What June's Employment Statistics Mean

Jeremy Glaser: Employment at a stalemate. I'm Jeremy Glaser with
Morningstar.com. Today's unemployment report was roughly in
line with consensus estimates. Not a lot of surprises, but I'm here
today with Associate Director of Economic Analysis, Bob Johnson
and employment analyst, Vishnu Lekraj to take a look at their take
on the report. Gentlemen, thanks for joining me.

Bob Johnson: Thank you.

Vishnu Lekraj: Good to be here.

Jeremy Glaser: So, we saw that there were 125,000 jobs lost. A lot of that was the
225,000 census workers that were laid off. What was your general
take on the report?

Bob Johnson: Well, I'd looked at it as the private sector is the key way to look at
it. Let's put the census people aside and look at what the regular
economy private sector is doing, and we grew about 83,000 jobs.
It's a little less than I had hoped. I hoped we might get over
100,000 but it was a better growth than the previous month and we
added about 33,000. So it accelerated a little bit. It's kind of in the
realm of statistical noise. It's a pretty small increase.

Vishnu Lekraj: Numbers were in line with what I had or what I thought would
happen. Bob was right. Private sector grew a little bit, a lot more
than last month, but we're at the point like you said, a stalemate,
where hiring and firings are pretty much equaling each other out.
We're at zero. This report itself in particular wasn't a lot of positive
in. It wasn't a huge amount of negatives, but there were more
negatives than positives, I would say.

Jeremy Glaser: One of the things that was somewhat surprising was that the
unemployment rate, which comes from a different survey than the
payroll numbers fell to 9.5%, which was people actually expected
to rise a little bit. What do you think was behind that fall?

Bob Johnson: Well, I think the unemployment rate as you say is calculated by
talking to individual households and doing a survey, and
apparently a lot of people weren't looking for jobs, and people
were a little bit discouraged about the job outlook perhaps, and
didn't even bother to look for a job. And then they are not counted
as unemployed, unless you're actually going out and looked for a
job. So, while the rate went down, which is nice to see,
unfortunately it was because a lot of people left the workforce.
They really weren't looking for a job.

Vishnu Lekraj: Along those lines, when you look at the U3 number, the headline
number, that went down, but when you take in consideration the
U6 number, I know Bob doesn't really care for this number a lot.
But it is out there, it is measured and the gap between the U3 and
the U6 has increased to 7%, that hasn't come down for the past
year. We'd like to see that range narrow into about 3.5%, which is
normally what it should be.

Bob Johnson: And the U6, just as a reminder of what is that, Vishnu?

Vishnu Lekraj: That is workers looking for part-time or looking for full-time work,
but they are working more part-time. They are encompassed in that
unemployment rate also.

Jeremy Glaser: Vishnu, were there any sectors that looked particularly strong or
particularly weak this month?

Vishnu Lekraj: It was a mixed bag. When you look at the construction sector, they
continued to lose jobs, about 20-some thousand. Positively, that
has slowed over the past few months.

When you take a look at leisure that was a huge upside surprise in
my opinion. When I spoke to our analyst in the floor, Warren
Miller, who covers that sector, he explained to me that a lot of
these companies that do participate within leisure and hospitality
have bookings numbers that can go far out in months and years,
and it looks like their bookings are pretty strong. So they've hired a
lot. And temporary help again was a big, big gainer this month.
Again, that's going to benefit our temporary service list, but things
have started to slow a little bit overall with job gains.

Bob Johnson: Yes, manufacturing had been a big gainer and it was a little bit of a
smaller gainer this month. I think some of the momentum in the
auto industry has slowed just a little bit, and that's kind of impacted
the numbers. The finance has been one that's been incredibly –
usually we come out of a recession, it starts to get better, it's been
bad most of the recent months and has continued the same trend.
We actually lost financed jobs again. And the information services,
kind of publishing type, communications type jobs were another
area that was a little bit disappointing this month. So, as you said,
kind of a mixed bag.

Jeremy Glaser: Bob, I know one statistic that you track pretty closely are the
number of hours that workers are actually on the job and also how
much they're getting paid. Where does that come into this report?

Bob Johnson: Yes, what I've always liked to do is say, well, you know, it's not
just the number of people at work, it's how many hours they work
per week, and what they get paid for those hours. And we had
three months where kind of we were hitting on all cylinders, where
all three of them were kind of going up. Unfortunately, this month,
we hit the trifecta on the negative way. The overall employment
was down a little bit because of the census workers. The hours
worked was marginally down and the average hourly wage was
down marginally. So after months of kind of improvement in all of
the sectors we were definitely disappointed by that this month.

Jeremy Glaser: How do we break this stalemate? When does employment start to
move? Either one way or another what are the factors that you're
looking for and where do you expect these numbers to go in the
coming months?

Vishnu Lekraj: When I'm looking at these numbers and I'm trying to model this
out for my employment services list for the companies I cover on
the ground. What I have in there right now is pretty much a slow
growth trend for 2010. Seeing that start to accelerate over in 2011
and start to become more robustly after that. That's what I believe
is going to happen. Slow growth over here over the medium to
near-term or near-term to medium-term, but more normal growth
over the longer term. I don't believe in any new normal type state
thing or theory, but I do believe we're going to see some anemic
growth over the near-term. So everyone should be braced for that.

Bob Johnson: Yes. I think what's going to break the stalemate, I mean I've
obviously been big on the manufacturing sector having done
relatively well, and that generally, eventually spills over into the
services sector. And we haven't really seen, other than this month's
leisure numbers, really started to see that happen yet. And so, I
think that's going to be the next driver, when the production
workers that have been continuously added here begin to spend
more of their money on leisure activities and other activities in the
service sector.

And I think that's going to be one of the key things to watch is
when we make that transition from it all being a manufacturing
story, which was probably slowing just a little bit here to over into
the services side of the house, and that's what I'm really looking
forward in the months ahead. I really think there is room for hours
and wages to kind of grow up in the months ahead as well.

Jeremy Glaser: Bob, Vishnu, thanks for your thoughts this morning.

Vishnu Lekraj: Thanks for having me.

Bob Johnson: Great to be here.

Jeremy Glaser: For MorningStar.com, I am Jeremy Glaser.