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The Job Market in 5 Charts 

 

 

3/11/2014 

The bull run in equities since the financial crisis has hit its five-year anniversary. But the labor market, while making strides, hasn’t enjoyed as much improvement as the stock market. Here’s the state of the employment situation in five simple charts.
1
Nonfarm Payrolls



February Snapshot: The US economy added a better-than-expected 175,000 jobs in February, while December and January payrolls were revised up a combined 25,000. That tracks just below the 12-month average of roughly 179,000 jobs per month but is a three-month average of just 129,000.

The Big Picture: Job growth is improving but it’s still trending below the 200,000 jobs per month typically considered necessary to achieve solid economic growth. However, job growth is not weak enough for the Fed to alter its taper timeline.


2
Average Hourly Earnings



February Snapshot: We saw a big move to the upside in average hourly earnings, which jumped nine cents to $24.31, or a 0.4% increase. That beat estimates and suggests that there’s stiffer competition for jobs. But weather also likely reduced the number of hours worked. Over the last year, there's been a 2.2% increase in average hourly earnings and that growth rate that has been consistently under 3% for the past five years.

The Big Picture: Higher wages have been hard to come by since the financial crisis erupted. However, we may begin to see some improvement in wage growth given that the percentage of the labor force that has been unemployed for six months or less has fallen to a level where historically we’ve begun to see wage pressure.


3
Persistently Unemployed



February Snapshot: An estimated 37% of unemployed people in America are long-term unemployed, or among those who have been without work for more than 27 weeks. In February, there was a rise in the number of long-term unemployed, adding 203,000 people to its ranks, for a total of 3.8 million. That comes in the face of expiring benefits for the long-term unemployed, which was expected to push people out of the workforce completely.

The Big Picture: The longer someone is unemployed, the harder it is for them to find a job. And the closer they come to losing unemployment benefits, the more they erode their personal wealth. This is a big hurdle for the Fed, which has a goal of achieving maximum employment.

4
Labor Force Participation Rate



February Snapshot: The labor force participation rate came in at 63%, unchanged from January. The labor force participation rate is the percentage of people who either had a job or who actively sought one in the previous four weeks.

The Big Picture: The average annual labor force participation rate hit a 35-year-low of 63.2% in 2013 and hasn’t really improved since. Since 2012, the decline is due partly to baby boomers exiting the workforce. This is likely structural rather than cyclical, which would mean the drop may not be reflective of labor-market slack.

5
Unemployment Rate



February Snapshot: The jobless rate inched up to 6.7% from 6.6%. The small uptick gives the Fed a cushion since it announced a 6.5% unemployment rate as a trigger for raising its target interest rate. However, the Fed is moving away from an unemployment threshold and more toward a qualitative, more holistic assessment of labor-market conditions.

The Big Picture: While unemployment is moving in the right direction, down from 8.1% in August 2012, the number of long-term unemployed skews the health of the overall labor market. The Fed seems likely to remove the goalposts altogether and rely more heavily on multiple data points and qualitative assessments.


 

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Market Insights 
AGI-2014-03-11-9139 

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