In the first article in this series we talked about the 4-week moving average for New Claims for Unemployment dropping under 400,000 and hitting 375,000. This signals that the “boat has stopped leaking” in terms of job losses which makes it easier for the economy to start adding jobs.
During the week of March 28th the 4-week moving average dropped to about 380,000 which is close enough to declare a “win” for the economy. Even more important, the weekly numbers have been under 400,000 for 5 consecutive weeks for the first time in 5 years.
Next is what to look for in job creation.
The recession officially ended in June of 2009, almost two years ago, and by now should be generating meaningful job growth. The U.S. has about 1% of its population hit the labor force every year which translates to 3,000,000 net new jobs per year just to absorb the new people looking for work. Therefore, 250,000 new jobs in the Non-Farms Monthly Payroll Report (released the first Friday of the month for the previous month) is the minimum for “goodness” and a number over 300,000 new jobs is considered necessary for job mobility and increased employment expectations. The U.S. economy hasn’t done that since Spring 2007 or about 4 years ago.
Manufacturing has been in a boom for over a year and is adding jobs. Unfortunately, manufacturing only accounts for about 15% of GDP so even a very strong job growth number from this sector has limited impact on the total.
Private Sector Services has been flat for a year and, as about 35% of GDP, is a major contributor to white collar jobs with good pay and benefits. This sector needs to being hiring for the economy to gain speed in employment and there is every indication that a wide variety of service sectors, law, accounting, banking, are showing job growth as clients being to do more.
Residential Real Estate is at 50 years lows, accounted for 50% of the job losses during the Great Recession, and will lag rather than lead the recovery. The good news is that this sector has bottomed and isn’t losing jobs. Every new home built generates the equivalent of 3 new jobs so even a small uptick in this segment, representing about 18% of GDP, will have a major positive impact on job growth in the second half of 2011 and beyond.
Government is the rest of GDP and, at 32% of the total, another major source of well paying jobs with equally desirable benefits. The Federal Government can print money so it won’t lose many jobs. State, County and Local Government will continue to be under budget pressure for several years but, for all the headlines and scare tactics, has lost very few positions. Net, net Government won’t be a major drag on jobs but it also won’t be a source of much good news until 2013 or so.
New jobs should cross the 225,000 mark in April or May and begin to have a meaningful impact on other sectors including housing, autos and consumer durables. I expect that new jobs will cross the key 250,000 mark in the third quarter of this year.
Please CLICK HERE to see this article of Michele Molitor's blog site
|
|