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March 3, 2015 / Toby Dayton

Strong Growth In January Job Openings Points To Above-Consensus February Jobs Estimate

Following a strong year of net job gains, a year in which just over 3 million new jobs were added to the U.S. economy (finally!), it looks like 2015 will be an even stronger year. But of course, any forecast relating to sustained job growth for the year, especially one made on March 3rd, rests on a huge number of assumptions even in the best of circumstances and in the most ‘normal’ of times (as if such a time does, in fact, exist). But these are no ordinary times, and the list of potential issues that could derail a strengthening labor market include, among countless others:

• Geopolitical risk throughout the world (Russia, Syria, ISIS, Israel/Iran, etc.)

• U.S. currency

• Low oil prices (which could go either way and maybe off-set)

• Totally dysfunctional and inept Congress that refuses (for about the 5th year in a row) to address any real issues impacting the U.S. economy

• Uncertainty about the timing of the Fed’s move on raising interest rates and what impact it might have on the economy

• China, Europe, Greece, South America….(and the list goes on and on….)

• Markets that appear to be reaching (have reached?) designation as over-valued and should (have to?) correct at some point

Needless to say, the list of potential risks to the U.S. jobs market is long and frightening. And nagging in everyone’s mind should be the number of times over the past 5 years that we started the year off with decent numbers in Q1, only to be disappointed (or more accurately – CRUSHED) as the jobs market petered out in subsequent quarters.

But having said all that, 2015 got off to a terrific start in January with a net gain of 257,000 jobs added to the U.S. economy. And based on the strong increase in job openings in LinkUp’s job search engine in January (new job posts up 24% and total job posts up 9%), we are forecasting an even better month in February with a net gain of 370,000 last month. (We won’t even attempt to account for the possible impact that crazy blizzards might have had in job gains last month, but if hiring was down in February because of the horrible weather, we should see that labor demand being met in March with higher-than-expected numbers this month).

Feb 2015 Forecast

Unfortunately in February, the growth in job openings cooled off a bit (perhaps also due, in part, to the fact that no one in the eastern half of the country was in the office much during the snowy month to post new openings on their company career portals). As the chart below shows, new job openings by state fell 3% while total job openings by state increased only 2%. Perhaps most concerning, 32 states reported a decline in new job openings.

Jobs By State Feb 2015

New and total job openings by category shows a similar picture, with new job postings falling 4% from January and total job openings rising a scant 1% from the prior month.

Jobs By Category Feb 2015

But the blended average of new and total job openings still rose nearly 2%, and as a result, our preliminary forecast for March is still a very robust gain of 415,000 jobs. That would put Q1 2015 net job growth at just over 1 million, surpassing even the phenomenal quarter we had to close out 2014. 

Jobs By Qtr 2011-2015

LinkUp Forecasts Net Gain of 4.1 Million Jobs in 2015

To gain additional perspective on the recent state of the labor market, I thought it would make sense to compare the past few years of actual job growth to the seasonal hiring trends that strongly characterize the U.S. labor market in a ‘normal’ environment. The chart below graphs average monthly recruitment advertising revenue of JobDig and LinkUp (JobDig is the parent company that owns LinkUp) over the past 13 years.

In almost every year, revenue starts off in January at the lowest point for the year as companies typically take a month or two to kick off their hiring plans for the year. Hiring then picks up considerably through Q2, plateaus a bit in the summer, peaks in Q3, and then tapers off in Q4. Keep in mind, the chart below depicts recruitment advertising which always precedes actual hiring or net job growth. (Hence our common refrain and well-grounded assumption that the best indicator of a future job being added to the economy is when a company advertises that opening or, better yet, posts that job on its own corporate career portal).

Average alone

In looking at net job gains in 2011, 2012, and 2013, it’s clear that hiring in those years did not track in the least bit with traditional seasonal hiring trends at any point during those 36 months. Recall that in each of those 3 years, early jobs momentum (with endless references to ‘green shoots’) crumbled as the year progressed.

2011-2013

But in 2014, hiring patterns finally returned to normal, with job gains once again tracking strongly to traditional seasonal hiring trends. It is this graph that also points to the very strong correlation between job openings in one period (call it period t) and job growth (or decline) in the next period (t + 1).

2014

If we were to map out monthly job gains in 2015 with near-perfect correlation to historical seasonality trends, the graph of monthly jobs gains for the year would resemble the chart below (which adjusts for the approximated 45-day lag between job openings appearing on a corporate career portal and those jobs being filled with new hires).

2015 Forecast 4M

With all the standard qualifications about assumptions, risk factors, hypothetical scenarios, and forward-looking statements, the graphic above depicts a scenario in which just over 4 million new jobs are added to the U.S. economy in 2015.

annual net job growth 2011-2015

Without a doubt, it’s early in the year to be making predictions about a second consecutive year with 30+% growth in jobs, even considering that the annual growth rate of 32.2% we envision above is slightly less than the 32.9% growth in jobs we saw in 2014. But with the strong start to 2015 and the ‘return to normal’ we saw last year with monthly job gains once again mapping closely to historical seasonality trends, our baseline forecast for the year calls for a net gain of 4.1 million jobs. Let’s hope those $#@!%#$& ‘green shoots’ can maintain their immunity to any Round Up that might come their way this year.