October Job Market Analysis

President Bush was recently quoted as saying “This is now our 50th consecutive month of uninterrupted job growth, the longest in the nation’s history.” 50 months ago is August of 2003. That is quite an achievement. But it isn’t always quantity that is important, quality must be considered as well.

The US job market added 166,000 jobs in October (2007). No one believes that number is realistic. Each month gets revised and this month will as well. The 80,000 prediction by briefing.com will probably be pretty close to reality. But most analyst agree that the job market is stalling.

There are three areas experiencing true hiring growth. Those areas are the Government sector, the leisure and hospitality sector, and the Professional Services sector.
    The government sector was outlined in a post I called US Government Hiring, but it also should be noted that school is back in session and that usually accounts for a bump at this time.
    I love the fact that the leisure and hospitality sector is hiring. Some of its growth can be attributed to the weak dollar. Canadians, for example, can easily visit anywhere in the US and buy at a “discount” because of the strength of the Canadian Dollar. Not to mention the strength of the Euro, which affords our European counterparts the ability to come to the US at a supremely cheap rate.
    The Professional service sector growth is based on productivity gains and we are currently in a favorable situation for that.

There are several areas with shrinking job markets. Areas like Retail, Construction, and Manufacturing are being hit hard.
    Retail isn’t hiring because the spending of the US is slowing. I documented that in my Peanut Butter and Pasta post. Two retail areas hit the hardest are in automotive sales and home improvement centers. This is significant because it reflects that American’s aren’t buying big ticket items. Everyone knows that home sales are down tremendously, but car sales are down too.
    Construction is down because new homes aren’t being built at the rate they were just a year ago.
Manufacturing is down too, but I don’t necessarily know why.

So why are people not buying big ticket items like they were a year ago? Two reasons. The first is subtle, but the US wage hasn’t increased much over inflation the past year. It is hanging at a 3.8% increase year over year. This is the slowest pace since 2004. So people don’t see their paychecks getting any bigger, but in the recent past, it was made up for with the appreciation rate of the home they are in. You can borrow on that. Well, with the housing slow down, that rate has fallen dramatically. So what have people decided to do? Pay down debt.

The US is paying down debt, but the world isn’t. The global economy is flying high. The growth of places like India and Eastern Europe in addition to China is fueling a run on commodities. The news is broadcasting stories about outrageous oil prices, but in the past the implication was the suppliers were holding it back. Now it is demand that is raising the price. With new parts of the world building factories and offices, the need for oil is increasing faster than ever before. And oil is just one example. Prices of items like gold and wheat are up too. Since the US supplies many commodities, the profits of many US corporations aren’t suffering from a slowdown in the US markets. But the productivity and profitability gains are staying near the executives of these corporations since no one knows how reliable a global expansion is. This is further deepening a US pull back.

I expect to see a third quarter GDP report above expectations tomorrow. I will update this blog with the results.

I expect this trend to continue for six months. By then the real estate vultures will have scooped up great value in homes and the US economy will get back into a competitive expansion race with the global one. I also expect to see a convergence of green technology and Web 2.0, pushing productivity up again over the next 12 to 18 months. These technologies will disrupt some commodity prices.  I expect President Bush to reach 64 straight months of job growth, regardless of if it really happened or not.
    

About benleeson
My name is Ben Leeson. I currently work for a large financial company in IT. I went to school at Marist College in Poughkeepsie, NY. I graduated with a B.S. in Business Administration concentrating in HR. Professor William Brown taught me and I enjoyed his classes; even acquiring an appreciation for just about all things HR. I didn’t pursue a job in that field after college but I’ve kept up with it. This blog will further my fascination with all things HR. I hope to grow my knowledge of the area through thoughtful writings and spirited feedback. I will attempt to have a fairly routine style so anyone reading can come to expect certain segments. Please excuse my incorrect grammar and occasional misspelling.

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