By Linda Koco
November’s improved employment numbers should be a pick-me-up for advisors, at least for those who believe they have skin in the game where job growth is concerned.
The November unemployment rate fell to 7 percent for households (from 7.3 percent in October), according to the U.S. Bureau of Labor Statistics (BLS). In addition, total employment (nonfarm payroll) rose by 203,000.
Overall, job growth has averaged 195,000 per month over the prior 12 months, BLS reported.
Those changes suggest that family finances in some American homes will begin to ease. That could translate into increased ability of some customers to meet insurance premium payment obligations.
It could also spark increased consumer interest in making insurance purchases these customers previously delayed. In particular, insurance professionals who have customers in the industries seeing the most growth in jobs — transportation and warehousing, health care, and manufacturing — may start receiving more receptive welcomes than previously.
Insurance practitioners also can use the data when helping employers in those and other industries make decisions on benefits and other insurance. If employment is going up, the employer’s benefit and protection needs will increase.
These aren’t sure things, but they are possible things.
Another possible thing is that a rising-tide-floats-all boats marketplace may be in the making. If so, insurance demand likely will rise with that tide.
It will be a slow-rising tide, though, since disposable income, the expansion of which favors greater insurance sales, continues to fluctuate.
For instance, according to the U.S. Bureau of Economic Analysis, real disposable personal income decreased 0.2 percent in October, but it increased 0.4 percent in September and August (by 0.5 percent) and July (by 0.2 percent), after decreasing in June (by 0.1 percent).
But the increases are larger in percentage and occur more frequently than the decreases, so it’s a matter of slow being better than no.
Unemployment in insurance
A drill-down of the BLS figures points to another development meriting producer study. This is the improving unemployment trend in the insurance industry.
According to BLS, the unemployment rate in the industry was down in November. The rate dropped to 2.9 percent from 3.8 percent in October.
The industry’s unemployment rate was also down from January, when it was 4.7 percent, and down from the industry’s 10-year high of 8.4 percent in March 2010. (See table.)
The BLS table indicates that the insurance industry’s unemployment rate has not only declined over the past 11 months, but that the November rate of 2.9 percent is within industry norms for the first half of the 10-year period illustrated — i.e., before the Great Recession of 2008-2009.
Not everyone in business cottons to federal government statistics — because they are not in the moment, because they are so broad, because they use terms that don’t fit business needs, because they leave out certain categories and countless other reasons.
However, since BLS uses a mostly consistent approach for its data gathering from year to year, industry professionals can use the BLS figures as one of several benchmarks or monitors to consult for decision-making, strategy-setting and/or client consultations.
In that sense, the recent BLS news about unemployment decline in insurance may at least encourage industry people to “hang in there” (versus throw in the towel).
It may also serve as a source of encouragement to agents and advisors who have voiced frustration with what they perceive to be a general decline in service from a number of carriers, beginning with the start of the last recession. Most conversations about this portray the decline as a function of layoffs and cost-cutting measures, not inept management or malfeasance, but insurance practitioners still complain that service declines have made doing business more difficult.
Now, in today’s market, if insurance industry unemployment numbers really are declining as the BLS chart shows, this might signal more predictable performance is in the wings. (Certainly, this is what carrier executives have said they have wanted to achieve since the get-go.)
Insurance industry employment
Some of that hopeful forecast will hinge on whether companies will also add new employees (in addition to slowing layoffs and reductions by attrition).
The good news is that the BLS data shows that employment in insurance is increasing, albeit at a snail’s pace.
In November, the preliminary numbers from BLS shows that the insurance industry employed 2.38 million. That’s up by only a hair (about 0.2 percent) from October’s preliminary (nearly 2.37 million). However, it is also up — by nearly 1.5 percent — from January’s 2.35 million, and the trend-line for the year has been up, up, up. (See table.)
A word of caution: BLS uses a very broad definition of insurance industry. It includes virtually all major industry categories by job class and product line. For instance, BLS says the key categories in the “insurance” sector are “insurance carriers” and “agencies, brokerages and other insurance related activities.” As for “insurance sales agents,” BLS says they “sell life, property, casualty, health, automotive or other types of insurance.”
For that reason, the BLS employment numbers should not be interpreted as applying only to life, annuity and health sectors.
Still, the life and annuity sector should benefit from the increases as well as the property-casualty sector, especially if sales grow with the generally improving economy.
That the growth seen so far is incremental rather than explosive is another positive sign. It suggests the industry is managing its growth rather than letting growth overpower its ability to function effectively.
Long story short: The BLS unemployment and employment figures do seem to be positive indicators for the insurance sector, including insurance sales agents. If the improvements shown above continue and become widespread by region, sales could expand, services may improve, and opportunities may emerge for independent agents to staff up their own shops.
There is a lot of “if” in that, but the trend in the government data suggests that now is the time to give the “ifs” some room at the planning table.
Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda may be reached at [email protected].
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