Workers know best: Job market weak
Even with unemployment still below 5%, more Americans are bracing for a weak job market. The bad news is they are probably right.
NEW YORK (CNNMoney.com) -- If you want to know what's going to happen to the labor market, don't ask an economist - ask your neighbor or co-worker.
And right now, those non-experts are likely to be telling you that things don't look very good.
Surveys show that Americans are growing increasingly glum about the availability of jobs. And history shows that workers know what they're talking about on this point - meaning that the unemployment rate is likely to increase sharply in the coming months.
Another sign from workers that the labor market is getting difficult: There has been a sharp decline in the number of workers willing to quit their jobs.
Economists surveyed by Briefing.com forecast that Friday's report will show that employers added only 25,000 jobs to payrolls in February, after a 17,000 drop in employment in January. And the unemployment rate is expected to climb to 5% from 4.9% in January.
To some economists, even 5% unemployment is considered close to full employment. But here, the view of the public is far less optimistic than the experts.
A Conference Board survey of 5,000 Americans in February found that their view of the job market went from bullish to bearish since the January reading. Those saying jobs are "hard to get" rose to 23.8% from 20.6%, as that pessimistic take now outnumbers the 20.6% claiming jobs are "plentiful," down from the 23.8% who saw a good market in January's reading.
In addition, when asked about the outlook for jobs six months from now, those who said they expected fewer jobs in the months ahead spiked 6 percentage points to 27.9%, and now outnumbers those who expect more jobs by better than three-to-one margin.
In the 40-year history of the monthly survey, there have only been 18 other months with a 5 percentage point or larger jump in those who believed the job outlook was going to get worse six months down the road. And in 14 of those cases, they were right, with the unemployment rate rising on average by 0.8 in the following six months, a statistically significant rise that is typically associated with a recession.
Economists say that kind of increase isn't a big surprise, that workers know of trouble ahead well at their own jobs before they start showing up in more traditional readings such as jobless claims or employer payroll counts.
"People know what's happening in their own office better than anyone else, sometimes better than the boss," said David Wyss, chief economist for Standard & Poor's.
Wyss said that another reason that expectations of a tougher job market proves out is that consumers worried about their jobs pull back on spending, which causes employers to respond by cutting staff or hiring plans.
Of course it's not just employees' view of the labor market that is pointing to a weak jobs report this Friday.
One of the Labor Department's lesser-watched reports is the Job Openings and Labor Turnover report, which reports on the percentage of employees quitting their jobs. It includes those who move immediately to another job as well as those who leave without another position immediately available.
The "quit rate" fell to a seasonally-adjusted 1.8% in December, as the number of those quitting was down about 11% from a year earlier. Some battered industries, such as construction, have seen the quit rate fall to the lowest levels on record.
"When the quit rate is low, it's a very bad sign," said economist Robert Bruca of FAO Economics. "The quit rates change slowly. When you see big changes, they're surprising."
Payroll services firm ADP's February Employment Report also showed a drop of 23,000 private sector jobs, the first decline in payrolls in the two years it has been reported. ADP crunched numbers that predate the survey that showed February was the worst month since April 2003, when the labor market was still in the midst of the so-called jobless recovery and the unemployment rate was 6%.
Joel Prakken, chairman of Macroeconomic Advisors, which processes the ADP payroll services data to produce the report, says what is notable is the decline in employment among medium size employers, those with 50 to 499 employees. They saw a net 4,000 decline in their staffing levels as a group.
"It's the small and medium firms that have been posting increases even as the large firms were weak and even negative," said Prakken. "But whether you slice it by sector or size of firm, there's softness there."
Prakken doesn't believe this is the end of job losses in the ADP report.