Friday, November 3, 2017

October jobs report: great utilization, decent growth, poor wages

- by New Deal democrat

  • +261,000 jobs added
  • U3 unemployment rate down -0.1% from 4.2% to 4.1%
  • U6 underemployment rate down -0.3 from 8.2% to7.9%
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 -443,000 from 5.628 million to 5.135 million   
  • Part time for economic reasons: down -369,000 from 5.122 million to 4.753 million
  • Employment/population ratio ages 25-54: down -0.1% from 78.9% to 78.8%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: down -$.0.1 from $22.23  to $22.22, up +2.4% 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.)  
Holding Trump accountable on manufacturing and mining jobs

 Trump specifically campaigned on bringing back manufacturing and mining jobs.  Is he keeping this promise?  
  • Manufacturing jobs rose by +24,000 for an average of  +14,000 a month vs. the last seven years of Obama's presidency in which an average of 10,300 manufacturing jobs were added each month.   
  • Coal mining jobs were unchanged for an average of +250 a month vs. the last seven years of Obama's presidency in which an average of -300 jobs were lost each month
August was revised upward by +39,000. September was also revised upward by +51,000, for a net change of +90,000.   

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 +0.2 hours from 40.8 hours to 41.0.  This is one of the 10 components of the LEI.
  • construction jobs increased by +11,000. YoY construction jobs are up +187,000.  
  • temporary jobs increased by +18,300. 
  • the number of people unemployed for 5 weeks or less decreased by -97,000 from 2,226,000 to 2,129,000.  The post-recession low was set al,ost two years ago at 2,095,000.
Other important coincident indicators help  us paint a more complete picture of the present:
  • Overtime rose +0.2 hours to  3.5 hours.
  • Professional and business employment (generally higher- paying jobs) increased by +50,000 and  is up +546,000 YoY.

  • the index of aggregate hours worked in the economy rose by 0.2  from 107.4 to  107.6   
  •  the index of aggregate payrolls rose by 0.8 from 176.5 to 177.3 .    
Other news included:           
  • the  alternate jobs number contained  in the more volatile household survey decreased by  -484,000  jobs.  This represents an increase of 1,959,000  jobs YoY vs. 2,004,000 in the establishment survey.     
  • Government jobs rose by 900.      
  • the overall  employment to  population ratio for all ages 16 and up fell -0.2% from 60.4% to  60.2 m/m  and is up +0.5%  YoY.        
  • The  labor force participation  rate fell -0.4% m/m and is down -0.1% YoY from 63.1% to 62.7%.        

  This was an excellent report in terms of labor utilization, decent in terms of jobs growth, and poor in terms of wages.

The big declines in unemployment, underemployment, involuntary part time employment, and persons who want a job now but haven't looked have nudged us very close to what has been "full employment" in the past two expansions.  We may be as little as 1.5 million jobs away.

The total gain in employment in the last two months is 279,000, or an average of 140,000 per month for the hurricane-affected month and the recovery. This is no better than mediocre or average.

That hourly wages for nonsupervisory workers actually *fell* month over month, and are still only up 2.4% YoY quite simply is awful this late into an expansion.

Bottom line: the late cycle deceleration in YoY employment gains is continuing, and outright wage deflation come the next recession looms ever larger. 

-- From Bonddad

Here's my inflation-adjusted 2 cents.

First, the 3, 6 and 12 month moving average of establishment job growth is slightly above 150,000/month:

These numbers have been declining since the end of 2014.  As we are now late-in-the-game of this recovery, I wouldn't expect more than 150,000 average month growth going forward.

We're seeing some weak Y/Y numbers.

Total service producing jobs (top chart), while still positive, are declining Y/Y.  Both retail (middle chart) and information jobs (bottom chart) are declining.

     Overall, the wage picture is weak:

The top two charts were released earlier this week in the BEA's personal income data.  Real DPI and real DPI less transfer payments are barely getting about 1% on the Y/Y basis.  Average hourly earnings (bottom chart), which are part of the employment report, are still weak on a historical basis.