Friday, November 2, 2012

Not Another Mediocre Empoyment Report

From the BLS:

Total nonfarm payroll employment increased by 171,000 in October, and the unemployment rate was essentially unchanged at 7.9 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in professional and business services, health care, and retail trade.

Overall, not bad.  The overall number is decent considering the current environment.

The household survey has some interesting data points.  First, we see that employment increased 410,000, after increasing 873,000 last month.  This number typically proceeds the establishment survey.  The civilian labor force increased by 578,000, indicating that people reentered the labor force, telling us that people saw an increased potential of getting hired.  This number increased by 409,000 the month before -- also a good sign.

The employment to population ratio has ticked up over the last four months, moving from 58.3 in August to 58.8 in October.

Goods producing jobs increased by 21,000.  Not great, but considering that the manufacturing landscape has changed to one of automation and that construction is still at depressed levels, it's not bad (largely because it's positive).

The following is directly from the report: 

Professional and business services added 51,000 jobs in October.
Health care added 31,000 jobs in October.
Retail trade added 36,000 jobs in October
Employment in leisure and hospitality continued to trend up (+28,000) over the month.

Overall, pretty good.

Now, here's the bad news:

In October, the average workweek for all employees on private nonfarm payrolls was 34.4 hours for the fourth consecutive month. The manufacturing workweek edged down by 0.1 hour to 40.5 hours, and factory overtime was unchanged at 3.2 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged down by 0.1 hour to 33.6 hours. (See tables B-2 and B-7.) 

In October, average hourly earnings for all employees on private nonfarm payrolls edged down by 1 cent to $23.58. Over the past 12 months, average hourly earnings have risen by 1.6 percent. In October, average hourly earnings of private-sector production and nonsupervisory employees edged down by 1 cent to $19.79. (See tables B-3 and B-8.)

Ideally, we'd like to see some of the slack in the labor market get taken up, thereby increasing wages and increasing hiring in the long run.  This situation would also increase overall earnings -- something we're not getting.

Now for the best news:

The change in total nonfarm payroll employment for August was revised from +142,000 to +192,000, and the change for September was revised from +114,000 to +148,000


NDD here with some additional comments:

This was actually a pretty decent report.  With the exception of the unemployment rate rising slightly to 7.9% (because more people entered the work force), and wages falling slightly (more on that below), the numbers were generally good.

This was the best monthly gain in jobs for over half a year.  Not only that, but August and September were revised up by a total of 84,000 jobs.  You don't get upward revisions like this in recessions.

The broader U6 unemployment rate, which includes discouraged workers, edged down to 14.6%.  The more volatile household survey showed 410,000 jobs gained, but 578,000 people entered the work force, so 170,000 of them did not find jobs.  That's why the U3 unemployment rate edged up from 7.8% to 7.9&.

Leading indicators in the report were mixed.  13,800 temporary jobs were added, for a new post-recession high.  The number of people unemployed less than 5 weeks (a better leading indicator than the weekly initial claims report) increased by 90,000, but was still only about 100,000 off its post-recession low, which is consistent with continued expansion.  The manufacturing work week did decline 0.1 hours to 40.5 hours.  This will be a negative in the official LEI.  Overtime remained constant.

The index of aggregate hours worked in the economy, an excellent coincident indicator, rose 0.1 to 96.8.

Wages, however, fell one cent.  YoY wages have only risen 1.6%.  This means that real, inflation adjusted wages continue to be flat or slightly negative.  This is a continuing red flag for continued economic progress.

Finally, both manufacturing and construction added workers.  These were the epicenter of the recession losses, so their slow rebound is a significant positive.  Government shed 13,000 jobs.  It is possible that, exclusive of these 3 problem sectors (government, construction, and manufacturing) that all of the lost jobs in the great recession have been made up.  I'll update once I do the math.