LoginIn recent months, initial unemployment claims have edged down
and the four-week moving average has fallen from over 400,000
claims a year ago to less than 370,000 a week. In September, the
reported unemployment rate fell to 7.8 percent crossing the
critical psychological barrier of 8 percent for the first time
since early 2009. U.S. consumer sentiment has actually reached a
five year high in October according to the University of Michigan
index.
“There is good reason to look at the economic data and say that
the workforce situation continues to improve,” says Rob Romaine,
president of MRINetwork. “People continue to see
friends and neighbors going to work and nothing will rebuild
sentiment faster than that. Consumer debt, which is increasing
after years of consecutive quarterly declines shows that people
have more confidence in their jobs and in their economic
future.”
Adding weight to the deluge of economic figures, GDP grew at an
annualized rate of 2 percent from 1.3 percent in the second quarter
of the year. The figure was more positive than many economists
projected, yet it still is unlikely enough to pull growth in 2012
as a whole over 2 percent. Such growth, though, is not typically
enough to drive substantial improvements in employment markets, and
certainly not enough to push unemployment down half a percent in
two months. Yet, that isn’t necessarily cause to think that either
the employment or GDP figures are incorrect.
One potential cause is that productivity, which has increased
through both the recession and the recovery, has reached a peak and
employers are finding they can’t keep running with the same level
of staff. The current level of economic growth has become less of a
temporary condition and more of the new normal. Managers can no
longer count on staff to continue working under emergency
conditions, especially as corporate America continues to see record
profitability. Since the economy’s peak in October of 2007
corporate after tax profitability has grown at nearly three times
the rate of GDP.
Since about 2008, the number of employees voluntarily leaving
their jobs fell significantly as people didn’t want to, or couldn’t
change jobs at the rate they once did. The U.S. quit rate fell as
low as 1.2 percent in late 2009, but has since recovered to 1.6
percent. The rate among workers who feel overworked or
under-compensated is understandably even higher.
“Even if a company isn’t cutting its staffing levels, it likely
is losing employees to churn at a higher rate today than they were
two years ago,” says Romaine. “While through the recession managers
might have tried to cover those losses with existing staff, today
companies have reached a point where most positions vacated need to
be backfilled. If a salary lasted in the budget through the
recession, it was a position worth keeping filled.”
If hiring is increasing, however, that could very well help add
buying power to the economy just in time for the holiday season,
giving a possible boost to fourth quarter GDP.
The United Kingdom recently experienced a similar situation
where employment was growing while GDP was shrinking. The counter
cyclical employment growth was puzzling to many economists giving
it names like ‘the employment paradox’ and the ‘economic puzzle.’
Whatever the cause though, the increased employment likely helped
to lift the UK economy out of recession in the third quarter.
So whether the dog wags the tail, or the tail wags the dog, 2013
seems to be building the potential for some upside surprise for
both the economy and labor market.