T he U.S. labor market showed strength and momentum at the end of 2014. The BLS Employment Situation Release for December 2014 reported the creation of 252,000 net new jobs. In addition, estimated job growth in October and November was revised upward by 50,000, bringing total job creation in the 4th quarter to a healthy 866,000 and almost 3 million for the full year.
October and November New Job Estimates Revised Upward
The year-end national unemployment rate fell to 5.6%, a level last seen in June 2008. Some of the decline in unemployment is due to new jobs, but 273,000 people also left the workforce in December. This exodus helped push the labor force participation rate downward to 62.7%, akin to levels seen in the late 1970s. Still, the broadest measure of unemployment, the U-6, declined from 13.1% in December 2013 to 11.2%, signifying progress against the stubborn problem of long-term unemployment.
Lots of Hiring but Few Raises
November saw an uptick in wages, fueling speculation that the U.S. labor market had finally tightened sufficiently to start driving up the price of labor. The December values erased those gains, leaving commentators scratching their heads and muttering about the inevitability of upward wage pressure—someday. Direct-hire wage growth at the end of 2014 stood at an annualized rate of 1.7%, roughly in line with inflation. The U.S. Master IQNdex shows the same lack of upward pressure on contingent labor bill rates, increasing less than 1% in 2014. The vigorous demand for labor does suggest that a tightening of the U.S. labor market will come, but at the end of the year there is little evidence in wage or bill-rate trends.
New Jobs Creation: Widespread and Robust
Much of the December 2014 new job creation was found among the usual suspects: Professional and Business Services, Healthcare, and Leisure and Hospitality. But Construction, Manufacturing and Government also contributed to the strong year-end gains. Transportation and Warehousing appeared to be taking a breather after the retail peak, and the rapid decline in the price of oil has stalled hiring in that industry sector.
Temporary Agency Employment – (Yawn) Jobs and Market Share Records Broken Again
For the 26th consecutive month, the BLS reported a record level of staffing agency employment. The seasonally adjusted total did not quite reach 3 million in 2014, but it can be said with a fair degree of confidence that this milestone will be achieved early in the new year. Staffing agency jobs also continue to grow as a share of total employment. At the end of 2014, staffing agency employment stood at 2.13% of the 140 million U.S. nonfarm jobs, a record high market share.
Temp Labor – Upward Revisions
The December jobs report made little change to October or November estimates of temporary employment.
The increasing pace of job creation in 2014 made real progress in reducing unemployment, though the large number of workers quitting the labor market has made the unemployment rate appear deceptively low. The supply of labor has not yet tightened enough to drive up direct hire wages or contingent labor bill rates, though that potential exists in the near future.
The increased enterprise reliance on contingent labor that became evident as the labor market improved in 2010 shows no signs of abating. Staffing agency employment is at record levels and also stands at a record share of total employment. The more broadly defined contingent labor is on the same trajectory. Five years into the labor market recovery, it is clear that the emphasis on a more flexible workforce was not just a transitional state, but has become a feature of the post-recession environment.