Friday, January 6, 2017

December jobs report: a positive report to close Obama's Presidency

- by New Deal democrat

  • +156,000 jobs added
  • U3 unemployment rate up +0.1% from 4.6% to 4.7%
  • U6 underemployment rate down -0.1% from 9.3% to 9.2%
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 5.876 million to 5.662 million  
  • Part time for economic reasons: down -64,000 from 5.662 million to 5.598 million
  • Employment/population ratio ages 25-54: up +0.1% from 78.1% to 78.2% 
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.07 from $21.73 to $21.80,  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.)
October was revised downward by -7,000, but November was revised upward by +26,000, for a net change of +19,000. 

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 positive.
  • the average manufacturing workweek rose 0.1 from 40.6 to 40.7 hours.  This is one of the 10 components of the LEI, and is a positive.
  • construction jobs decreased by -3,000 YoY construction jobs are up +102,000.  
  • manufacturing jobs increased by +17,000, but are down -45,000 YoY
  • temporary jobs decreased by -15,500.

  • the number of people unemployed for 5 weeks or less decreased by -36,000 from 2,415,000 to 2,379,000.  The post-recession low was set over 1 year 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 to 3.3 hours.
  • Professional and business employment (generally higher- paying jobs) increased by +15,000 and are up 522,000 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 by 0.7 from 131.0 to 103.7. 
Other news included:         
  • the alternate jobs number contained  in the more volatile household survey increased by  +63,000 jobs.  This represents an increase  of 2,811,000  jobs YoY vs. 2,157,000 in the establishment survey.    
  • Government jobs rose by +12,000.     
  • the overall employment  to  population ratio for all ages 16 and up was unchanged at  59.7%  m/m  and is up +0.1% YoY.   
  • The  labor force participation  rate was unchanged at  62.7% and is also unchanged YoY (remember, this includes droves of retiring Bsoomers).     

This was a nearly uniformly positive report. While the headline unemployment rate rose slightly, and there were some downward revisions to last month's strongly positive household survey numbers, the broader underemployment rate continued its recent strong decline.  Hours and wages increased.

As Barack Obama closes out his Presidency, his record on jobs (as a share of the prime working age population)  and aggregate wage creation is nearly that of Ronald Reagan's.  The weak points remain a participation rate for the working age population that never made it back more than 2/3's of the way to last 2007 high, and wages that never increased more than 2.6% YoY.  Since wages gains YoY typically fall by about that percentage during recessions, I continue to fear that the next recession will include actual wage deflation, with the possibility of a wage/price deflationary spiral.