The May jobs report brought welcome news of healthy employment gains again this month, while the unemployment rate remained unchanged at 6.3 percent. With the addition of 217,000 jobs in May, the U.S. now boasts more jobs than ever before. The country last experienced this level of job growth in January 2008, just before massive layoffs occurred and the unemployment rate soared to 10 percent.
While much has improved, the economy needs to add more jobs because the U.S. population has grown nearly 7 percent since the start of the recession. To achieve a healthy level, the economy needs to add roughly 7 million more jobs to keep up with the population growth, according to the Economic Policy Institute.” Further, economists surveyed by CNNMoney predict another two to three years before the U.S. returns to “full employment,” defined as an unemployment rate of around 5.5 percent.
The largest employment gains in May occurred in professional and business services, health care, and transportation and warehousing. Professional and business services added 55,000 jobs, which is the same amount as this sector’s average monthly job gain over the prior 12 months. Employment in temporary help services continued to trend up (+14,000) and has grown by 224,000 jobs over the past year. Also in May, the health care industry added 34,000 jobs, twice its average monthly gain for the prior 12 months. Lastly, transportation and warehousing employment rose by 16,000 in May, with the sector adding an average of 9,000 jobs per month over the past year.
For College Grads, the Recession May Have Never Ended
Despite improved hiring and employment levels, the landscape can still be very confusing for recent college graduates. For example, in contrast to the robust job gains seen over the past two months, the portion of Americans age 25–34 who were working in April fell to a five-month low of 75.5 percent, down from 75.9 percent in March.
Economists speculate this was due to a particularly high number of younger workers dropping out of the labor force. Today, less than 78 percent of people aged 20 to 34 either have jobs or are looking for work, according to the Bureau of Labor Statistics. That’s down from the peak of 83 percent in 2000 and the lowest since the 1970s.
There are a few reasons why young people are opting out of the workforce more than ever, including the weak economy which is particularly hard on younger workers due to last-in, first-out policies and a tendency to freeze hiring before laying off. In addition, economists generally agree that aside from the economy, extended education is the biggest reason why younger workers are out of the job market.
More people are going to college, and they are taking longer to finish due to advanced degrees or the financial burden of college. And finally, married women are leaving the labor force at a higher rate, and baby boomers are delaying retirement leaving less opportunities for younger workers.
And while this year’s graduates face an improved job market, they also will compete directly against more seasoned workers whose careers slowed or stalled over the last several years due to the recession. In addition, several broader trends bring additional challenges: rising tuition costs, parents’ decreasing ability to pay for tuition, fewer jobs after graduation and lower wages for the jobs that are available.
Accelerated Economic Growth Expected for 2014
Several recent macro-economic indicators suggest a growth uptick during the second quarter of 2014, according to Fannie Mae’s Economic & Strategic Research Group. The group expects economic growth to accelerate to just over 3.0 percent on an annualized basis in the current quarter and to average 2.4 percent for all of 2014.
For example, March data showed positive consumer spending in both goods and services, which has helped to deliver more solid spending growth this quarter. April auto sales marked the second consecutive month of at least 16 million annualized units and hitting a high not seen since 2007. The outlook for business capital spending has also improved, with core capital goods orders rising 3.5 percent in March to the highest nominal reading on record. Further optimistic news came with the April jobs report showing hiring at the fastest pace in more than two years.
The housing sector remains worrisome however, with existing home sales, new home sales, housing starts and multifamily housing all experiencing a year-over-year decline despite improving consumer attitudes. The Fannie Mae group expects a modest uptick in housing activity as the summer selling and building season gets under way.
Consumer Sentiment Slightly Down Due to Waning Income Growth
The Thomson Reuters/University of Michigan’s monthly gauge of U.S. consumer sentiment fell in May as a gloomy view on income growth overshadowed an overall positive economic outlook. The May index reading came in at 81.9, down from 84.1 the month prior and below expectations of 82.5 among economists polled by Reuters.
Although the economy has produced robust job gains over the past two months and shown promise for better job prospects for the rest of this year, consumers’ main concern lies with projections for dismal wage growth. Nearly half of all households surveyed anticipate declines in inflation-adjusted incomes and living standards the remainder of the year. However, some 56 percent of consumers reported the economy has improved, up from 49 percent last month.
Worker Confidence Levels Vary by Region
Mirroring the sentiments of many economists, U.S. workers are divided on their opinions about key aspects of the economy, while their overall confidence level remains essentially unchanged from last month. According to the May Randstad U.S. Employee Confidence Index, one-third of workers say the economy is getting stronger, another third indicate that it is staying the same and 35 percent believe the economy is getting weaker. Meanwhile, the overall employee confidence index fell only slightly in May to 55.5, a 1.0 point decrease from prior month.
In addition, workers have similarly wide-ranging views on the overall job market. The Index found that while more than one-quarter (26%) of workers believe there are more jobs available, 46 percent of employees say there are fewer jobs available. When it comes to the likelihood of looking for a new job in the next 12 months, 34 percent of employees feel it is likely whereas 51 percent indicate it is not likely.
Worker confidence levels and beliefs about the job market also vary greatly depending on the region in which individuals live and work. Key findings include:
• Workers living in the West are most optimistic when it comes to the strength of the economy and the job market. Employees from this region are the most likely to report the economy is getting stronger (38%) and report the highest confidence in their ability to find a new job (53%).
• Northeast employees report the lowest confidence levels in their own job security. The Index found that 21 percent of workers in this region say it is likely they will lose their job in the next 12 months, compared to 15 percent of U.S. workers overall.
• However, when it comes to job stability, Midwest workers seem to be the most secure. The Index found that workers in this region report the highest level of job security, with 79 percent indicating it is unlikely they will lose their job in the next 12 months.
• Workers in the South are the least confident in the economy and other job-related factors. In fact, only 27 percent of workers in the South believe the economy is getting stronger, and they are the least confident in their ability to find a new job compared to other regions.