Friday, June 7, 2013

May employment: a mixed report that isn't nearly good enough

- by New Deal democrat

May's employment report can best be described as a tepidly good report, that mainly took back losses we saw in several categories last month. You probably already know the headlines, +175,000 jobs added, and the unemployment rate ticked up .1 to 7.6%. Government subtracted -3000 from the 178,000 private jobs number. The broader U6 unemployment rate ticked down -.1 to 13.8% (putting us back at March's level).

As always for me, after the headline the next thing I want to do is look at the more leading numbers in the report which tell us about where the economy is likely to be a few months from now. This was generally good, but mainly in that April's bad numbers were reversed, putting us back a March levels:
  • temporary jobs - a leading indicator for jobs overall - increased by 25,600.

  • manufacturing jobs declined -8,000. This is the third month in a row of manufacturing job losses, and is a red flag

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - rose 232,000. This places it back in the caution zone nearly 300,000 off its lows.

  • the average manufacturing workweek rose +0.1 hour from 40.8 hours to 40.7 hours. This is one of the 10 components of the LEI and will affect that number positively.

  • construction jobs gained 7000.

Now here are some of the other important coincident indicators filling out our view of where we are now:
  • the average workweek was unchanged at 34.5 hours

  • overtime hours were also unchanged

  • The broad U-6 unemployment rate, that includes discouraged workers, fell back from its April level of 13.9% to its March level of 13.8%.

  • the index of aggregate hours worked in the economy, which last month had been reported to have fallen -0.4 from 98.2 to 97.8, was revised to a -0.1 fall, which was reversed with a +0.1 rise back to its March level of 98.3
Other news included:
  • the alternate jobs number contained in the more volatile household survey showed a gain of 319,000 jobs, which with April's +293,000, totals over +600,000 in two months.

  • 420,000 people entered the labor force, muting the impact of the slight increase in the unemployment rate.

  • Combined revisions to the March and April reports totalled -12,000.

  • average hourly earnings increased $.01 to $23.89. The YoY change rose from +1.9% to +2.0%. Since I expect May CPI to rise at least 0.2%, this will be a real albeit slight m/m decline.

This month's report can be filed under the catergory of "positive, but not nearly good enough," which basically describes the entire last 3 years. Most of the positive indicators outside of the headline number actually just take back last month's declines. The only - slight - silver lining in the ongoing losses in manufacturing jobs is that we don't rely on those any more for a functioning economy.

There's nothing to get excited about in this report, and while it is mainly positive, there are some warning signs that the metrics are stalling.