Friday, November 4, 2016

October Jobs report: a positive final report before the election

- by New Deal democrat

  • +161,000 jobs added
  • U3 unemployment rate declined -0.1% from 5.0% to 4.9%
  • U6 underemployment rate declined -0.2% from 9.7% to 9.5% (new post-recession low)
Here are the headlines on wages and the chronic heightened underemployment:

Wages and participation rates
  • Not in Labor Force, but Want a Job Now: down -176,000 from 6.088 million to 5.912 million  
  • Part time for economic reasons: down 5,000 from 5.894 million to 5.889 million
  • Employment/population ratio ages 25-54:rose +0.2% from 78.0% to 78.2% (new post-recession high)
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.04 from $21.68 to $21.72,  up +2.5% 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.)
August was revised upward by +9,000, and September was revised upward by +35,000, for a net change of +44,000. 

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were positive.
  • the average manufacturing workweek rose +0.1 from 40.8 to 40.9 hours.  This is one of the 10 components of the LEI, and is a positive.
  • construction jobs increased by +11,000 YoY construction jobs are up +195,000.  
  • manufacturing jobs declined by -9,000, and are down -53,000 YoY
  • temporary jobs - a leading indicator for jobs overall - increased by 6,400 (this made a peak last December, and recently has been stabilizing).

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - decreased by -177,000 from 2,574,000 to 2.397,000.  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 +43,000 and are up +542,000 YoY.

  • the index of aggregate hours worked in the economy rose by 0.2  from  105.8 to 106.0 
  •  the index of aggregate payrolls rose  0.7 from 130.6 to  131.3 . 
Other news included:         
  • the alternate jobs number contained  in the more volatile household survey decreased by  -43,000 jobs.  This represents an increase  of 2,728,000  jobs YoY vs. 2,357,000 in the establishment survey.    
  • Government jobs rose by +19,000.     
  • the overall employment  to  population ratio for all ages 16 and above declined from 59.8% to 59.7% m/m and is up +0.4% Y oY.   
  • The  labor force participation rate fell from 62. 9% to 62.8% and is up +0.3% YoY (remember, this includes droves of retiring Bsoomers).     

This was a nearly perfectly positive report, With the exception of manufacturing jobs, YoY wage growth and broad labor force participation, everything else was positive across the board. Espectially positive was the new low in the U6 underemployment rate, and the increase in the prime age participation rate.  One longer term caution is that the YoY change in payroll growth continues to decelerate, but there is no imminent cause for concern.

This report is probably more significant as the last piece of economic data that could affect the election.  That both the unemployment and underemployment rates are lower than they were last December is particularly positive for the candidate of the incumbent party.  The economic fundamentals point to a narrow (e.g., 52%/48%) Hillary Clinton victory.  If the broad electorate views both candidattes as about equally distasteful, that's where I see the election result coming in.