MONEY Jobs

Why Is Employment Picking Up? Thank Government

public construction workers
Reza Estakhrian—Getty Images

After hurting the employment picture for so long, local, state and federal governments are finally adding to payrolls.

The U.S. economy continued its winning streak by adding 252,000 jobs in December, the 11th consecutive month employers hired more than 200,000 workers. The unemployment rate fell to 5.6%, a post-recession low, as various sectors (from business services to health care to construction) added to payrolls.

Boosting hiring isn’t exactly new when it comes to private businesses, which have been bolstering their staffing for every month for almost five years.

What’s different about the recent pickup in employment is the positive effect of governments (state, local and federal). While jobs aren’t being added at rapid pace, they have grown steadily over the past year, and are no longer subtracting from the labor market like they were not too long ago.

Government employment increased by 12,000 in December, compared to a reduction of 2,000 employees in the last month of 2013. Compared to a year ago, state and local governments throughout the country have added a combined 108,000 jobs.

As recently as last January the government shed 22,000 positions. Sustained, incremental growth beats much of the sector’s post-recession record, which saw employment drop off thanks to lower tax revenue and austerity measures.

Government payrolls increased by about 0.5% over the last year — which doesn’t look terribly good compared to the private sector’s 2.1% gain. But when you look at the recent gains against the 0.05% decrease in the twelve months before January 2014, you start to appreciate the recent uptick.

Gov't jobs

What’s going on?

Well, state and local government finances have stabilized and marginally improved over the past couple of years, giving statehouses and municipalities a chance to improve its fiscal situation.

Take this note from a recent National Association of State Budget Officers report which says, “In contrast to the period immediately following the Great Recession, consistent year-over-year growth has helped states steadily increase spending, reduce taxes and fees, close budget gaps and minimize mid-year budget cuts.”

The nation’s economy grew at an annualized 5% rate in the third quarter, after jumping 4.6% in the three months before. The trade deficit fell in November to an 11-month low, thanks in part to lower energy costs, which will help fourth quarter growth.

NASBO expects states’s revenues to increase by 3.1% in the next fiscal year, compared to an estimated 1.3% gain in 2014, with much of that spending dedicated to education and Medicaid.

With a more solid financial position, governments across the country are able to spend more on basic items, like construction. Public construction, for instance, increased by 3.2% last November compared to the same time last year, according to the Census Bureau.

Overall government spending has stopped following dramatically and actually picked up in the third quarter on a year-over-year basis.

Expenditure

Of course, government employment still has a ways to go before returning to normal. In the five years after the dot-com inspired recession, public sector employment gained by 4.5%. (It’s fallen by 2.8% since the recession ended in June 2009.) And while state budgets have normalized, Governors aren’t exactly flush with cash.

Says NASBO: “More and more states are moving beyond recession induced declines, but spending growth is below average in fiscal 2015, as it has been throughout the economic recovery.”

Not to mention hourly earnings fell by five cents, to $24.57, a decline of 0.2%.

Still, some employment growth is better than none at all.

Updated with earnings data.

TIME Economy

U.S. Employers Laid Off the Fewest People in 17 Years in 2014

Getty Images

Data are the latest indicator that the U.S. labor market is performing well

Job cuts announced by U.S.-based employers last year were 5% fewer than in 2013 and the lowest annual total since 1997, the latest indicator that the U.S. labor market is performing well.

Overall, employers announced job cuts totaling 483,171 in 2014, down from 509,051 cuts announced the prior year, according to a report by global outplacement firm Challenger, Gray & Christmas.

“Layoffs aren’t simply at pre-recession levels; they are at pre-2001-recession levels,” said John A. Challenger, CEO of the firm. “This bodes well for job seekers, who will not only find more employment opportunities in 2015, but will enjoy increased job security once they are in those new positions.”

Challenger’s report pointed out that while the economy and employment has grown in 2014, no job is ever truly secure as the nation still averaged about 40,000 planned job cuts per month. That’s because companies restructure their operations, announce cost-cutting moves or cut jobs when mergers and acquisitions are completed.

Notably, the tech sector, a relatively strong performer in the economy, saw the heaviest downsizing last year. That sector announced 59,528 planned layoffs. Challenger said that was a 69% increase from a year ago. Much of that downsizing was due to plans announced by Hewlett-Packard and Microsoft to each cut thousands of jobs. With both of their traditional businesses heavily tied to the PC world, the companies are pivoting to compete as the tech market moves to mobile devices where other rivals are stronger.

Job cuts in the retail sector declined by 11% in 2014 but the industry still ranked second. The third-ranked health care sector also posted fewer layoffs in 2014, Challenger said. Meanwhile, the largest increases in job cuts occurred among employers in the entertainment industry and electronics, where job cuts in 2014 more than doubled for both.

“We expect downsizing to remain subdued in 2015, as a growing number of employers turn their attention toward job creation,” Challenger said.

The biggest potential threat? Falling oil prices, which could result in higher job cuts in one of 2014’s star performers: the energy sector. Energy related layoffs only totaled 14,262 last year. In a nod to that possible soft spot, Challenger pointed to an announcement earlier this week that U.S. Steel would be laying off 756 employees due to soft demand related to weak oil prices.

“Lower prices mean less money for research, exploration and new drilling operations,” Challenger said. “However, the slowdown in oil-related industries may be more than offset by the extra dollars in consumers’ pockets as they shell out less money for gas and heating oil. The money not spent at the pump can be used for consumer goods, travel, home improvement, and dining out. Furthermore, continued low gas prices could spur an increase in SUV sales. All of these are going to have an immediate and positive impact on the job market and hiring.”

This article originally appeared on Fortune.com

TIME Economy

Private Sector Adds More Than 2.5 Million Jobs in 2014

At the current pace of job growth the economy could return to full employment by this time next year

The U.S. private sector has added more than 2.5 million jobs last year, and some economists say that if the pace of hiring continues, the nation could return to full employment by this time next year.

The rosy view can be attributed to the latest employment figures reported by payroll processor Automatic Data Processing and analysis provider Moody’s Analytics. Their report shows private-sector payrolls in the U.S. jumped by 241,000 in December, surpassing the 235,000 increase projected by economists. The U.S. private sector has now added more than 200,000 jobs for four consecutive months.

“At the current pace of job growth, the economy will be back to full employment by this time next year,” said Mark Zandi, chief economist of Moody’s Analytics. Full employment is when all, or nearly all, people who are willing and able to work are able to do so.

The gain in December was fueled by small businesses, which added 106,000 jobs last month. ADP defines small businesses as those that employ fewer than 49 people. Medium-sized businesses added 70,000 jobs last month, while large businesses (which employ 500 or more people) added 66,000.

By sector, the professional/business services and the trade/transportation/utilities industries added the most jobs in December, the report showed. Construction, manufacturing and financial activities employers also added to their payrolls.

The labor market had a stellar 2014, with gains in hiring across a range of sectors as U.S. economic growth encouraged many employers to add jobs. 2014 has been the best year for job gains this millennium, as Fortune previously reported.

The ADP report is issued two days before the federal government’s monthly jobs report, which includes the unemployment rate. Economists predict that Friday’s December jobs report will show U.S. hiring swelled by 245,000, while the nation’s unemployment rate is expected to dip to 5.7% from 5.8%.

This article originally appeared on Fortune.com

MONEY Economy

Why Your Paycheck May Not Grow With the Economy

500lb weight on top of money
Kiyoshi Togashi—Alamy

Though the job market is improving, workers might have to wait a while longer to see those big raises they've been waiting for.

You may have heard that the U.S. economy is back. The nation’s gross domestic product grew by 4.6% and 5% in the last two quarters—the strongest increase since 2003; Americans are more confident about the economy than at any time since the recession; and gasoline prices are as low as they’ve been in more than five years, amounting to a huge tax break for consumers and businesses.

No wonder employers felt strong enough to add 321,000 jobs to the economy in November, while the unemployment rate was at a post-recession low of 5.8%.

Still, many workers have not seen a pick-up in pay even as the employment climate has improved. In fact private sector wages declined by 5 cents (or by 0.2%) in December, despite the economy adding 252,000 jobs.

Total compensation, which includes benefits like medical insurance, rose 2.1% from the same period a year ago. That’s actually a slight uptick from the post-recession norm, but well below pre-2008 levels.

Which is weird. As demand for workers improves, and the unemployment rate declines, you’d expect inflation to rise and wages to increase.

One reason why wages have grown so slowly is that for much of the recovery there’s simply been a lack of demand for goods from consumers as many Americans worked to get out from the terrible effects of the housing crisis.

Since my spending is your income, more dollars saved and fewer spent mean less economic activity resulting in a weaker labor market. And since the Federal Reserve already dropped short-term interest rates to practically zero, and Washington lawmakers are reluctant or disinterested in further fiscal stimulus, marginal relief is coming from D.C.

Another explanation might have to do with the nature of compensation.

In a recent report, the Federal Reserve Bank of San Francisco highlighted the notion of “sticky” wages.

The argument goes: Since businesses were unable to reduce wages as much as they wanted when the economy got really bad five years ago (short of firing people), they are now not inclined to raise salaries as the economy lifts off.

If wages are rigid against a terrible economy, they’re stagnant (at least for a while) when the tide turns. “Businesses hold back wage increases and wait for inflation and productivity growth to bring wages closer to their desired levels,” says the report authors’s Mary Daly and Bart Hobijn. “Since it takes some time to fully exhaust the pool of wage cuts, growth remains low even as the economy expands and the unemployment rate declines.”

While there’s a bit of rigidity to all wages, the authors found “industries with the most downwardly rigid wage structures before the recession have seen the slowest growth during the recovery.” This means that businesses that were able to lower pay when revenues dried up have been more likely to increase wages as the good times returned.

So people in the wholesale trade business (truck drivers to sales reps) saw wages increase relative to pre-recession levels, while those in construction have to make due on less income.

What does this mean for workers?

“The rigidity of wages in a number of sectors has shaped the dynamics of unemployment and wage growth and is likely to do so until labor markets have fully returned to normal,” per Daly and Hobijn. And with still elevated levels of the long-term unemployed, high numbers of workers in part-time positions that want full-time ones, and fewer people quitting their jobs than before the recession, we’re still in not normal labor market territory.

Investors, especially older ones with larger holdings in fixed-income, should take note, too. Without higher inflation, and especially wage growth, the Federal Reserve is likely to delay raising rates.

While recent Fed meetings minutes have been interpreted as having a more hawkish tone, rates aren’t likely to rise (or rise quickly) while workers still struggle to make up lost ground.

Updated to reflect on Jan. 9 jobs report.

MONEY Jobs

Why Americans Finally Feel Better About the Economy

Smiling George Washington on dollar bill
Gary S. Chapman—Getty Images

It's been a long climb out of the Great Recession.

The recession ended in June 2009. The unemployment rate peaked in October 2009, and since then, it’s been almost cut in half. The labor market regained all 8.7 million jobs lost by June 2014. But for every week of the past six years, a majority of Americans have told Gallup that economic conditions were poor and/or getting worse.

Until now. Gallup’s U.S. Economic Confidence Index is a positive number for the first time since the beginning of the Great Recession.

To compute the index, Gallup takes the percentage of Americans who say economic conditions are excellent or good and the percentage who say the economy is getting better, and averages the two numbers. The index could theoretically be as high as +100, if every person polled said economic conditions were good and improving.

Today, the index is just +2. But after six years of negative economic confidence indices, any positive number is a milestone. And it’s been a great year-end: The unemployment rate fell to 5.8% in November. Both the S&P and the Dow hit record highs. And last month, we finally started to see some real, broad-based wage growth.

Americans might have more economic confidence if not for a number of other roadblocks. While the labor market has rebounded, an estimated 41% of job growth is in low-wage industries, which means Americans might not be able to find the high-paying jobs they need. Likewise, while wages are improving for low-wage workers, middle-class workers haven’t gotten much of a raise. And the long-term employed have struggled to re-enter the workforce—or have just stopped trying.

That said, the job market should continue to improve in 2015. And employers are getting worried about retaining talent—which means top performers may finally be in for a raise, or a higher-paying job somewhere else.

MONEY Federal Reserve

What Will the Fed Do Today? These Five Numbers Can Tell Us

With the economy and job markets finally looking healthy, the Federal Reserve may signal its first interest rate hike in years.

While you’ve been doing your Christmas shopping, the Federal Reserve’s Open Markets Committee — the club of officials who set short-term interest rates — has been meeting in Washington.

With the economy finally humming along, and interest rates still close to zero, market watchers are wondering how much longer the Fed will hold out before signaling its first rate hike since before the financial crisis.

That step isn’t likely to be taken Wednesday, when the two-day meeting concludes and the Fed issues an official statement. But economists do expect a significant change in the language that the Fed uses to telegraphs its policies.

In particular, the central bank has consistently stated that it will keep rates low for a “considerable time.” But a recent survey conducted by Bloomberg found that four-fifths of economists believe the Fed will drop the phrase today in order to signal a more aggressive time table — and that rates are actually likely to rise in the middle of next year.

In the meantime, here are five data points the Committee is likely discussing. The statement comes out at 2 p.m.

 

GDP

GDP

The economy is growing at a healthy pace. After a blip earlier this year — widely attributed to 2013’s severe winter — the economy grew 3.9% in the third quarter. Hiking interest rates would presumably help fight off unwanted inflation. But it would also slow economic growth and could even throw the country back into a recession. That was a much bigger risk when growth was crawling along at 1% to 2% rate. With growth close to 4%, the Fed may finally be getting ready to move.

 

Payroll

Jobs

Of course, GDP growth doesn’t mean much if you can’t actually get a job. And the employment picture has been downright sluggish in recent years, even at times when the broader economy was showing signs of life. But that’s finally started to change. The most recent jobs report, which showed the economy adding 321,000 jobs in November, was widely regarded as one of the best in years.

 

Inflation

Inflation

While GDP and jobs growth may be robust enough to justify an interest rate hike, the Fed may remain cautious for several reasons. The first one is that there is not much forcing its hand. Interest rates hikes are the central bank’s main weapon for fighting inflation. But with prices rising at less than 2%, there’s not much inflation to fight. That’s good news, meaning the Fed has flexibility to keep rates low if it seems helpful.

 

stocks

Stocks

Like the economy more broadly, the stock market is doing well — up about 12% so far this year. Nonetheless the Fed will want to avoid roiling markets with unexpected news. That’s what happened during 2013’s “taper tantrum” when markets slumped after the Fed let slip plans to taper off its stimulative bond purchases. Since economists are widely expecting the Fed to hint at higher interest rates, that seems unlikely this time…but markets are always fickle.

 

oil

Oil

While the U.S. may be looking rosier, there’s still plenty to worry about in the rest of the world. One dramatic manifestation of these fears: the sudden, sharp drop in oil prices. Booming economies tend to use a lot of energy. Weakening ones less so. In many ways cheap oil helps the U.S. It’s certainly been a boon to Detroit. But it can also have destabilizing effects. It’s the key reason the ruble has crashed in the past few days. It’s also the prime suspect in the U.S. stock market swoon in past two weeks. Shares have fallen nearly 5% since Dec. 5, including 112 points on Tuesday. Those jitters are one more reason the Fed may choose to tread carefully.

MONEY Jobs

Here’s What To Expect From The Job Market in 2015

There should be good news for job seekers in 2015 as the US economy continues to rebound.

MONEY Jobs

Why It’s Still Hard to Find the Job You Really Want

workers at construction site
Don Mason—Gallery Stock

The U.S. economy is adding jobs at a surprisingly fast pace. They just might not be the ones you want.

The U.S. added 321,000 new jobs in November, according to the Labor Department. Although unemployment remained unchanged at 5.8%, the new jobs number beat most economists’ estimates. The strong results follow news on Tuesday that the economy grew at a 3.9% clip in the third quarter. Combined with the preceding period, that represents the fastest six-month expansion in more than a decade.

And yet the job market still feels sluggish for many middle-income job seekers, or those looking for a job that’s better than what they’ve got now.

The problem is that the post-recession economy is still better at producing marginal jobs—think retail and food service gigs—than the comparatively well-paying construction, manufacturing, and government jobs that let middle-class people buy homes and support their families.

That’s led to what some call a “low-wage recovery.” As recently as August, the National Employment Law Project, a labor group, calculated that 41% of job growth in the previous year was in low-wage industries, compared with just 26% in middle-wage industries.

A look at Friday’s numbers suggests that dynamic starting to change, but slowly.

The U.S. added 50,000 more retail jobs in November. There were also 27,000 additional jobs in bars and restaurants.

That kind of growth outpaced growth in sectors like construction, which added 20,000 jobs, and government, which added just 7,000. One bright spot was manufacturing. Economists have long warned this sector, hobbled by trends like automation and competition from low wage countries, isn’t ever likely resume it’s former stature. It’s been making something of comeback nonetheless: 28,000 manufacturing jobs were created in November.

Moody’s Analytics economist Ryan Sweet argues the jobs picture will steadily improve for middle income workers. On Thursday, he forecast construction hiring would continue to show gains in 2015 and 2016, driven in part by the housing market, where supply is getting tight again—Moody’s Analytics recently estimated rental vacancy rates at 20-year lows. Meanwhile, steadily improving GDP should replenish state and local tax coffers, allowing governments to start hiring again. Even Detroit, one of the recession’s biggest victims, has seen its prospects improve. Pointing to low oil prices, Sweet cited a forecast that automakers could sell 17 million cars next year.

These are all the kinds of trends you’d expect to see in a recovery—the surprise is how many years it has taken to get to this point.

 

TIME Demographics

4 Ways Millennials Have It Worse Than Their Parents

millenial money
Adrian Samson—Getty Images

The latest Census numbers show Americans aged 18 to 34 struggling worse than their parents did in the '80s

Millennials make less money, are more likely to live in poverty and have lower rates of employment than their parents did at their ages 20 and 30 years ago.

That’s the bleak assessment from the U.S. Census Bureau’s latest American Community Survey numbers Thursday, which paint a financially disheartening portrait of Americans aged 18 to 34 who are still trying to rebound from the Great Recession.

The survey largely shows that millennials are worse off than the same age group in 1980, 1990 and 2000 when looking at almost every major economic indicator:

1. Median income
Millennials earned roughly $33,883 a year on average between 2009 and 2013 compared with $35,845 in 1980 and $37,355 in 2000 (all in 2013 inflation-adjusted dollars).

(MORE: American Women are Waiting to Have Kids)

2. Leaving home
More than 30% of millennials live with at least one parent compared to about 23% in 1980, largely because they can’t get a job.

3. Employment
Only about 65% of millennials are currently working compared with more than 70% in 1990

4. Poverty
Almost 20% live in poverty compared with about 14% in 1980.

But it’s not all bad news. The new Census numbers show that young Americans are much more diverse and educated than previous generations. About 22% have a bachelor’s degree or higher (up from 16% in 1980), and a quarter have grown up speaking a language other than English at home (up from 10% in 1980).

And possibly the most interesting statistic in the new numbers? A little over 2% of those aged 18 to 34 are veterans, compared with almost 10% in 1980.

Read next: Millennials Are Mooches…and Other Money Myths

TIME Innovation

Five Best Ideas of the Day: December 3

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

1. The Obamas should consider teaching in an urban public school after 2016.

By Valerie Strauss in the Washington Post

2. Tech journalism needs to grow up.

By Michael Brendan Dougherty in The Week

3. Despite conventional wisdom to the contrary, the surge strategy didn’t end the war in Iraq. We shouldn’t try it again against ISIS.

By Daniel L. Davis in The American Conservative

4. Adjusting outdated rules for overtime could give middle class wages a valuable boost.

By Nick Hanauer in PBS News Hour’s Making Sense

5. A new solar power device can collect energy even on cloudy days and from reflected lunar light.

By Tuan C. Nguyen in Smithsonian Magazine

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

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