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Employment Numbers Provide Mixed Signals

Posted by Andre Mayer on Oct 15, 2015 11:12:14 AM

New state employment numbers released today show that Massachusetts lost 7,100 jobs in September, adding to evidence of a third-quarter economic slowdown.

Unemployment.Sept.15National employment has also weakened, and AIM’s Business Confidence Index declined in August and September.

The new preliminary data, prepared by the federal Bureau of Labor Statistics, puts the Massachusetts unemployment rate at 4.6 percent, a tenth below the August reading and a point below last September’s. The national unemployment rate in September was 5.1 percent.

The longer-term picture of Massachusetts employment remains positive – the state has added 46,900 jobs so far in 2015, and 67,200 year-over-year. The month-to-month figures are by contrast negative, with job losses in the Education and Health Services, Trade, Transportation and Utilities, Construction, and Manufacturing sectors. The labor-force participation rate was down, and so was the total labor force. The state’s apparent slowdown from a recent strong growth trend is a natural result of a weakening national economy and adverse global conditions.

The monthly employment report provides relatively current information about the state’s economy, but some of its limitations are on display this month. Most obviously, the two headline numbers conflict: the unemployment rate is down to 4.6 percent, but 7,100 jobs were lost.

The Massachusetts Executive Office of Labor and Workforce Development emphasizes job gains year-to-date (i.e., under the current administration) rather than year-over-year. The year-over-year job gains, moreover, are very different in the employer survey (+67,200) and the household survey (+32,500). This is without getting into the alternative measures of unemployment, or the fact that some expert observers believe that the state’s reported employment growth this year may have been overestimated.

Also released today was broader perspective on the condition and future of the Massachusetts economy from the New England Economic Partnership, prepared by Alan Clayton-Matthews of Northeastern University, a member of AIM’s Board of Economic Advisors.  Likening the state’s recent growth to that of the boom of the 1990s, Clayton-Matthews forecasts an average gain of 50,000 jobs yearly for 2015-18, with unemployment falling to 4.1 percent and total wages and salaries rising in the 5 percent to 6 percent range. This positive outlook implies its own set of challenges for employers, who will confront a more competitive labor market than they have seen in 15 years.

Topics: Massachusetts economy, Unemployment

Strong Employment Report May Signal Pressure on Wages

Posted by Andre Mayer on Mar 10, 2015 1:47:00 PM

Massachusetts added only 2,600 jobs in January but the unemployment rate dropped two-tenths of a point to 5.1 percent, a point below its level of last January, according to a preliminary report released today. The state unemployment rate is at its lowest level since May 2008.

Although the U.S. has seen consistently high levels of net job creation during the past year, the nation’s unemployment rate remains above the state’s: 5.7 percent in January and 5.5 percent in February.

Employment grew over the year in all sectors except Manufacturing (-1.0%). The largest gainers by percentage were Construction (+3.8%) and Information (+2.6%); by jobs added, Education and Health Services (+16,800) and Professional, Scientific and Business Services (+12,800) led the way.

Total employment in Massachusetts is at an all-time high, and the unemployment rate is at a level last seen before the Great Recession (although the economy was weakening in May 2008). Alternative measures of unemployment counting involuntary, part-time and discouraged workers are likewise at or near pre-recession levels.

The major remaining “deficits” are overall workforce participation, partly attributable to aging, and wages, which have had weak growth at best. The signs point to labor shortages ahead, and upward pressure on pay – especially in a state like Massachusetts with relatively slow population growth.

State reports will “catch up” with the national data next week, when we will see a Massachusetts report for February incorporating annual revisions. The revisions will show somewhat lower job growth (60,700 versus 68,000) and lower monthly unemployment rates in 2014 compared to initial reports. The household survey, the basis of the unemployment rate, shows a gain of 97,800 jobs on the year.

The federal Bureau of Labor Statistics develops the national and state data; the Massachusetts report is released by the state’s Executive Office of Labor and Workforce Development.

Topics: Massachusetts economy, Jobs, Unemployment

Employment Growth Not Limited to Boston

Posted by Andre Mayer on Nov 26, 2014 11:55:30 AM

Is employment growth in Massachusetts limited to the Boston area?

Not according to regional data from the Massachusetts Executive Office of Labor and Workforce Development. Over the period October 2013 – October 2014, employment in the Boston Metropolitan Statistical Area (MSA) increased a bit less than the statewide figure (3.9 percent versus 4.0 percent), and the unemployment rate declined a hair less (25 percent versus 26 percent) as well.

Job growth in the state’s other seven MSAs ranged from 3.4 percent in Fall River to 4.7 percent in the Worcester area; the highest rates were in the two largest areas, Worcester and Springfield (4.4 percent). Unemployment rate declines ranged from 23 percent in Springfield to 29 percent in Leominster-Fitchburg-Gardner. Barnstable, New Bedford, and Pittsfield fell in the middle on both measures, close to Boston and to the state averages.

The Boston MSA, covering eastern Massachusetts except for the south coast, Cape and islands, accounts for 74 percent of the state’s employment. Trends within that MSA are generally similar to those prevailing statewide, although the Lawrence-Chelmsford division recorded a lower rate of job growth (2.9 percent) and higher unemployment (8 percent, down from 11 percent last year.)

These regional figures, by the way, are prepared using a different methodology than the more widely noted state employment and unemployment reports. They show a seasonally unadjusted state unemployment rate for October of 5.1 percent, compared to the adjusted rate of 6.0 percent; and net annual job growth of 130,000 rather than 52,600.

If Greater Boston, by size alone, is the economic locomotive of the commonwealth, we can say that at this point it is pulling the train rather than pulling away. We are seeing job creation from Cape Cod to the Berkshires, and unemployment rates approaching (what we think of as) normal in most regions.  

Topics: Massachusetts economy, Unemployment

Employers Add 1,200 Jobs in October

Posted by Andre Mayer on Nov 20, 2014 1:45:27 PM

Massachusetts added 1,200 jobs in October, according to preliminary estimates from the federal Bureau of Labor Statistics released today by the state’s Executive Office of Labor and Workforce Development (detailed chart here). The unemployment rate remained unchanged at 6.0 percent, slightly above the national rate of 5.8 percent.

The October report for Massachusetts is notably weaker than the strong national report released two weeks ago. Together, they support a conclusion that the state’s economy is currently growing somewhat more slowly than the nation’s, but that a longer perspective shows Massachusetts keeping pace.  

Over the past year, Massachusetts has gained a net of 52,600 jobs, and the unemployment rate has declined by 1.2 percent. The annual figures are more indicative of trends than the monthly results, which tend to fluctuate. With the October report, we are finally free of the effects of the Market Basket imbroglio, in which thousands of employees were temporarily out of work – an event large enough to produce discernable ripples even in the national data.

Sectors with the largest year-over-year job gains include Education and Health Services (+16,000), Professional, Scientific and Business Services (+14,500), and Information (+7,900 – a 9.1 percent increase). Manufacturing basically held its own, shading off by 700 jobs, or 0.3%.

The figures cited above, except for the unemployment rate, derive from a survey of employers. The household survey shows considerably stronger job creation – a gain of 16,400 for the month and 100,600 for the year. The same pattern appears in the national data.

 

Topics: Massachusetts economy, Unemployment

Economic Growth Takes a Summer Holiday

Posted by Andre Mayer on Sep 5, 2014 9:58:02 AM

Economic growth appears to have taken a summer holiday during August.

BCI.August.2014Two separate economic reports released this morning suggest that steady, upward momentum in national hiring and in Massachusetts business confidence paused last month during the dog days of summer. Economists are disappointed with the numbers, but stress that both the state and national economy remain far stronger than they were at this time last year.

Associated Industries of Massachusetts announced that its Business Confidence Index lost two points in August to 54.2, while remaining well above its level of a year before (48.7).

“As the elections approach, political uncertainty – particularly at the national level – may be contributing to unease in the employer community,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“Historically, the Index has declined in August more often than not,” Torto added. “Economic indicators for the month – financial markets, employment, consumer confidence, the ISM manufacturing index – have been generally positive. On the down side is international news, including conflict in the Middle East and Ukraine and economic problems in Europe.”

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It is calculated on a 100-point scale, with 50 as neutral; a reading above 50 is positive, while below 50 is negative. The Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009.

The business confidence numbers came during a month when U.S. employers hired at a surprising weak pace. The Labor Department reported today that the economy created 142,000 jobs during August, the first time since January that job growth remained below the 200,000 threshold needed to absorb new workers into the labor force.

Economists had been estimating a 225,000 jump in payrolls. The unemployment rate dropped 0.1 percentage point to 6.1 percent last month.

Overall, the economy expanded at a 4.2 percent annual rate in the second quarter, compared with a 2.1 percent contraction in the first three months of 2014. Economists foresee a growth rate of about 3 percent in the second half of this year.

Many observers believe the economy is still finding equilibrium after swinging from first-quarter contraction to a catch-up period during the second quarter as companies restocked inventories and resumed normal activity delayed by bad weather at the beginning of the year.

U.S. employers had been creating an average of 230,000 per month prior to the summer slump.

Massachusetts employers remain more bullish about their own companies than about the economy as a whole.

The Company Index of the AIM confidence report, reflecting survey respondents' assessments of conditions for their own operations, was up 4.1 points on the year to 56.5. The Employment Index was up 5.4 at 54.1; and the Sales Index, the only component to gain from July to August, was up 4.6 points to 58.5.

“We continue to see a moderate upward trend in the employment results,” said BEA member said Alan Clayton-Matthews, professor at the School of Public Policy and Urban Affairs at Northeastern University. “The great majority (69%) of employers responding to the survey planned to stand pat on staffing over the next six months, but those expecting to add personnel outnumbered those foreseeing reductions by almost three to one (23%-8%).”

Topics: AIM Business Confidence Index, Jobs, Unemployment

What's Behind Drop in State Jobless Rate?

Posted by Andre Mayer on Jun 19, 2014 11:41:37 AM

The headline number in the state employment report released today by the Executive Office of Labor and Workforce Development is 5.6 percent - the state's May unemployment rate. The rate is down four percentage points from April and 1.4 percentage points from last May, and is well below the 6.3 percent national rate.

Unemployment.JobSearch.SmallThe preliminary figures from the employer survey show Massachusetts adding 9,100 jobs last month, and 49,700 over 12 months.

Looking past month-to-month fluctuations, the annual job gain has been running steady at about 50,000, which is solid if not spectacular. In raw numbers, Massachusetts has recouped the jobs lost in the most recent recession and surpassed its prior all-time high before the previous downturn. Notably, the household survey, which in 2011-13 showed much lower job creation than the employer counterpart, now shows greater employment gains (+63,000).

More than half of the 12-month job increase came in two super-sectors, Education and Health Services (+16,500); and Professional, Scientific, and Business Services (+10,400). The Information sector (+4,400) had the largest percentage gain (5.1%). The only sectors showing losses were Government (-1,600) and Manufacturing (-200).

The May state report reinforces evidence of a shift in employers' hiring policies, moving from a hunkered-down recession/recovery mode towards a greater willingness to add personnel even through periods of slower growth.

What we are not seeing is an influx into the active workforce of people who had been discouraged by a weak labor market from seeking jobs. Because workforce participation remains historically low, job creation is a better indicator of economic progress than the unemployment rate.

Topics: Unemployment

Massachusetts Hits 13-Year Job High. Is the Economy Back?

Posted by Andre Mayer on Apr 25, 2014 9:00:00 AM

The Massachusetts employment report for March, released last week, marked a milestone for our economy – total employment statewide edged past its previous high, attained more than 13 years ago in February 2001. But although total employment today is almost exactly what it was then (3,396,400 compared to 3,391,200, seasonally adjusted) the distribution of these jobs has changed considerably.

Massachusetts employmentDespite the new employment record, many broad sectors of the economy are down from 2001. These include Manufacturing (-39%), Information (-22%), Financial Activities (-11%), Construction (-11%), and Trade, Transportation & Utilities (-6%).

 Different factors are at work in the various sectors. Manufacturing, the principal source of productivity growth, has been shedding jobs for three decades while maintaining and increasing its output. Finance and utilities have undergone significant restructuring and consolidation. The Information sector was hammered in the "dot-com bust," and Construction suffered badly in the more recent recession.

Offsetting these losses were employment gains in Education & Health Services (+34%), Leisure & Hospitality (+20%), Other Services (+11%) and Professional, Scientific and Business Services (+2%). In Education & Health Services, 90 percent of the gain was on the health side (+39%). In Professional, Scientific and Business Services, all of the increase was in Professional, Scientific, Technical Services, while management and support functions gave ground. What the sectors on the positive side have in common is reliance on increased staffing to generate growth – although efficiency may improve, personal services and billable hours are key measures of output.

Government employment is almost exactly what it was 13 years ago (-0.2%), with a significant drop in federal jobs almost offset by small gains at the state and local levels. These numbers include public services in education and health – fields in which the private sector has added jobs.

Has Massachusetts finally achieved recovery, not only from the last recession but also from the one before that? The employment totals may say we have, but there is other evidence – some of it from the same employment report. The unemployment rate in February 2001 was 3.0 percent (it had already begun to tick up). At the inter-recession employment peak in April 2008, the rate was 4.8 percent. In March 2014, despite recent improvement, it stands at 6.3 percent. Employers and job-seekers know that we aren't all the way back yet.

Topics: Massachusetts economy, Jobs, Unemployment

Massachusetts Employment Growth Steady in 2013

Posted by Andre Mayer on Mar 6, 2014 10:31:00 AM

Employment growth in Massachusetts was substantial and fairly steady in 2013, but may have faltered in January, according to figures released today by the Executive Office of Labor and Workforce Development.

UnemploymentThe release includes preliminary results for January, showing a seasonally-adjusted loss of 4,500 jobs accompanied by a decline of 0.3 percentage points in the unemployment rate to 6.8 percent, close to the U.S. rate of 6.6 percent. The January data annually appear in early March rather than late February to allow time for revisions both to key population estimates and to the prior year data that provide baselines for reports going forward.  (The report for February will appear on March 20.)
 
The retrospective changes to the data for 2013, which smooth out month-to-month statistical fluctuations in the original reports, show jobs gains in 11 months and no change in the other, with a net gain of 55,200, – the most job creation since 2000. Professional, Scientific, and Business Services and Education and Health Services added the most jobs, while Manufacturing (-1,200) was the only sector shedding jobs.

Take-aways:

  • •The Massachusetts economy has been doing pretty well. The reported January job loss may signal a slowdown, but it may just as well be statistical error from the survey or seasonal adjustment, or simply a result of bad weather.
  • The monthly employment reports are eagerly awaited and avidly examined as reasonably current information on trends in the state economy, but they suffer from small sample size and show more fluctuation than is really there.
  • It's increasingly clear that the household survey, which is the basis of the unemployment rate, is particularly unreliable. That survey shows much less job creation than the monthly survey of employers (the source of the data above), but the latter is consistent with the more accurate employment report based on unemployment insurance data, which is quarterly and appears with a considerable time lag.

 

Topics: Massachusetts economy, Jobs, Unemployment

Unemployment Rate Shows Covergence of State Economies

Posted by Andre Mayer on Dec 19, 2013 2:01:00 PM

Massachusetts added 6,500 jobs in November, pushing the state’s unemployment rate down a tenth of a point to 7.1 percent, according to federal Bureau of Labor Statistics preliminary estimates released today by the state Executive Office of Labor and Workforce Development.

Over the past year, Massachusetts has added 55,300 jobs (53,800 in the private sector), but the unemployment rate has risen four-tenths of a percentage point.

Adding jobs in November were Professional, Scientific, and Business Services; Manufacturing; Financial Activities; Education and Health Services; Information; Construction and Other Services.  Manufacturing added 2,100 jobs in the month, but was down 1,000 since last November.

The job gains for the month and year are from the monthly survey of employers. The survey of households, upon which the unemployment rate is based, shows a decline in employment both for the month (-300) and for the year (-8,200). While AIM tends to be most interested in the employer numbers, we note that public perception (consumer confidence) is an important determinant of economic performance, so this continuing divergence remains a cause for concern.

The most striking aspect of today's report is that the Massachusetts unemployment rate (7.1%) is higher than the national rate (7.0%).  The last time this happened was in May 2007, when the state rate was 4.5 percent and the national rate was 4.4 percent. In that period before the onset of the Great Recession, the state and national rates were running close. But when the recession hit, Massachusetts fared better. Our economy went into decline later; the peak-to-trough employment loss was less; and recovery came faster.

That the state and national unemployment rates are again closely aligned is not in itself bad news for Massachusetts. It is simply a return to the status quo.

If however, we choose to regard this restoration of balance as marking the symbolic end of the recession-recovery cycle and entry into "new normal" conditions, then the unacceptably high levels of unemployment in both the state and nation are bad news indeed. So, of course, is the fact that the state's unemployment rate has risen to meet the national rate; it's one thing to be overtaken, and another to be going in the wrong direction.  

A big part of the story is that over the long term, individual state economies have moved more and more in unison. This movement towards a more truly national economy is demonstrated by the following graph developed by Steven G. Cochrane of Moody’s Analytics:

describe the imageCochrane attributes the convergence of state economies primarily to the national consolidation of many industries – most notably the banking sector. He notes that the spike in differentiation at the onset of the Great Recession resulted from the impact of the housing collapse on states such as Florida, Arizona, and Nevada, where residential construction is a large component of the economy.

Does this nationalization of the economy mean that state policy doesn’t matter anymore? Not at all – it means that all states are competing for economic development, wealth, and jobs in the same arena, and that every advantage and disadvantage matters more than ever.

Topics: Massachusetts economy, Jobs, Unemployment

Political Uncertainty Undermines Business Confidence

Posted by Andre Mayer on Dec 3, 2013 9:08:00 AM

Political uncertainty continues to whipsaw the economic recovery.

Massachusetts Business ConfidenceMassachusetts employers increasingly confident about the prospects of their own companies remain skittish about the future in the face of serial government shutdowns, default scares and a seemingly intractable partisan fiscal standoff.

The freshest evidence comes this morning from the November Associated Industries of Massachusetts Business Confidence Index, which rose 3.5 points in November to 50.2, extending the up-and-down pattern that has prevailed for some time.  The Index is up 3.4 from last November, when it was driven down by concerns about the fiscal cliff, and up 3.5 from October, when the federal government shut down.

"When left alone, the economy is making progress – but with recurrent uncertainties on the political side, it isn't able to build much momentum," said Raymond G. Torto, Chairman at CB Richard Ellis Group, Inc., the chair of AIM’s Board of Economic Advisors (BEA).

"Coming back from the psychological and economic impact of the federal shutdown, employers still see an upside," said Michael A. Tyler, Chief Investment Officer, Eastern Bank Wealth Management, a BEA member. "They do not expect politics to bring growth to a halt. Also, whether or not current Federal Reserve policy is actually good for the economy today, employers do perceive it as a net positive."

The U.S. Index of business conditions prevailing nationally gained five points in November to 42.8, while the Massachusetts Index of conditions within the Commonwealth rose 2.5 to 47.0.

"These indicators must be read as containing a large component of political commentary," Tyler noted.  "The political goings-on in Washington undermine the confidence of many businesspeople; not one survey respondent rated national conditions 'very good'.  Some state issues may also be lessening confidence at that level. At the same time other indicators, notably those related to respondents' own operations, paint a sunnier picture of the business climate."  

AIM’s Business Confidence Index has been issued monthly since July 1991 under the oversight of the Board of Economic Advisors. Presented on a scale on which 50 is neutral, its historical high was 68.5, attained in 1997 and 1998; its all-time low was 33.3 in February 2009. 

Confidence readings have moved in a see-saw pattern since April, alternating modest increases and decreases never far from the neutral 50 level. The gyrations have taken place against the backdrop of a surge in unemployment in Massachusetts from 6.4 to 7.2 percent.

All of the sub-indices based on selected questions or respondent characteristics rose in November along with the main Index, and all were up from November 2012 (a weak month).  The Current Index, tracking employers’ assessment of existing business conditions, added 3.1 points to 49.3, and the Future Index, measuring expectations for the next six months, gained 3.0 to 50.8.

The Company Index, which measures survey respondents’ overall confidence in the situations of their own operations, added 3.8 points in November to 55.5. The Employment Index rose 2.6 to 51.1, and theSales Index gained 2.2 to 55.2.

"The numbers have bounced back to about where they were in September, which is good news," said BEA member Sara L. Johnson, Senior Research Director of Global Economics at IHS Global Insight, "but job creation, which has been a stumbling block for economic progress, remains a concern.”

Analysts say uncertainty has seeped into state issues as well.

"The up-and-down pattern of the Business Confidence Index is part of what has been an up-and-down year for Massachusetts employers and for the state's economy," said Richard C. Lord, AIM’s President and CEO, a BEA member.

"Despite headwinds from federal tax increases and sequestration, economic growth started strong, but then weakened in the second quarter, picked up again in the third, and was probably impaired in this quarter by the shutdown. We've had some ups and downs on Beacon Hill as well, for example over the short-lived tax on software services."

Topics: AIM Business Confidence Index, Economy, Unemployment

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