growth in pay is still lower than the averages before the financial crisis when wages often rose by about 5 per cent.

Productivity also remains lower than pre-recession levels.  As Bloomberg reports:

“Without a significant improvement, firms may find their profit margins coming under pressure and increase prices to compensate. Flash figures for the second quarter show output per hour rose 0.4 per cent, leaving productivity up just 1.5 per cent on the year — below the rates enjoyed before the financial crisis.”

The Unknown

The relatively low number of jobs added may be an indication that the recent surge in jobs may have leveled off. Uncertainty over Brexit may be having an impact on workers who might otherwise move to new positions to increase their income.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, noted in the Guardian that while the strongest pay growth was among people moving jobs, workers may be increasingly opting to stay put while the risk lingered of no deal with the EU.“It would be a mistake to extrapolate the recent pickup in wage growth [into a trend],” he said.

The Labor Department released its August jobs report which shows 201,000 jobs added to the U.S. economy. U.S. employers have added to payrolls for 95 straight months, extending the longest continuous jobs expansion on record. The unemployment rate remained steady at 3.9 percent.


The Numbers

201,000: The economy added 201,000 jobs in August.
3.9%: The unemployment remained at 3.9 percent.
2.9%: Wages increased 2.9 percent over the last year.

The Good

The 201,000 jobs added in August modestly beat analyst expectations. Average hourly earnings for all private-sector workers increased 10 cents last month to $27.16, a 2.9 percent increase from last August. This increase is the strongest year-over-year rise in earnings since the current expansion began in 2009. Over the past six months, 781,000 part-time workers have moved to full-time jobs.
Professional and business services added 53,000 jobs in August and 519,000 jobs over the year. The healthcare sector also had robust job gains with an addition of 33,000 positions in August and 301,000 since August 2017.

The Bad

The reason that the unemployment rate remained unchanged despite the job gains is that the labor participation rate dropped .02 percentage points from the previous month. This may indicate that there are limits for the tight job market to lure back those who have stayed out of the workforce.
While the loss of 3,000 manufacturing jobs in August may not be significant, most of these losses were in trade-affected industries like automobiles and transportation equipment. Without a resolution to the current trade disputes, the employment outlook in key manufacturing sectors is unclear and may have negative ripple effects in the nation’s industrial heartland.

The Unknown

It is not certain whether the decrease in the labor force will become a trend in the coming months. In 2008, more than 66 percent of adults were in the labor force which decreased to 62.7 percent in early 2015. This is the same level it fell to in August. A major factor is demographic change, with baby boomers hitting retirement age. It is uncertain whether a potential shortfall in workers can be addressed through immigration and automation.

Statistics Canada released its August 2018 Labour Force Survey which shows a loss of 51,600 jobs from the Canadian economy, driving the unemployment rate up to 6.0 per cent from 5.8 per cent in July. The loss of 92,000 part-time positions contributed to the drop.


The Numbers

-51,600: The economy lost 51,600 jobs in July.
6.0%: The unemployment rate rose to 6.0 per cent.
2.9%: Wages increased by 2.9 per cent over the last year.

The Good

Offsetting the loss of part-time jobs, full-time jobs rose by 40,400. For three provinces, the news was more positive than the nation as a whole. Employment in Alberta increased by 16,000, where the unemployment rate remained at 6.7 per cent because more people participated in the labour market.
In Manitoba, employment rose by 2,600, due to an increase in part-time work, and the unemployment rate was 5.8 per cent. While over the last year, employment in the province was unchanged, the unemployment rate increased 0.8 percentage points as the number of people looking for work increased in August. In British Columbia, employment edged up and the unemployment rate increased 0.3 percentage points to 5.3 per cent as more people in the province were brought into the labour market.
Compared to 12 months earlier, Canada’s overall employment is still up 0.9 per cent, following the addition of 171,700 jobs, including 326,100 full-time positions.

The Bad

The job losses in August wiped out the gains made in July. Ontario, Canada’s most populous province, lost 80,100 jobs last month after gaining 60,600 in July, both of which were almost entirely caused by volatile swings in part-time work. Ontario’s August decrease, a drop of 1.1 per cent, was by far the biggest decline among the provinces.
Average hourly wage growth continued its gradual slide in August to 2.9 per cent after increasing 3.2 per cent year over year in July and 3.6 per cent in June. The slowing of wage increases may create difficulties for Canadian employers who could see workers leave for jobs in other companies with the hope of substantial salary increases.

The Unknown

The result of the current intense negotiations between the U.S. and Canada regarding the future of the North American Free Trade Agreement or NAFTA may have a profound effect on the Canadian economy for years to come. Because the United States is Canada’s biggest trading partner, employers in the many sectors that depend on exports for profitability may hesitate to expand their workforce until a final agreement is reached.