Nonfarm employment increased by 167,000 in December, and the unemployment rate was unchanged at 4.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Job gains occurred in several service- providing industries, including professional and business services, health care, and food services. Average hourly earnings rose by 8 cents, or 0.5 percent, in December.
This is a solid number, especially when the consensus was lower. Let's look at the details.
Construction was -3000. I have a hard time squaring this number with all of the 1000+ layoffs the DOL reported in their weekly unemployment claims. Yesterday alone we have 12 states that reported more than 1000 layoffs in manufacturing and construction. I am guessing they will revise this number higher.
Manufacturing was -11,000: One of the untold stories of this expansion is the incredible inverse relationship between manufacturing output increases and manufacturing employment decreases. Manufacturing output is now above the 2001 pre-recession level, but employment has not followed suit. In short, the productivity increases have seriously eaten into manufacturing employment growth.
Retail was -9000. This jibes with the weak retail numbers we saw yesterday. Obviously retailers were either expecting a slower season or were trying to cut costs to increase profits during a slow season, or a combination of both.
Employment in retail trade was little changed over the month after rising by 39,000 in November. Building and garden supply stores lost 8,000 jobs in December. Over the year, retail trade employment edged down.
Translation: Home Depot and Lowe's laid people off. Interestingly, retail employment has trended down this year, despite an increase in consumer spending. Any thoughts on why?
Professional and Business +50,000. Another solid gain in this area. We have seen these numbers perform well for awhile now. Here is some more detail from the report:
Job gains occurred in services to buildings and dwellings (13,000) and in management and technical consulting services (7,000). Employment continued to trend up in architectural and engineering services and in computer systems design and related services.
There seem to be a fair amount of real estate related gains here.
Education and Health Services, +43,000. This has also been a constant trend for this expansion. I would expect this trend to continue for a long time as the US population grows older. I do wish the BLS would break these numbers out -- that is, separate education from health services. Here is more from the report:
Employment rose in ambulatory health care services (14,000), hospitals (11,000), and nursing and residential care facilities (7,000).
Leisure and Hospitality, +31,000. This is another area where we have seen a large amount of job growth. While people do have to eat somewhere, I have to wonder who is filling these jobs. 23,000 of these jobs were in food services and drinking places -- bars and restaurants.
The .5% increase in wages may scare the Fed, which is still very concerned about inflation.
One final note. In late 2006, the BLS revised jobs created by +800,000 plus (or somewhere near that number). In other words, there was a serious methodological flaw somewhere in the BLS' system. I do not know if they have taken care of that issue.
7 comments:
It appears commercial construction was strong, making up in large part for the drop in residential construction.
The BLS revision will come in March.
The decline in retail employment at a time of general strength in retail spending is unprecedented. As in manufacturing it represents a strong rise in productivity. There are a number of different factors at play, improved logistics, a shift away from in-store help at places like Home Depot, and industry consolidation.
In addition to being strong above expectations growth in jobs, wages got a nice boost and past job growth was revised upward. All in all a strong report reflecting a strong economy.
Still bearish Bonddad?
This was not a strong report.
We need to add 145,000 jobs a month just to make up for growth in the work force ... anything under 145k and the job market is getting worse, not better.
167k jobs means the employment situation got a tinier bit better.
A strong report would be 250k jobs.
The .5% increase in wages may scare the Fed, which is still very concerned about inflation.
Perhaps one of the reasons we have a lingering problem with people making the same or less than they did years ago is that fed policy is working against them. I recognize that my understanding of economics is based on hazy recollections of Sophmore macro-economics, but it seems to me that if we see labor costs going up but we also see productivity going up at a higher rate, then it should be considerd a good, non-inflationary thing.
More simply put: if tomorrow you could do the equivalent work of 10 people, but got paid nearly the same, you're getting ripped off. It seems rather counterproductive for the fed to be trying to clamp down on the economy because wages are going up. Wages going up is a good thing so long as it's not in a situation where productivity is stagnant.
I reckon the increase in consumer spending was on bigger ticket items ... if some people are thinking about tightening their belt coming up, one thing that can happen in a Christmas buying season is more durables "just in case" next Christmas is not as good. That would also have been fed by the mini-price war in flat screen TV's.
Indeed, a flat screen TV was purchased in our house, as part of a "shopping trip" christmas gift to a household member ... but since it was bought at a going out of business sale, I don't think that adding it into the numbers means any real good news!
Also bear in mind the unseasonably warm weather ... some of the increase in commercial construction will be taking advantage of the home construction downturn and the warm weather to get projects done ahead of schedule.
Personally, I'm still hanging our for the January Year-On-Year inventory number ... if that shows strength, I'll feel more hope that a new growth driver is stepping up to take over from residential house construction.
Steve, yes, its counterproductive. The inflation pressure they should be targetting is wage increases less productivity gains. As long as that number is less than current inflation, there is no baseline problem with an inflationary wage-price spiral.
However, productivity gains are notoriously difficult to get a firm handle on in short term numbers, and at the same time the institutional history of inflation targetting at the Fed was part of a loose, heavily clouded, shift from the failed (and doomed to fail) efforts at monetary growth targetting, in an environment when they were trying to ratched inflation down.
So the problem if mismatch between the confidence in estimates of wage growth and productivity growth, combined with the habit of vaguely talking around the problems at hand, combined with the habit of treating inflation as the primary problem even after it has been soundly beaten into submission, yields the present situation.
Evidently, if you keep acting like you need to ratchet inflation down in an era of low productivity growth (the late 1980's), when in fact you simply need to prevent a new outbreak of accelerating inflation, that introduces a recessionary bias into Fed policy.
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