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“The Economy, Stupid” – James Carville (1992)
In 1992, James Carville hung a sign in Bill Clinton’s campaign headquarters in Little Rock with the 3 key messages for the campaign. Those messages were:
1) Change vs. more of the same
2) The economy, stupid
3) Don’t forget about healthcare
Of those, the second became the defining theme of Clinton’s campaign and the relentless focus on the state of the economy under Bush helped Clinton win the White House that year. Carville’s mantra highlights one of the great truisms not only of American politics, but the American psyche itself. As goes the economy, so goes the general mood of the country, and understandably so.
But as recent evidence indicates, the most critical aspect of the economy as the driver of the American state of mind is jobs. It’s not GDP growth rates, corporate earnings, or the stock market, although each of those undoubtedly plays both a unique and interrelated role, but jobs. And right behind jobs is rising wages. There has been no greater contributor to the growing indignation afflicting the entire nation these days than the epic job losses during the Great Recession, declining household income over the past 15 years, and stagnant real wages for the past 30 years.
And while all of that seems patently obvious to some, it is truly amazing how little real attention Washington is paying to what has become, arguably, the defining characteristic of America over the past few decades. And as much as America’s indignation occasionally transforms into anger and outright hostility, it is equally as amazing how little sustained outrage there is given the severe and rising inequality in the U.S. and the grim economic circumstances facing a growing percentage of the country.
To be sure, the slowly improving labor market which has seen a net gain of nearly 2.3 million jobs so far this year has most certainly helped lessen the severity of the situation, but there is still much to concerned about, and no one should be celebrating quite yet. A disproportionate share of the job gains this year have been part-time and/or low-wage jobs, and until very recently, the decline in unemployment has occurred mostly because so many people had given up looking for work. Those factors have started to change for the better in recent months as the jobs recovery has picked up momentum, but wages still haven’t budged and that statistic has, of late, become the most closely watched labor market indicator among economists, particularly at the Fed.
But debates around the Beveridge Curve notwithstanding, what will drive continued momentum in the labor market, as evidenced by continued net job gains and eventually rising wages, is sustained labor demand. And how we evaluate labor demand at LinkUp is by looking at the nearly 3 million job openings in our search engine, all of which are published by companies on their own corporate websites (which means our highly unique data set eliminates old jobs, duplicate listings, scams, resume fishing, fraud, and other types of job pollution). And unfortunately, our data for November does not present a positive picture.
In November, there were 175,000 fewer new job listings on corporate websites throughout the country than there were in October, a sharp decline of 23%. Total job listings fell 6% from October, dropped by almost 120,000 from the prior month. Of course there is some seasonality in the data which we purposely do not remove, but even accounting for that, the employment situation appears to be getting a bit grim as we look ahead to December. What is particularly discouraging is that new and total job listings declined in every single state in the U.S.
In looking at new and total job growth by category, the picture is equally as bleak, with new and total job openings declining by 22% and 6% respectively.
It is in this table that we can see, at least partially, the seasonality in our data with new retail job openings decreasing by 30,000 from their peak in October and total job listings dropping by 26,000. Undoubtedly, there are other seasonal jobs mixed throughout other categories such as Supply Chain & Logistics, Hospitality & Travel, and Restaurant & Food Service, but the bulk of the seasonality factor is contained in the retail category and even factoring in the declines in that category, the November numbers are still horrible.
With the sharp decline in new and total job openings in our job search engine (which lists roughly 2.6 million job openings from 50,000 company websites across the country), our preliminary forecast for December’s jobs report (which will be released on January 9th) is a net gain of only 85,000 jobs. For our November forecast, we have to look back to our October data which showed a minuscule 0.5% increase in the blended average of new and total job openings on LinkUp that month. Based on that data, we are forecasting a net gain of 235,000 jobs for the November NFP number that will be released this Friday by the Bureau of Labor Statistics.
One last data point worth highlighting comes from our jobs duration report. Each month, we look at the all the jobs that companies removed from their corporate websites over the previous 6 months, presumably because were filled with a new hire, and calculate the average number of days that those jobs had been on the company’s corporate website.
Between April and October, that number had steadily declined from 51 days in April to 41 days in October which matches the increased traction in the labor market during that period. Unfortunately, that number jumped up to almost 44 days in November, further indicating a slow-down in hiring. That slow-down couldn’t be more evident when one looks at the monthly change in new and total job openings on LinkUp over the course of the year.
The average monthly increase in new and total job openings so far this year has been 4% and 3% respectively, but the trend line most definitely provides some cause for concern. We are definitely in for some turbulence ahead, and I wouldn’t be too quick to predict an imminent increase in wages or an accelerated timetable for a raise in rates by Janet Yellen. While we’ll certainly celebrate the 10th straight month of a 200,000+ jobs number on Friday, we expect that streak to come to an abrupt end in December.
If that makes you a bit depressed, cheer up with a clip of Bill Hader’s James Carville on Weekend Update.