It's a curious mix.
Nearly every measure of economic activity has improved notably, but the number of people working has not. Last week's report of initial unemployment claims showed an increase of 15,000, and as reported Friday, nonfarm payrolls fell for the seventh straight week. The consensus estimates that were calling for a drop in first-time claims and an increase in payrolls seemed to reflect the relatively widely held belief that employment, which normally lags economic improvement, would be on the mend by now.
There has been some improvement in employment, but it is regionally spotty and focused mostly in technology or telecommunications. Last week's release of the Beige Book, a periodic review of the 12 Federal Reserve bank districts, addressed the employment issue multiple times. It, however, offered little to answer the question of when payroll ranks would swell.
To some extent, an answer can be found at nearly every firm in the country where workers are doing more with less. The recent report on productivity confirmed this point. After vaulting nearly 21/2 times higher than expected in July, the final second-quarter productivity rate estimate was hiked again to an astounding 6.9 percent. Even the best of the economic times in the last decade did not see productivity gains this strong.
Part of the problem is perception and, therefore, conviction. Chances for an economic misstep are still considered to be high, which is keeping employers very hesitant about adding to their payrolls.
The alternative, which the Fed's Beige Book report also discussed, has been for employers whose businesses are improving to hedge their bets by hiring temporary staff. This -- added to the work-more-and-enjoy-it-less status most people with jobs are facing -- does not produce encouraging employment stats.
Perception and conviction may be part of the problem, but perspective is, too.
The current hiring attitude is consistent with nearly every post-recession period. As widely reported and as factually accurate as it is, not many people are willing to acknowledge the fact that employment often is one of the last economic measures to turn higher. It is no different this time. The only point of debate seems to be whether the employment recovery this time around is occurring more slowly than normal.
But measuring employment gains now against whatever benchmark you may use as the norm misses the point -- this is not a normal recovery.
The spike in economic activity in the latter stage of the last decade produced excesses in many forms, including employment. This took several years to create and will take several years to reverse.
The fact that important segments of the U.S. economy held together too well during the overall decline is an issue, too. During most recessions, there is a relatively uniform drop-off in payrolls as the economy rolls over. Consumer spending remained robust through most of the decline. Thanks partly to incentives, auto sales stayed remarkably strong. This meant that the typical employment snap-back seen after most down economic years would not be as strong this time.
The economy is in transition -- not from a disaster -- but from an unsustainably robust period. Companies now are juggling payrolls to meet circumstances that for most have not been seen for decades, if ever.
As long as broad economic measures continue to improve, even if only modestly each month, employment will follow.
For investors looking for the final confirmation that the economy is on the mend, waiting for notably better employment conditions could mean forsaking a fruitful period before improved payrolls are widely reported.
The market waits for no one, not even the unemployed.
Follow almost any other group of economic measures for now except employment. If all the others improve, so will the ranks of the gainfully employed.
