How did the labor market perform in the first month of 2016? That’s the question that will be answered by tomorrow’s jobs report from the Bureau of Labor Statistics. There are a few signs that point to positive results but other indicators that may temper the good news. Here’s my take:
We have surpassed the pre-recession jobs numbers by a significant margin
On Friday, we will likely see the jobs numbers come in above 123,000. If that’s the case, the US will have crossed an important threshold—we’ll have created over 5 million more jobs than we had in 2008, before the recession hit with full force.
This figure, though symbolic, is a good sign of how strong the labor market became throughout the course of 2015, gathering momentum just in time for the Federal Reserve to raise interest rates. Unfortunately, this alone won’t quell fears of a downturn in 2016 as the labor market tries to shake off the massive decline in oil and natural gas jobs, potential declines in manufacturing, and a drop in export demands from overseas.
If any economy can endure setbacks, however, it’s the United States. And at the moment, we expect Friday’s report to have more good than bad.
Employer demand for talent is growing
Indeed industry trends show strong growth in job openings across sectors year-over-year, including a 50% year-on-year increase in job postings in Education and Hospitality, and a whopping 100% growth rate for Transportation—where the demand has been high all year. This growth includes both new and replacement hires.
But the quit rate, which we’ll have to wait for from the JOLTS survey, will tell us how job seekers are responding to all the job opportunities out there. According to our recent survey, more than 50% of US workers are considering a new job in 2016. People are ready to trade up for new jobs this year and are moving ahead with confidence to find new work. This increase in job seeker confidence is a good sign for the economy as people make changes to find work that fits them best.
But, manufacturing jobs are tapering off
Continued declines from the oil sector have impacted another key driver of the economy: manufacturing. According to Indeed’s most recent data, manufacturing jobs have fallen 5% month-over-month. This could be a sign that job needs in this sector have peaked in the economic recovery. The decline is likely due to weaker economies overseas, leading to decreased demand for US products, coupled with the strength of the dollar that is making American exports more expensive for other countries.
Job postings tend to be more forward looking than actual employment, so we may not see the drop off in manufacturing employment for a few months yet. Even though manufacturing jobs account for a decreasing share of jobs in our economy, the health of this sector provides a key indicator for the overall strength of the economy, so we’ll be watching this industry closely to gauge what hiring will look like as we move further into 2016.
You can get more insights about where the economy is headed from our latest report, Labor Market Outlook 2016: Uncovering the Causes of Global Jobs Mismatch.