Friday, October 7, 2016

September jobs report: mixed news showing further deceleration approaching a peak

- by New Deal democrat

  • +156,000 jobs added
  • U3 unemployment rate rose +0.1% from 4.9% to 5.0%
  • U6 underemployment rate unchanged at 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:  up +255,000 from 5.833 million to 6.088 million  
  • Part time for economic reasons: down -159,000 from 6.053 million to 5.984 million
  • Employment/population ratio ages 25-54: up +0.2% from 77.8% to 78.0% (tie for post-recession high)
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.06 from $21.63 to $21.68,  up +2.6% YoY. (tied for post-recession high)  (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 down by -23,000, and August was revised up by +16,000, for a net change of -7,000. 

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mixed.
  • the average manufacturing workweek rose 0.1 from 40.7 to 40.8 hours.  This is one of the 10 components of the LEI, and is a positive.
  • construction jobs rose by +23,000 YoY construction jobs are up +218,000.  
  • manufacturing jobs fell by -13,000, and are down -47,000 YoY
  • temporary jobs - a leading indicator for jobs overall - increased by 23,200 (this made a peak in December, and recently has been stabilizing).

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - increased by 284,000 from 2,290,000 to 2.574,000.  The post-recession low was set 1 year 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 hours.
  • Professional and business employment (generally higher- paying jobs) increased by 67,000 and are up +582,000 YoY.

  • the index of aggregate hours worked in the economy rose by 0.4  from  105.4 to 105.8 
  •  the index of aggregate payrolls rose  0.9 from 129.6 to  130.5. 
Other news included:        
  • the alternate jobs number contained  in the more volatile household survey increased by  354,000 jobs.  This represents an increase  of 3,036,000  jobs YoY vs. 2,447,000 in the establishment survey.    
  • Government jobs fell by -11,000.     
  • the overall employment  to  population ratio for all ages 16 and above rose from 59.7% to 59.8% m/m and is up +0.5% YoY.   
  • The  labor force participation rate rose from 62.8% to 62.9% and is up +0.5% YoY (remember, this includes droves of retiring Bsoomers).     

This was a mixed report, continuing to show late cycle deceleration.  

The biggest negative was the uptick in the unemployment rate to 5.0%.  This metric has gone basically sideways since last December, and I suspect we may already have seen the low for this series for this expansion in May at 4.7%.  The broader measures of underutilization -- involuntary part-time employment and those not in the labor force who want a job now -- have also made no further progress this year.The uptick in short term unemployment is also a negative, contradicting the good initial jobless claims reports. Revisions have also been running generally negative all year long. 

Positive news included the headline number, as well as the increases in the employment to population ratio, the labor force participation rate, and aggregate hours and payrolls.  Temporary jobs have come back from lows earlier this year, although not to new highs. Average hourly earnings are also showing YoY strength.

This report does not show recession now or imminently.  But it does contain signs of an economic expansion that may be nearing peak.