Friday, August 5, 2016

July jobs report: welcome and nearly uniformly positive

- by New Deal democrat

  • +255,000 jobs added
  • U3 unemployment rate unchanged at 4.9%
  • U6 underemployment rate down -0.1 from 9.8% to 9.7%
Here are the headlines on wages and the chronic heightened underemployment:

Wages and participation rates
  • Not in Labor Force, but Want a Job Now:  rose 194,000 from 5.692 million to 5.886 million  
  • Part time for economic reasons: rose 97,000 from 5.843 million to 5.940 million
  • Employment/population ratio ages 25-54: rose +0.2% from 77.8% to 78.0% 
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up +$.07 from $21.52 to $21.59,  up +2.6% 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.)
May was revised upward by 13,000, and June was revised upward by 5,000, for a net change of +18,000. 

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were all positive.
  • the average manufacturing workweek rose +0.2 from 41.8 to 42.0 hours.  This is one of the 10 components of the LEI, and is a big positive.
  • construction jobs rose by 14,000 YoY construction jobs are up +215,000.  
  • manufacturing jobs increased by 9,000, but are down -31,000 YoY
  • temporary jobs - a leading indicator for jobs overall increased by 17,000 (this made a peak in December, and seems to be stabilizing now).

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - decreased by -258,000 from 2,418,000 to 2.160,000.  The post-recession low was set 11 months ago at 2,095,000.

Other important coincident indicators help  us paint a more complete picture of the present:
  • Overtime rose +0.1 from 3.2 hours  to 3.3 hours.
  • Professional and busines s employment (generally higher- paying jobs) --creased by 70,000 and are up -550,000 YoY.

  • the index of aggregate hours worked in the economy rose  by 0.5 from  105.4 to 105.9 
  •  the index of aggregate payrolls rose  by 1.0 from 129.0 to 130.0. 
Other news included:        
  • the alternate jobs number contained  in the more volatile household survey increased by  420,000  jobs.  This represents an increase  of 2,631,000  jobs YoY vs. 2,447,000 in the establishment survey.   
  • Government jobs rose  by 38,000.     
  • the overall employment  to  population ratio for all ages 16 and above rose 0.1%  from  59.6% to 59.7% m/m but is up +0.4% YoY.  
  • The  labor force participation rate rose  0.1%  from 62.7%  to  62.8%  and is up +.0.2% YoY (remember, this includes droves of retiring Bsoomers).     

This was obviously a very good report.  Not only were the headlines good, but almost all of the internals were positive as well.  Only the two measures of underemployment -- part time for economic reasons, and those not in the labor force who want a job now -- were negatives.  This relative lack of improvement in underemployment is something that happens in the decelerating part of an expansion.

But overall this report isn't just good for July, it suggests that this expansion still has a ways to go.  A welcome report.

UPDATE   There are two particularly good takeaways in this report:  (1) nominal YoY wage growth, at 2.6%, is the best bof this economic expansion; and (2) aggregate wage growth of +1.0% in just one month.  This is potent evidence that the economy has improved enough where gains are being more widely shared -- very good for the average American.