- by New Deal democrat
(N.B.: I'll put up the Weekly Indicators post tomorrow).
I was out this morning but have now had a chance to look at the May employment report. My main impression is that just as April's report was probably an outlier to the good side, this is probably an outlier to the down side in a noisy series.
A few points of interest in the underlying data are worth emphasizing:
1. The housing credit - and its expiration - are playing havoc with housing and construction statistics. Just as housing permits and starts have surged and crashed in the month before and after the expiration of the housing credit - twice! - so construction jobs appear to have been similarly affected. In March 27,000 construction jobs were added; in April 14,000. In May, by contrast, 35,000 construction jobs were lost. This is a swing of 56,000 jobs down from the average of the last two months.
2. State and local budget pressures are showing up in government jobs. In each of the last three months, about 10,000 to 25,000 non-census government jobs were lost. These always lag, but are particularly bothersome now, because Federal aid to the states is ending.
3. The BP oil cataclysm may be showing up in leisure and hospitality jobs. 23,000 were added in March, and 35,000 in April, but only 2,000 in May, a decline of 27,000 from the average of the last two months. This may also have had some affect on retail jobs, which after advances of 23,000 and 19,000 in March and April, respectively, declined 7,000 in May, a loss of 28,000 from the average.
Despite the fact that the employment number obviously disappointed compared with expectations, there are some absolute good points:
1. Aggregate hours worked, the ultimate coincident incidator, increased 0.3%, the third month in a row of a good advance. Overtime also increased 0.2 hours to 40.1 hours. Simply put, work is being added into the economy.
2. The average workweek added 0.1 hours, but more importantly, the factory workweek added 0.3 hours. This is one of the 10 Leading Economic Indicators. If M2 continues to increase sufficiently for all of May - with one week's data remaining - and if building permits hold steady, we may yet see a positive LEI for May despite the stock market correction.
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3 comments:
This is a comment by the economist
Charles Lieberman that says it all...
"Instead of lipstick, how about some real analysis? As the economy recovers, firms need man-hours. Late in a cycle, after the workweek is back to normal, firms can't get much in the way of additional hours, so they must resort to adding more workers. At this stage of the cycle, they can add either to headcount or to hours or some combination of the two. So, let's look at the combination of the two.
In table B4, the index of man-hours is shown to have increased 0.3% for the month. That's a 3.6% annual rate. If we add a rough estimate for productivity of 2%, (2.5% to 3% might be a better estimate), we would ballpark GDP as rising at a 5.5% rate in real terms. That is hardly shabby.
Another critical element in the report is whether this implies a good gain for household income. This would combine headcount, the workweek and wage rates. That estimate is also provided in table B4 and it shows an increase of 0.7% for the month. If we subtract 0.1% for inflation, we would get an estimate of 0.6% for monthly gain in real income, or 7.2% at an annual rate. This implies a very strong gain in the ability of households to finance spending.
The above suggests that the details of the report are far better than suggested by a superficial reading of the top line number and an analysis based solely on headcount. "
The thing that some of the folks around me have been echoing is how in the world can so many bad things happen all at the same time? In a single month we had the BP disaster, Europe's daily headlines, China's anti-growth attitude, Korean and Israel/Gaza tensions, and whatever else I forgot to mention. I've gone through an entire year without seeing all the uncertainty in the last month.
Brodero:
Appropos of your quote, since rather than +0.1 inflation, we're probably going to see something like -0.5 DElfation for May, household disposable income will be even better.
Anon 3:57: The expiration of the housing credit ....
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