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August Labor Market Trends May Signal Further Improvement

by Shawn M. Griffiths, published

August ended on a high note with the Employment and Training Administration’s ‘Unemployment Insurance Weekly Claims Report'. The seasonably adjusted number for the week ending September 1 was 365,000 claims, which dropped 12,000 from the advanced figure of 177,000 for the week ending August 25.

However, this report wasn’t the only good news released on Thursday. There were more potential indications of notable improvement in labor market trends.

The 4-week moving average for initial jobless claims increased by 250, but the total number of people on unemployment insurance decreased 6,000 from the revised 3,328,000 to 3,322,000. The uninsured unemployment rate remained at the static rate of 2.6 percent, but it’s a good way to end a month of uneven numbers.

According to a report released by the outplacement firm Challenger, Gray, and Christmas, the number of planned layoffs in the U.S. dropped to a twenty-month low last month. It said employers “announced plans to shed 32,239 workers from their payrolls in August.” These are the lowest numbers since January 2010 and a 37% drop from August 2011.

From January 1 to the end of August layoffs fell 3% from the 8-month total in 2011. The last three months reversed a negative trend in downsizing. Job cuts were up 15% at the midway point of 2012 from the previous year, but year-to-date numbers have improved significantly since then.

The people at Challenger, Gray, and Christmas were clear to caution people not to read too much into the report. The figures could very well be a sign of dramatic turnaround on the layoffs side, but they could also just be exclusive to the summer months.

"The three-month decline in the pace of downsizing may be further evidence of an improving economy or it may simply be a summer lull in jobcut activity."

Layoffs have eased in the past few months, which shows some degree of mending in that area of the labor market, but many people are more concerned about job creation. July’s gains were the highest in five months, but the slight increase in the unemployment rate took away from the good news. We still don’t have the level of job growth needed to have a solid impact on the unemployment rate.

ADP released their ‘National Employment Report’ for the month of August. According to the report, the private sector added 201,000 jobs. This number is on a seasonably adjusted basis. ADP revised their figures for July. They reported 173,000 jobs, which is an increase of 10,000 from the 163,000 they reported last month.

The government report, released monthly by the U.S. Bureau of Labor Statistics (BLS), will release on Friday. ADP and BLS have agreed on labor market trends in recent months, but it is never a guarantee since neither track each other very closely. That being said, if the BLS numbers are as high as the gains ADP reported, some economists speculate we could see a slight decrease in the overall unemployment rate.

Economists disagree on market outlook for August. ADP reported 201,000 jobs created in the private sector, but the median expectations among experts and analysts for the BLS report is around 127,000. If the government reports a number closer to this prediction then experts say the unemployment rate will likely remain at 8.3%.

Job creation and the economy are issues the primetime speakers at the Democratic National Convention have focused heavily on. They know they need to convince Americans and independent voters in swing states that they have the solutions to spur economic growth. The employment figures released on Friday may affect voters more than any words spoken at the DNC.

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