Friday, January 8, 2016

December jobs report: a solid report with few blemishes

- by New Deal democrat


  • 292,000 jobs added to the economy
  • U3 unemployment rate unchanged at 5.0%
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 249,000 from 5.637 million to 5.886 million
  • Part time for economic reasons: down -63,000 from 6.085 million to 6.022 million
  • Employment/population ratio ages 25-54: was unchanged at 77.4% 
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.02 from $21.20 to $21.22,  up +2.4%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.)
October was revised upward by 9,000.  November was also revised upward by 41,000, for a net change of 50,000.

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

  • the average manufacturing workweek declined from 41.7 hours to 41.6 hours.  This is one of the 10 components of the LEI and will be a negative.
  • construction jobs 45,000.  YoY construction jobs are up 263,000.  
  • manufacturing jobs increased by 8,000, and are up 30,000 YoY.
  • Professional and business employment (generally higher-paying jobs) increased by 73,000 and are up 605,000 YoY.

  • temporary jobs - a leading indicator for jobs overall increased by 34,400.

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - fell by 7,000 from 2,412,000 to 2.405,000.  The post-recession low was set 4 months ago at 2,095,000.

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

  • Overtime was up 0.1 hour from 3.2 hours to 3.3 hours.

  • the index of aggregate hours worked in the economy rose by 0.3% from  104.3 to 104.6. 
  • The broad U-6 unemployment rate, that includes discouraged workers was unchanged at 9.9%. 
  •  the index of aggregate payrolls rose by 03%  from 125.7 to 126.0.
Other news included:      
  • the alternate jobs number contained in the more volatile household survey increased by 485,000  jobs.   This represents an increase  of 2,490,000  jobs YoY vs. 2,650,000 in the establishment survey.  
  • Government jobs rose  by  17,000.  
  • the overall employment  to  population ratio for all a ges 16 and above rose by .1 to 59.5  m/m and +0.3% YoY.  The labor force participation rate rose 0.1% from 62.5%  to 62.6%  and is down -0.1% YoY (remember, this incl udes droves of retiring Boomers).  

This was a solid report with just a few blemishes. Job increases were across the board, even in manufacturing.  Average wages were up, and are now up +2.4% YoY, the best in several years.  Aggregate hours and wages increased solidly. Revisions were positive.

The blemishes were sideways unemployment and participation, the decline in the manufacturing workweek, and the increase in those outside of the labor force who want a job, as well as the deceleration in YoY job growth.

I caution against reading too much into the YoY wage increase, since what really happened is that the miserable -0.6% decline in December 2014 dropped out of the YoY comparison.  The decline in YoY job growth, confirming that we are late in the expansion, together with continued objectively poor underemployment, should be taken as serious issues.  I can't emphasize how much I am worried about outright wage deflation, with all that implies, whenever the next recession hits.