Friday, November 7, 2014

October jobs report: solid improvement, except for discouraged workers

- by New Deal democrat


  • 214,000 jobs added to the economy
  • U3 unemployment rate fell from 5.9% to 5.8%
Wages and participation rates
  • Not in Labor Force, but Want a Job Now: rose 188,000 from 6.349 million to 6.537 million
  • Employment/population ratio ages 25-54: up 0.2% from 76.7% to 76.9%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.04 to $20.70 up 2.2% YoY
August was revised upward by 23,000 to 203,000. September was also revised upward by 8,000 to 256,000. The net revision was +31,000.

Since the economic expansion is well established, in recent months my focus has shifted to wages and the chronic heightened unemployment.  The headline numbers for October continue to show a little progress on wages, and mixed results on participation.

Those who want a job now, but weren't even counted in the workforce were 4.3 million at the height of the tech boom, and were at 7.0 million a couple of years ago.  Since Congress cut off extended unemployment benefits at the end of last year, they have actually risen by over half a million, and this month were 6.537 million.

On the other hand, the participation rate in the prime working age group has made up over 40% of its loss from its pre-recession high.

After inflation, real hourly wages for nonsupervisory employees probably rose from September to Ocotbe. The  nominal YoY% change in average hourly earnings is 2.2% somewhat better than the inflation rate.

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were flat to slightly positive

  • the average manufacturing workweek was unchanged at 40.8 hous.  This is one of the 10 components of the LEI.

  • construction jobs increased by 12,000. YoY construction jobs are up 464,000.  

  • manufacturing jobs  were up 15,000, and are up 170,000 YoY.

  • Professional and business employment rose 37,000 and is averaging a 56,000 monthly gain for the last year.

  • temporary jobs - a leading indicator for jobs overall - increased by 15,100.

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - increased by 90,000 from 2,383,000 to 2,473,000, compared with last December's 2,255,000 low.

Other important coincident indicators help us paint a more complete picture of the present:

  • Overtime hours were down from 3.5 hours to 3.4 hours.

  • the index of aggregate hours worked in the economy rose sharply by 0.5 to 101.9

  • The broad U-6 unemployment rate, that includes discouraged workers decreased from 11.8% to 11.5%

  • Part time jobs for economic reasons decreased by -76,000 to a total of 7.027 million.
Other news included:
  • the alternate jobs number contained in the more volatile household survey increased by 683,000 jobs.  This is a 3,8 million increase in jobs YoY vs. 2,643,000 in the establishment survey. 

  • Government jobs increased by 5,000.
  • the overall employment to population ratio for all ages 16 and above rose 0.2% from 59.0% to 59.2%,  and has risen by +1.0% YoY. The labor force participation rate rose from 62.7% to 62.8%, and is unchanged YoY - an actual improvement!  (and remember, this includes droves of retiring Boomers).
Oveall this was another solid report. Not only did unemployment go down,but it went down for the right reasons, i.e., employment was up and so was the civilian labor force participation rate.  Part-time for economic reasons also declined.    Revisions to past reports continued to be positive.

Of the important metrics I am watching now, adjusted for inflation, nonsupervisory wages probably also rose this month, albeit slightly.

Additionally, higher paying construction, manufacturing, and business and professional service jobs are showing consistent improvement.  In other words, with continued improvement in overall employment, it looks like the manta that the economy is only adding low paying jobs is beginning to give way.

The one big sore spot is the continuing increase in people who have completely stopped looking, but want a job now.  On the other hand, the  employment to population ratio among the prime 25-54 working age group made a new post-recession high, and is over 40% back to pre-recession levels - not great, but improvement nevertheless.