Tuesday, May 14, 2013

Labor market stabilization lacks one crucial ingredient: hiring

We are clearly seeing signs of stabilization in the US labor markets as new unemployment claims march toward pre-recession levels (though obviously not there yet). Also as we saw today, small businesses have been increasing the numbers of employees (see Twitter link). However, the nation's labor market is still suffering form weak overall hiring. The pattern of hiring in the US has dislocated in late 2008 and has remained virtually unchanged since the recession (chart below). This relative weakness in hiring is consistent across most industries. Thus far the pace of hiring in 2013 has not been significantly different from other post-recession years.

Source: US Department of Labor (unit = thousands of workers)

How is it possible that other labor market metrics are showing stabilization while hiring has not materially improved? The answer has to do with declining numbers of layoffs. According to the Bureau of Labor Statistics, the number of layoffs in the US has been at or below pre-recession levels since 2010.

While lower layoffs is a positive sign, a healthy economy is usually driven by improvements in hiring rates. So far however that hasn't been the case in the US. Going forward, the number of hires will be an important metric to track in order to determine if the labor markets are indeed healing.

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