While the initial Employment Situation report for December from the Bureau of labor Statistics has still not been released, it may not much matter in the job market whether the year-end unemployment rate is higher or lower than the 3.5% most recent data. This problem has persisted for some time, but it only seems to be getting worse rather than better — employers just cannot find qualified workers to hire, particularly in construction.
Ahead of Friday’s official employment two different reports are setting the stage for a strong jobs market to continue into at least the start of 2020.
ADP released its private sector payrolls report from December showing that the private sector added 202,000 jobs in December. Dow Jones (WSJ) was calling for only 150,000 in the month. While ADP showed that the so-called goods-producing sector added 29,000 jobs in December, the 37,000 gain in construction payrolls was offset by a loss of 1,000 payrolls in mining and natural resources and a loss of 7,000 in manufacturing.
A competing report came from the National Federation of Independent Business on Thursday signaling that small businesses continued to hire employees and add new positions. They also continued to raise employee compensation. One issue cited for the strong conditions by businesses was due to regulatory and tax relief.
While the NFIB study comes from roughly 10,000 small business owners or members, the focus of where it’s hard to find workers is really in the construction segment. That is likely to only keep a lid on how many homes and buildings can be built, remodeled or reworked ahead. With a total of 33% of all business owners reporting that they had job openings which they could not fill, there was a sharper 61% of independent businesses which had job openings in construction.
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The NFIB report also showed that a historically high 29% of owners reported that they have raised compensation over the last three months, and a net of 24% of owners plan to raise compensation in the coming months. Another 7% of independent business owners cited the all-in cost of labor as their top problem.
Manufacturing was a tad higher at 63% of employers being unable to hire qualified applicants, but manufacturing as a whole involves high tech and too many other sectors to lump together as a whole. According to the December NFIB jobs report, it said:
Finding qualified workers remained the top issue for owners in December, with 23% reporting it as their number one problem. Fifty-three percent reported hiring or trying to hire, but 94% of those owners reported few or no qualified applicants for the positions they were trying to fill… Sixty-two percent of construction firms reported few or no qualified applicants and 46% cited the shortage of qualified labor as their top business problem. The manufacturing sector reported comparable figures with 63% and 24% respectively.
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As for Friday’s unemployment situation report, Econoday has the following consensus estimates for December’s report due on Friday morning:
- Unemployment unchanged at 3.5%
- Nonfarm Payrolls up 158,000 (versus 266,000 prior)
- Private Payrolls 150,000 (versus 254,000 prior)
- Manufacturing payrolls -1,000 (versus 54,000 prior)
- Participation Rate unchanged at 63.2%
- Average Hourly Earnings up 0.3% monthly and up 3.1% annually
- Average Workweek flat at 34.4 hours
Investors may be paying rather close attention to Friday’s unemployment report, but it seems that business owners are going to have a “hiring ability” issue for some time whether the unemployment rate ticks up marginally or continues to contract even deeper beyond the full employment barometer. It may also get even harder for politicians to keep touting that things haven’t really improved for workers throughout this decade-long economic recovery and record-breaking bull market for stocks.
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