Friday, April 1, 2016

March jobs report: mixed headline, mainly negative leading employment indicators

- by New Deal democrat


  • +215,000 jobs added
  • U3 unemployment rate up +0.1% to 5.0%
  • U6 underemployment rate up +0.1% 9.8%
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:  down 158,000 from 5.870 million to 5.712 million
  • Part time for economic reasons: up 135,000 from 5.988 million to 6.123 million
  • Employment/population ratio ages 25-54: up +0.2% from 77.8% to 78.0% 
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.04 from $21.33 to $21.37,  up +2.3%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.)
January was revised downward by -4,000.  February was revised upward by +1,000, for a net change of -1,000. 

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

  • the average manufacturing workweek fell from 41.8 hours to 41.7 hours.  This is one of the 10 components of the LEI, the net will be a negative.
  • construction jobs +37,000.  YoY construction jobs are up +301,000.  
  • manufacturing jobs decreased by -29,000, and are now *down* -20,000 YoY
  • temporary jobs - a leading indicator for jobs overall increased by 4,000 (but is still down from December's high).

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - increased by 115,000 from 2,297,000 to 2.412,000.  The post-recession low was set 7 months ago at 2,095,000.

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

  • Overtime was unchanged at 3.3.
  • Professional and business employment (generally higher-paying jobs) increased by +33,000 and are up +606,000 YoY.

  • the index of aggregate hours worked in the economy rose by 0.2 from  104.9 to 105.1 (but is still below January's 105.3). 
  •  the index of aggregate payrolls rose by 0.5 from 127.2 to 127.7.
Other news included:      
  • the alternate jobs number contained in the more volatile household survey increased by +246,000 jobs.  This represents an increase  of 2,987,000  jobs YoY vs. 2,802,000 in the establishment survey.   
  • Government jobs rose by +20,000.   
  • the overall employment  to  population ratio for all a ges 16 and above rose  by  0.2  from  59.8   to 59.9  m/m and +0.6% YoY.  
  • The  labor force participation rate rose  0.1%  from 62.9%  to  63.0%  and is now up +.0.3% YoY (remember, this incl udes droves of retiring Boomers).  

Let me start with the positive.  In addition to the headline jobs number, the best news was the jump in the employment population ratio and the labor force participation rate.  The core e/p ratio for ages 25-54 has jumped +0.5% just in the last 3 months, and has now made up almost 2/3 of the ground it lost in the last recession.  That jump in participation is why both the unemployment and underemployment rates rose slightly.

Another piece of good news is in the leading construction sector, which has added nearly 5% more jobs in the last year. The higher paying professional and business services sector also has added about 3% more jobs in the same time.  Hourly earnings continued to be "meh," although aggregate payrolls grew smartly.

But the negatives, especially among the series that lead, are beginning to outweigh the positives.   Revisions were mixed. The manufacturing workweek declined, and manufacturing jobs are now down YoY. Although temporary jobs rose this month, they have failed to top their December peak for the last 3 months. Short term unemployment has continued to rise slightly. A coincident indicator, aggregate hours, also failed to exceed its January high.

So while we can cheer yet another month of jobs added to the economy, and the jump in participation, this report just adds to my concern about next year.

From Bonddad: 

A few comments on top of NDD’s points:

We’re seeing the long-term impact of the oil market slowdown along with the weaker trade environment.  From the report:

In March, employment in professional and business services changed little for the third month in a row. In 2015, the industry added an average of 52,000 jobs per month.

Employment in manufacturing declined by 29,000 in March. Most of the job losses occurred in durable goods industries (-24,000), including machinery (-7,000), primary metals (-3,000), and semiconductors and electronic components (-3,000).

Industrial production has been weak for the last 12 months while capital investment contracted in the 4Q15.  The combination of these two events means manufacturing jobs will be declining, explaining the drop of 29,000.  And, we’re also seeing broader ramifications of this slowdown.  For example, as manufacturers slow, they consumer fewer professional services, i.e. they are more judicious in using their accountant or lawyer.  This explains the weak pace of professional job growth.

Both the participation rate and employment/population ratio increased .1%.  This tells us that people are coming back into the labor force – another health sign.

However, how long can this pace of hiring continue in the face of weak corporate profit growth?

At some point, you’d think businesses would start to cut costs