Last month we wrote about some initial signs of improvement in regional labor markets, focusing on evidence of tapering job losses and decelerating initial claims for unemployment benefits. In addition to these sources, we are also watching for improvement in average weekly hours and temporary services employment.
The reasoning behind this is rather straightforward: As businesses become more confident that revenue declines are abating, layoffs decelerate. The slower rate of job losses and drop in initial claims for unemployment benefits seem to indicate that this is well under way.
As sales expectations grow and actual revenues begin to improve, firms may not add directly to permanent payrolls right away. Several months of rising orders and/or revenues are needed to assure businesses that the increase is sustainable. Our discussions with business owners throughout the Sixth District support the idea that companies have been hesitant to add to payrolls. In this environment firms have some alternatives to increasing their permanent workforce—two such methods are increasing the hours of remaining staff and/or obtaining temporary employees. And most of these data are available at the state level.
Looking at weekly hours data, the results are mixed. The chart below shows a weighted average for the six states in the Sixth District (Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee). While overall private sector hours do not show much of a trend, manufacturing hours are rising steadily. A rebound in weekly hours worked is supported by the latest Southeast Purchasing Managers Index.
The evidence regarding employment services data is also mixed. Unfortunately, the U.S. Bureau of Labor Statistics only reports employment services data for two states in the region—Florida and Georgia—and the data are not seasonally adjusted. We seasonally adjusted these series in an effort to eliminate holiday effects caused mainly by retailers adding temporary help over the holiday season. This effort was not wholly successful for Florida, but we do see an increase in Georgia.
While we do see an increase in hours worked in manufacturing in the region, we cannot determine with clarity that the trend in rising hours is taking place across several sectors. Employment services jobs are rising in Georgia, but not in Florida.
Several times over the past several months we have heard the phrase "no longer firing, but not yet hiring" from our business contacts. The data seem to bear this out. We get a look at February data later this week, and increases in hours or a pickup in temporary employment would indicate that we are moving farther from the "firing" phase and closer to beginning the "hiring" chapter in the region's recovery.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department