Blog : The Job Outlook Cloud's Silver Lining

by Ed Zwirn on February 8th, 2014

U.S. job creation has come in significantly lower than expectations for two months running now and nobody seems to care. After December's disastrous showing of 74,000 jobs, the consensus had called for a January rebound to 175,000.

As disappointing as the actual 113,000 January jobs creation figure proved to be, the stock market shrugged it off, with all market indices up modestly as of late Friday morning, followed by an afternoon rally which saw the Dow Jones Industrial Average up 1% on the day, the NASDAQ Composite ahead 1.7% and the penny stock-rich Russell 200 up 1.1%

Of course, the market may have been in an oversold condition, given the debacle seen for stocks over the past few weeks.

But, beyond that, there may be good reason why the "bad" news contained in Friday's Bureau of Labor Statistics release may not have been bad enough to spook the stock market.

It's true that, according to the latest, there has been a slowdown for job creation going on since late last year. Incorporating the revisions for November and December, which increased nonfarm employment by 34,000 on net, monthly job gains have averaged 154,000 over the past three months. In 2013, employment growth averaged 194,000 per month.

On the other hand, the release points paradoxically to a tightening of labor conditions. For one thing, the unemployment rate ticked down once again, this time to 6.6% from 6.7%, and at the same time the labor participation rate actually ticked up.

Not only were discouraged workers not the cause of the unemployment rate decrease, the number of unemployed who have given up looking for work out of despair over their prospects actually fell, to 837,000 in January from 917,000 in December.

Other numbers point to a tightening of the job market. For one thing, the tendency of employers to trim full-time employees down to part-time hours is not in evidence. In January, the number of workers who said they were part-time due to economic reasons fell by 514,000, to 7.25 million.

While fewer employers cut hours and more of those who wanted to find full-time work apparently were able to do so, those working part-time for other than economic reasons (e.g., to take care of a family member or because they didn't feel like working full-time) rose by 434,000 to 19.1 million.

In the last year, full-time employment has increased by 1.8 million. Part-time jobs are up just 8,000.

This low lack of growth for part-time labor is significant for two reasons: For one thing, the willingness of companies to take on full-time staff is not only good for the economy, it is a sign of confidence on the part of the business community. It addition, it is apparent that, at least up until this point, the prediction that the Affordable Care Act would prompt employers to trim hours has not come to pass, as it presumably would have done by January, when its main provisions took effect.

In addition, there is evidence of a return to the types of solid blue collar jobs that are the mainstay of the U.S. economy. Employment rose in construction, manufacturing, wholesale trade and mining, with construction adding 48,000 jobs in January, more than enough to offset the loss seen in December. Manufacturing employment increased by 21,000 in January. In 2013, employment growth in manufacturing averaged 7,000 per month.

Further evidence of a revival of hard hat jobs comes from the fact that the unemployment rate for people with just a high school diploma fell from December's 7.1% to January's 6.5%, even as the number of people in that educational bracket seeking jobs rose. The number of unemployed high school graduates fell 9.1% in absolute terms, to 2.3 million.

The pay being received by the employed is also on the upswing. Average hourly earnings of all employees on private non-farm payrolls rose by 5 cents in January to $24.21. Over the past 12 months, average hourly earnings have risen by 1.9%. From December 2012 to December 2013, the Consumer Price Index for All Urban Consumers increased by 1.5%.
 
But, consistent with January's relatively low job growth tally, there were weak spots as well.

Not surprisingly, federal government employment declined by 12,000 in January. Over the past 12 months, federal government employment has decreased by 85,000, or 3%.

Another job-losing sector may be falling victim to longer-term sales trends. With retail bookstores and other specialty outlets losing out to the internet, employment in sporting goods, hobby, book and music stores fell by a collective 22,000.

The upshot for penny stock investors: There are the clues to longer-term trends buried in this mass of government statistics. Companies over the past year have shown an increased willingness to take on full-time employees. At the same time, there are fewer people working part-time because they are forced into it and a greater number working less than full-time because it suits them.

Part of this is due to the growing freelance trend. In addition, many people are finding themselves economically able to reduce work hours to take care of family obligations or just because they'd prefer it that way. In any case, assuming this grudging U.S. recovery continues, we are looking at an increasingly flexible and assertive labor force outlook, an outlook which can only pose opportunities to entrepreurial penny stock companies clever enough to find resultant new marketing hooks.