Conference Board commentary on November, 2022 jobs report

Commentary on today’s U.S. Bureau of Labor Statistics Employment Situation Report by Frank Steemers, Senior Economist, The Conference Board

Today’s jobs report showed another strong month of job growth, with 263,000 jobs added in November 2022, after an increase of 284,000 jobs (an upward revision) in October. This report underscores that the US labor market remains robust. The strong pace of hiring reflects continued and resilient demand for workers. Labor shortages may have eased compared to earlier in 2022, but recruitment and retention difficulties remain high. While layoffs are not widespread, temporary help services jobs—a leading indicator for hiring—have now declined for four consecutive months, signaling slower job growth ahead.

With no significant slowdown in the labor market visible yet, the Fed is likely to further raise its target interest rate by 50 basis points at its upcoming December meeting. Job growth is likely to decelerate in 2023, when a slowing US economy and higher interest rates are expected to start having a stronger negative impact on hiring.

The unemployment rate remained at 3.7 percent in November 2022. The labor force participation rate for people aged 16 and older ticked down to 62.1 percent, from 62.2 percent in October 2022.

Leisure and hospitality reported another strong month of employment gains, with 88,000 jobs added in November (after adding 60,000 jobs last month). Other noteworthy gains were reported in health care and social assistance (68,100), construction (20,000), and manufacturing (14,000). On the other hand, after applying seasonal adjustment, today’s report showed the third consecutive month of job losses in retail and transportation and warehousing. This may reflect weakness in these industries. Alternatively, it could also mean that companies may be upstaffing less for the holiday season compared to previous years as inflation weighs on consumer spending. Without seasonal adjustment, retail and transportation and warehousing gained jobs over the last two months.

Currently, labor shortages are still a significant problem for employers. Wage growth is not accelerating, but growth rates remain elevated. Average hourly earnings grew 5.1 percent over the past year, only slightly down from an average of 5.4 percent in the first half of 2022. The job openings rate (6.3 percent) and quits rate (2.6 percent) are lower compared to earlier this year, but still high.

Labor shortages are a result of robust demand for workers, but limited labor supply. The aging of the US population is the main driver of shortages, but labor supply is being further squeezed because of stagnant labor force participation rates. Participation for people aged 25 to 54 is at 82.4 percent in November 2022—still below its prepandemic rate of 83 percent in February 2020. The gap in participation rates for people aged 55 and over is even larger—38.6 percent in November 2022 compared to 40.3 percent in February 2020.

On the other hand, there is still a large cohort who are marginally attached to the labor force—people currently not in the labor force, but who want a job and have looked for work in the past 12 months although not recently. At around 1.5 million, this group is slightly bigger than it was before the pandemic (1.4 million in 2019). This group could potentially be an additional source of labor, although the projected upcoming recession—which would result in fewer job opportunities—may discourage some of these people from entering the labor force in 2023.

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United States BEA report on monthly income and spending; October 2022

BEA News: Personal Income and Outlays, October 2022 The U.S. Bureau of Economic Analysis (BEA) has issued the following news release today: Personal income increased $155.3 billion, or 0.7 percent at a monthly rate, while consumer spending increased $147.9 billion, or 0.8 percent, in October. The increase in personal income primarily reflected increases in compensation and personal current transfer receipts. The personal saving rate (that is, personal saving as a percentage of disposable personal income) was 2.3 percent in October, compared with 2.4 percent in September. The full text of the release can be found at: www.bea.gov/news/2022/personal-income-and-outlays-october-2022

Consumer Confidence Index; November, 2022

New York, November 29, 2022…The Conference Board Consumer Confidence Index® decreased in November after also losing ground in October. The Index now stands at 100.2 (1985=100), down from 102.2 in October. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—decreased to 137.4 from 138.7 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—declined to 75.4 from 77.9. 

“Consumer confidence declined again in November, most likely prompted by the recent rise in gas prices,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation Index moderated further and continues to suggest the economy has lost momentum as the year winds down. Consumers’ expectations regarding the short-term outlook remained gloomy. Indeed, the Expectations Index is below a reading of 80, which suggests the likelihood of a recession remains elevated.”

“Inflation expectations increased to their highest level since July, with both gas and food prices as the main culprits. Intentions to purchase homes, automobiles, and big-ticket appliances all cooled. The combination of inflation and interest rate hikes will continue to pose challenges to confidence and economic growth into early 2023.”

National new home residential sales metrics; October, 2022

November 23, 2022 ‐ The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced the following new residential sales statistics for October 2022:

New Home Sales
Sales of new single‐family houses in October 2022 were at a seasonally adjusted annual rate of 632,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 7.5 percent above the revised September rate of 588,000, but is 5.8 percent
below the October 2021 estimate of 671,000.

Sales Price
The median sales price of new houses sold in October 2022 was $493,000. The average sales price was $544,000.

For Sale Inventory and Months’ Supply
The seasonally‐adjusted estimate of new houses for sale at the end of October was 470,000. This represents a supply of 8.9 months at the current sales rate.

Conference Board Leading Economic Index; October, 2022

The Conference Board Leading Economic Index® (LEI)for theU.S. decreased by 0.8 percent in October 2022 to 114.9 (2016=100), following a decline of 0.5 percent in September. The LEI is now down 3.2 percent over the six-month period between April and October 2022, a reversal from its 0.5 percent growth over the previous six months.

“The US LEI fell for an eighth consecutive month, suggesting the economy is possibly in a recession,” said Ataman Ozyildirim, Senior Director, Economics, at The Conference Board. “The downturn in the LEI reflects consumers’ worsening outlook amid high inflation and rising interest rates, as well as declining prospects for housing construction and manufacturing. The Conference Board forecasts real GDP growth will be 1.8 percent year-over-year in 2022, and a recession is likely to start around yearend and last through mid-2023.”

National new home housing metrics; October 2022

Building Permits
Privately‐owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,526,000. This is 2.4 percent below the revised September rate of 1,564,000 and is 10.1 percent below the October 2021 rate of
1,698,000. Single‐family authorizations in October were at a rate of 839,000; this is 3.6 percent below the revised September figure of 870,000. Authorizations of units in buildings with five units or more were at a rate of 633,000 in October.

Housing Starts
Privately‐owned housing starts in October were at a seasonally adjusted annual rate of 1,425,000. This is 4.2 percent below the revised September estimate of 1,488,000 and is 8.8 percent below the October 2021 rate of 1,563,000. Single‐family housing starts in October were at a rate of 855,000; this is 6.1 percent (±13.4 percent)* below the revised September figure of 911,000. The October rate for units in buildings with five units or more was 556,000.

Housing Completions
Privately‐owned housing completions in October were at a seasonally adjusted annual rate of 1,339,000. This is 6.4 percent (±10.6 percent)* below the revised September estimate of 1,431,000, but is 6.6 percent (±12.6 percent)* above the
October 2021 rate of 1,256,000. Single‐family housing completions in October were at a rate of 961,000; this is 8.3 percent (±8.2 percent) below the revised September rate of 1,048,000. The October rate for units in buildings with five units or more was 362,000.

Consumer Price Index key components; 10/22

Conference Board Employment Trends Index; 10/22

The Conference Board Employment Trends Index™ (ETI) declined in October to 119.57, down from an upwardly revised 120.73 in September 2022. The Employment Trends Index is a leading composite index for employment. When the index increases, employment is likely to increase as well, and vice versa. Turning points in the index indicate that a turning point in the number of jobs is about to occur in the coming months.

“The ETI decreased in October 2022 and has been flat since early 2022, but it remains at a high level and a clear turning point in the Index is not yet visible,” said Frank Steemers, Senior Economist at The Conference Board. “Therefore, job growth will likely continue over the next months, albeit at a slowing pace. Indeed, the labor market remains resilient with job gains still strong, but the Fed’s rapid monetary policy tightening is expected to have a more visibly negative impact on the pace of hiring by early 2023.”

Steemers added: “Until that happens, employers will have to deal with continued labor shortages. While there are signs these shortages have begun easing somewhat, hiring and retention difficulties are not over. A tight US labor market, understaffing, limited recovery in labor force participation, and an aging workforce all suggest US labor supply will remain a challenge for companies. As a result, employers may be more careful in laying off workers. Currently, we expect the US economy to enter recession around yearend 2022, with the unemployment rate to rise to around 4.5 percent in 2023—roughly one percentage point higher than today, but still quite low compared to past downturns.”

October’s decrease in the Employment Trends Index was driven by negative contributions from four of eight components. From the largest negative contributor to the smallest, these were: Percentage of Respondents Who Say They Find “Jobs Hard to Get”, Initial Claims for Unemployment Insurance, Real Manufacturing and Trade Sales, and Job Openings.

The Employment Trends Index aggregates eight leading indicators of employment, each of which has proven accurate in its own area. Aggregating individual indicators into a composite index filters out “noise” to show underlying trends more clearly.

Conference Board Commentary on 11/22 U.S. jobs report

Commentary on today’s U.S. Bureau of Labor Statistics Employment Situation Report by Frank Steemers, Senior Economist, The Conference Board

11/4/2022 jobs report revealed continued strength in the US labor market: 261,000 jobs were added in October 2022, after an increase of 315,000 jobs (an upward revision) in September. Labor demand remains strong while labor supply is constrained, keeping the labor market tight. Some cooling of labor shortages has been observed over the past few months, but October’s report emphasizes that we are not yet near significant easing of recruitment and retention difficulties. Wage growth remains elevated and this will make the Fed’s task of bringing inflation under control harder. This solid jobs report supports the Fed’s intent to continue raising rates, even if at a slower pace.

The unemployment rate ticked up to 3.7 percent in October 2022, from 3.5 percent in September. The labor force participation rate ticked down to 62.2 percent, from 62.3 percent in September. Average hourly earnings is down slightly from earlier this year but remains quite elevated (4.7 percent growth over the past year).

Most industries reported an increase in employment. Leisure and hospitality gained 35,000 jobs (after adding 107,000 jobs last month), with other notable gains reported in health care and social assistance (71,100), professional and business services (39,000), manufacturing (32,000), and wholesale trade (14,600).

While job gains remained strong in October, there are signs that the labor market is gradually cooling and labor shortages are easing somewhat. First, job growth is down from its pace in the first half of 2022 (444,000 average monthly job gains). Second, according to The Conference Board Measure of CEO Confidence™, fewer CEOs expect some or a lot of trouble overall attracting qualified workers over the next 12 months (39 percent of CEOs in Q4, down from 66 percent in Q1 2022). Third, according to The Conference Board Consumer Confidence Survey®, fewer consumers say jobs are plentiful (45.2 percent in October, down from 56.7 percent in March 2022). Lastly, the job openings rate in the private sector has dropped to 6.9 percent, from 7.7 percent in March 2022, while the quits rate is now at 2.9 percent, down from 3.3 in March 2022.

At the same time, there are no signs that widespread layoffs are happening. So far, temporary help services—a leading indicator for hiring—continues to add jobs (11,800). In addition, different layoff measures remain historically low without evidence of a significant increase.

It is increasingly likely that the US will fall into recession around yearend 2022 amid the Fed’s rapid tightening of monetary policy. With the US economy slowing, the labor market is also expected to further cool over the coming months and possibly shed some jobs during 2023. This may result in the unemployment rate rising to about 4.5 percent in 2023. There may be some temporary easing of labor shortages in 2023 as demand for workers diminishes. However, recruitment and retention difficulties will not disappear, with the unemployment rate projected to remain relatively low in the context of past downturns. Once the US economy starts growing again, severe labor shortages could soon reappear.

National new home sales metrics; September, 2022

October 26, 2022 ‐ The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced the following new residential sales statistics for September 2022:

New Home Sales
Sales of new single‐family houses in September 2022 were at a seasonally adjusted annual rate of 603,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 10.9 percent (±15.2 percent)* below the revised August rate of 677,000 and is 17.6 percent (±15.9 percent) below the September 2021 estimate of 732,000.

Sales Price
The median sales price of new houses sold in September 2022 was $470,600. The average sales price was $517,700.

For Sale Inventory and Months’ Supply
The seasonally‐adjusted estimate of new houses for sale at the end of September was 462,000. This represents a supply of 9.2 months at the current sales rate.