As anyone who follows labor market data knows all too well, there is no harder period of time to predict job growth in the U.S. than December and January. Between temporary holiday hiring and other crazy seasonality adjustments, ADP’s ‘Purge Effect,’ year-end budgeting issues, and essentially the identical, corresponding issues on the other side of the New Year, it is a challenging period to forecast job growth, to say the least. While we were very pleased to have made a strong call for the December jobs numbers, our trepidation in making the January call is only slightly less than it was when we made our December call.
In December of last year, new job listings on LinkUp’s job search engine (which only indexes jobs found on company websites – currently 1.8 million jobs from 40,000 companies) fell 22% from November and total job openings fell 7% from November. That decline continues a sobering trend we saw throughout 2013 with almost a continuous stream of month-over-month declines in job listings in the LinkUp index.
That trend accurately foretold what would happen in the labor market in subsequent periods. Job growth by quarter as reported by the Bureau of Labor Statistics (BLS) fell in every quarter last year. As an aside, anyone who says the labor market is in good shape and improving couldn’t be more dead wrong. I have no idea what data those people are looking at, (and there are plenty of those people, by the way) but it isn’t any data set I’ve seen.
Because there is a lag between a company posting a job opening on their corporate website and that listing translating into a job being filled (usually 30-60 days), LinkUp’s data from December does not bode well for tomorrow’s BLS report. While the consensus forecast calls for a gain of roughly 185,000 jobs, we are forecasting that the U.S. economy actually lost 76,000 jobs in January. It’s a bearish report, for sure, and I seriously hope we are wrong, but we have to go with what our model and our data is telling us.
On a much more positive note, our numbers for January paint a far more optimistic picture of the labor market if one looks beyond tomorrow’s Employment Situation Report. In January, LinkUp’s new job listings by state rose 21% and total job openings rose 7%.
LinkUp’s jobs by category data is equally as positive, with new job listings rising 19% from December and total job openings climbing 6% from December.
Unfortunately, the trepidation mentioned earlier comes from the fact that January data is not always a reliable input for forecasting job gains. In 2013, LinkUp’s data for January accurately presaged a decline in job growth last March (when the lag between an opening turning into a job was 60 days). But in 2012, we saw huge gains in job openings on LinkUp that never translated into any gains at any point in the first quarter of that year. But with the qualifier firmly in place, we are forecasting that the U.S. economy will add 176,000 in February. We’ll see one more data point for February at the end of the month, so things could change, but at this point it looks like the heart attack-inducing numbers we’ll see tomorrow will be temporary.
As I wrote roughly a year ago, the vanguard is no place for the faint of heart.