November 19, 2012

Some U.S. employment sub-sectors are taking interesting turns


Chief Economist, CanaData

Better numbers on the U.S. economy continue to pour down the pipeline. The Conference Board’s consumer confidence index in October improved to 72.2, its best reading so far this year. September’s figure was 68.4. Surveyed respondents were more upbeat about job prospects

Two other economic gauges reported by the Conference Board also moved in the right direction. The “present situation index” in October improved to 56.2 from 47.7 in September, a big jump, and the expectations index rose to 82.9 from 81.5.

Also for October, the Purchasing Managers Index (PMI) of the Institute of Supply Management climbed to a 5-month high of 51.7%, indicating that both the overall economy and manufacturing are expanding. (By the way, the Canadian version of the manufacturing PMI published by the Ivey Business School at the University of Western Ontario was also quite strong at 58.3% in October.)

The non-manufacturing index of the ISM was also above 50.0% at 54.2%, but that was a decline from 55.1% in September. Non-manufacturing is essentially the services side of the economy, which provides close to 90% of all jobs when the public sector is included.

Speaking of jobs, U.S. employment is no longer the “total disaster” it once was. An appreciation of this fact, even if it is only gradually entering the public consciousness, may have been one big reason President Obama managed to win a second term.

A major recent driver of the U.S. economy has been motor vehicle sales. Whether or not GM and Chrysler should have been rescued by Washington was one of the most contentious debating points in the recent Presidential election campaign.

The Republicans would have preferred a redistribution of corporate assets through bankruptcy proceedings. The Democrats preferred to extend a financial helping hand. The latter approach seems have yielded a quantifiable payback. The accompanying Chart 1 on auto sector employment shows a steady rise since its low point of 600,000 jobs in the summer of 2009 to a present level of nearly 800,000.

One can easily see, however, that the level of total employment in the sector remains well below its earlier history. Due to automation, outsourcing of work, and the higher quality of the final product (i.e., when cars last longer, fewer of them need to be made), employment in the industry has fallen dramatically versus 2000.

Of special interest for the construction sector, is employment in architectural and engineering services. Chart 2 shows a gradual pick-up beginning in early 2011. Ultra-low interest rates and healthy levels of retail spending are two of the factors that will spur on hiring in the design trades for residential and commercial projects. Government initiatives to fund transportation projects are helping with the level of civil work that is being initiated.

Also of note, the number of jobs in computer systems design services has been on an almost steady upward march since mid-2003. This is positive on several important counts.

First, it highlights a key source of paychecks for many new workers entering the labour force. The workers in this profession aren’t all young people, but there is a bias towards fresh-faced recent graduates from university and college technical programs.

Second, it reveals an important underlying trend. In today’s competitive global marketplace, success depends on how thoroughly and enthusiastically the whole business community embraces “the new”. Throughout its history, the U.S. has been a formidable industrial powerhouse because it has been able to keep re-inventing itself.

Here’s a final observation about career choices. If you’re a young person, you might want to pursue a career in the entertainment business. It may not carry the same prestige as what cousin Fred, the doctor or lawyer or accountant is doing, but employment in “amusement, gambling and recreation” has stayed solid through some pretty uncertain times.

For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog. His lifestyle blog is at

U.S. employment: motor vehicles and parts manufacturing – level
(based on seasonally adjusted data)

U.S. employment: architectural and engineering services – level
(based on seasonally adjusted data)

Data source: Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor).
Chart: Reed Construction Data - CanaData.

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