The Jobs Smoother: 2020 in the rear-view mirror

By | January 13, 2021

Amazingly, it has been exactly one year since I last did a piece on the monthly jobs report. Then again, the last 12 months were 2020. During the last year, we had such unprecedented levels of employment change that the Jobs Smoother that we typically look at didn’t tell us what we really needed to know. Does that change in 2021? I’m not sure, yet, but we are going to start the year off by taking a look, and hopefully we will get more clarity as the year unfolds.

Each month, the team of experts at FTR take a look at the payroll employment report from the Census Bureau. It gives a timely indicator of the health of the economy. In a “normal” year the downside is that the numbers can be somewhat volatile in any given month (+/- 100k is the typical margin of error). When we look at the actual level of volatility and variation in the monthly employment data during 2020, those typical margins are swamped. For comparison, in a single month we lost more than 20 MILLION(!) jobs and for the next 4 months following that loss we averaged more than 2.6 MILLION(!) jobs gained per month. We actually peaked out at 4.8 million jobs added during June. Quite the rollercoaster we were on during 2020.

Prior to 2020 we accounted for the variation by looking at the average monthly gains smoothed over the last 3 and 6 months. This gave us the added benefit of being able to better highlight if employment indicators were accelerating or decelerating. Let’s get back to the practice of reviewing these numbers and see if they are highlighting anything important.

Payroll Employment

Let’s start by highlighting the top line figures and then we’ll assess the overall health of jobs in the US. December saw notably weak results with the payroll employment numbers showing a net LOSS of 140,000 jobs for the month. This is the first loss since that miserable April report in which we saw employment drop by 20.8 million. The prior month’s results were revised up, but the change is of little consequence. Both construction and manufacturing employment were up in the month, although they still remain below their February peaks. The unemployment rate was unchanged at 6.7%, but this belies some of the additional stresses that are in the system due to loss of hours and removal from the workforce due to COVID shutdowns.

Total payroll declines for the full year amount to 9.8 million, quite the change from the 2.1 million gain recorded in calendar year 2019. The 10-year average figure has stabilized over the last 5 months, hitting 98k in December after a major downward reset following the March and April declines. At the start of the year we were finally bypassing the early portions of the Great Recession when job losses were very large, leading to improved results for the 10-year average. That is no longer the case. At this time last year the 10-yr average was at 185k.

Looking at our jobs smoother graph we can see that the overall employment numbers are all over the board, but there is a clear downward trend as we look at more recent data. FTR expects payroll growth to return in 2021, but the near-term pandemic indicators do not give me optimism for a quick return as we start the year.

Transportation Employment

The U.S. warehousing and storage sector in December added 8k payroll jobs, and, unlike most sectors, it is well above pre-pandemic levels. But hold on! The single best result for any sector is attributed to local delivery. Payroll employment is UP 26%(!) compared to February. Gains in December continued, up another 37k, and the continuation of shutdowns into January should keep the streak alive as this sector has not seen a decline in employment since February.

Despite the decline in overall payrolls at U.S. employers, for-hire trucking added another 7k payroll jobs. This is a robust level of growth, but not enough to dent the capacity shortfall that engulfs the industry and it is below the levels we had seen in the prior two months. Employment is down 43k jobs from the February high; however, this means that we have brought back more than half of the number that we lost last Spring. Prior to the pandemic the fleets had already been slowly whittling down their employee counts.

Looking at our jobs smoother graph we can see that the employment numbers are running at very strong levels and they haven’t strayed too far in any direction over the last 6 months. The quarantine period essentially allowed the carriers to shed any excess they had (plus some), leading to a sustained period of employment growth. FTR expects the payroll gains to continue – as long as the current freight environment holds firm.

“There are certainly road bumps in the freight markets, but the overall economy continues to hum along at a reasonable pace.” That is what I said last January. What a difference a year makes.

Stay tuned…