PRINCETON, NJ -- Gallup's hiring measure shows U.S. employees' perceptions of the job situation at their companies remain negative as 2009 gets underway. The net difference between hiring and firing remained negative during the week ending Jan. 10, suggesting that the U.S. Labor Department will likely report Thursday that seasonally adjusted weekly jobless claims have surged past the 500,000 consensus estimate -- far exceeding the 467,000 reported for the previous week.
Deteriorating Job Market
As anticipated, the Labor Department reported Friday that the unemployment rate soared past 7%, hitting a new 2008 high of 7.2% in December. Normally, jobless claims are a relatively good predictor of unemployment, but that was not the case as 2008 came to a close. Both weekly and seasonally adjusted four-week average jobless claims fell for the second consecutive week during the week ending Jan. 3 -- the former to 467,000 and the latter to 525,750 -- moving in the opposite direction from the unemployment rate. In this regard, Gallup's hiring measure suggests that the holiday jobless claims reports were something of an aberration and did not reflect underlying conditions in the job market.
Given the surprising declines of recent weeks, the economists whose estimates form the basis for the Bloomberg consensus forecast have projected that jobless claims for the week ending Jan. 10 will increase to a comparatively moderate 500,000 when reported Thursday. While a number of variables make it hard to predict the exact number of weekly jobless claims reported by the Labor Department -- and the holidays and the related seasonal adjustments add to the uncertainty -- Gallup's hiring measure suggests weekly jobless claims are likely to surge past this 500,000 consensus estimate for the past week. Similarly, the seasonally adjusted four-week average of jobless claims is likely to exceed last week's reported 525,750.
Unlike Money, Jobs Aren't "Fungible"
With continuing jobless claims at 4.6 million -- the worst level since 1982 -- and the economy losing more than 100,000 jobs a week, President-elect Obama's goal for the new stimulus plan of saving and/or creating between 3 and 4 million new jobs seems reasonable. However, as policy-makers shape the stimulus effort, they need to keep in mind that unlike money, which is easily fungible -- meaning one dollar can be substituted for another, whether it comes from the government, private business, or the individual consumer -- jobs are not.
For example, the financial sector is rapidly shedding numerous high-paying jobs -- many having nothing to do with the financial abuses of the past couple of years. It seems unlikely that these new job seekers will be readily converted to jobs involving rebuilding of the nation's infrastructure. Similarly, those who are losing jobs in the auto sector may not be able to easily shift to the new jobs envisioned by the new fiscal stimulus legislation.
As a result, saving existing private-sector jobs might seem like a reasonable priority. However, this effort may have difficulties similar to those surrounding the banking bailout (TARP) spending. It is often difficult to show how a spending effort prevented things from getting worse when they continue to deteriorate. In this regard, it is easy to talk about saving jobs, but it could be difficult to show which specific jobs might have been lost and how they were actually saved by additional federal spending.
Regardless, Gallup's jobs data suggest that the labor market continues to worsen on a weekly basis. Until the job market stabilizes, it is unlikely that the deepening recession will find a bottom, let alone give way to economic growth.
Using weekly results for 2008, Gallup's analysis suggests that its hiring measure has a better than 7-in-10 probability of correctly projecting the direction of weekly jobless claims and a better than 8-in-10 probability of predicting the direction of the four-week average of jobless claims. Gallup's hiring measure is based on aggregated interviews with a nationally representative sample of more than 2,000 U.S. workers each week. Gallup asks current full- and part-time employees whether their employers are hiring new people and expanding the size of their workforces, not changing the size of their workforces, or letting people go and reducing the size of their workforces. Gallup's hiring measure is computed by subtracting the "letting go and reducing" percentage from the "hiring and expanding" percentage. The assumption is that employees across the country have a good feel for what's happening in their companies, and that these insider perceptions can yield a meaningful indication of the nation's job situation.
Gallup's Net New Hiring Activity measure was initiated in January 2008. It is an effort to assess U.S. job creation or elimination based on the self-reports of more than 2,000 individual employees aggregated each week about hiring and firing activity at their workplaces. For results based on these samples, the maximum margin of sampling error is ±3 percentage point.
Interviews are conducted with respondents on land-line telephones (for respondents with a land-line telephone) and cellular phones (for respondents who are cell-phone only).
In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.