Tuesday, March 6, 2012

US Employment Indicators

It’s starting to look like a very big beanstalk could pop up in the labor patch on Friday when the Bureau of Labor Statistics will release February’s employment report. If so, then the Obama administration will undoubtedly take credit for having created so many new jobs. According to their narrative, they did so by bailing out the banks, the car companies, and the unions. Fed officials will say that their quantitative easing accounts for the pickup in jobs. My narrative is that the economy is performing better despite Washington’s reckless fiscal and monetary policies. It is profitable companies that are creating jobs. Let’s review the latest good news on this front:

(1) The ISM reported yesterday that the employment index derived from the monthly survey of purchasing managers in non-manufacturing industries was 55.7 during February. While that was down from 57.3 during January, it was still one of the best readings in over a year. Such high readings tend to be associated with month-over-month gains of at least 200,000 in private payrolls excluding manufacturing. Indeed, these jobs rose 207,000 during January.

(2) I also track the average of the employment indexes derived from regional surveys of businesses surrounding Chicago, Dallas, Kansas City, Philadelphia, and Richmond. These are all currently available through February. While these surveys are mostly billed as surveys of manufacturing companies, the average index doesn’t have any predictive usefulness for projecting monthly changes in factory payrolls. Neither, by the way, does the aggregate employment index included in the national survey of manufacturing purchasing managers. However, my regional average employment index is highly correlated with the monthly change in total payroll employment; it jumped from 9.0 during January to 15.1 during February. (More for subscribers.)

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