Friday, October 2, 2015

September jobs report: a downshift in the trend in employment growth

- by New Deal democrat


  • 142,000 jobs added to the economy
  • U3 unemployment rate unchanged at  5.1% 
With the expansion firmly established, the focus has shifted to wages and the chronic heightened unemployment.  Here's the headlines on those:

Wages and participation rates
  • Not in Labor Force, but Want a Job Now: up 23,000 from 5.932 million to 5.935 million
  • Part time for economic reasons: down  -447,000 from 6.483 million to 6.036 million
  • Employment/population ratio ages 25-54: unchanged at 77.2% 
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: unchanged at $21.08 ,  up +1.9%YoY. (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)
July was revised downward by -22,000.  August was also revised downward by -37,000, for a net change of -59,000.

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

  • the average manufacturing workweek fell -0.2 hours from 41.8 hours to 41.6 hours.  This is one of the 10 components of the LEI and so will affect it negatively.
  • construction jobs 8,000.  YoY construction jobs are up 199,000.  

  • manufacturing jobs decreased by -9,000, and are up 92,000 YoY.
  • Professional and business employment (generally higher-paying jobs) increased by 31,000 and are up 604,000 YoY.

  • temporary jobs - a leading indicator for jobs overall - rosse by 4,600.

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - rose by 268,000 from 2,095,000 (the post-recession low) to 2.363,000.

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

  • Overtime declined -0.2 hours from 3.3 hours to 3.1 hours.

  • the index of aggregate hours worked in the economy declined by 0.2 from  104.0 to 103.8. 
  • The broad U-6 unemployment rate, that includes discouraged workers fell by -0.3% from 10.3% to 10.0%. 
  •  the index of aggregate payrolls declined by -0.3% from 124.6  to 124.3 .
Other news included:      
  • the alternate jobs number contained in the more volatile household survey decreased by  -236,000  jobs.  This represents an increase of 2,193,000 jobs YoY vs. 2,708,000 in the establishment survey.  

  • Government jobs rose  by 24,000. 
  • the overall employment  to population ratio for all ages 16 and above fell -0.2%  from 59.4% to 59.2%,  and has risen by 0.2%  YoY. The labor force participation rate also fell -0.2% from  62.6% to 62.4% and is down -0.5% YoY (remember, this incl udes droves of retiring Boomers). 


Last month we had a "meh" headline jobs number with great internals.  This month we had a "meh" headline number with poor internals.  From a second month of sub-200,000 job growth to manufacturing hours to revisions of past months to declining e/p and labor force participation ratios to declining aggergate hours and payrolls, this was a poor report -- which basically took back last month's great report.

If you want a bright spot, it was the continued big decline in involuntary part time workers, which also drove down the U6 unemployment rate to 10.0%.  Below this number is where I expect nominal wage growth to finally improve.

This decline in employment trend growth is something I have seen for a number of months, as last year's poor housing market feeds through the rest of the economy this year.  This decline is also obviously about the continuing international deterioration feeding through the strong US$ to  a shallow industrial recession (but a continuing consumer expansion) here.