Friday, March 9, 2018

February jobs report: a blowout! Except (sigh) for wages

- by New Deal democrat

  • +313,000 jobs added
  • U3 unemployment rate unchanged at 4.1%
  • U6 underemployment rate unchanged at 8.2%
Here are the headlines on wages and the chronic heightened underemployment:

Wages and participation rates
  • Not in Labor Force, but Want a Job Now: declined -40,000 from 5.171 million to 5.131 million   
  • Part time for economic reasons: rose 171,000 from 4.989 million to 5.160 million
  • Employment/population ratio ages 25-54: rose 0.3% from 79.0% to 79.3%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: rose $.06 from  $22.34 to $22.40, 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.)      
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 31,000 for an average of 18,700/month in the past year 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 increased by 300 for an average of -17/month vs. the last seven years of Obama's presidency in which an average of -300 jobs were lost each month
December was revised upward by 15,000. January was also revised upward by 39,000, for a net change of +54,000.   

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 hours (reversing last month's decline).  This is one of the 10 components of the LEI.
  • construction jobs increased by 61,000. YoY construction jobs are up +254,000.  
  • temporary jobs increased by 26,500. 
  • the number of people unemployed for 5 weeks or less increased by 228,000 from 2,280,000 to 2,508,000.  The post-recession low was set over two years ago at 2,095,000.
Other important coincident indicators help  us paint a more complete picture of the present:
  • Overtime rose from 3.5 to 3.6 hours.
  • Professional and business employment (generally higher- paying jobs) increased by  50,000 and  is up +495,000 YoY.

  • the index of aggregate hours worked in the economy rose by 0.9%.
  •  the index of aggregate payrolls rose by 0.6% .     
Other news included:            
  • the  alternate jobs number contained  in the more volatile household survey increased by  785,000  jobs.  This represents an increase of 1,924,000 jobs YoY vs. 2,281,000 in the establishment survey.      
  • Government jobs rose by 28,000.       
  • the overall employment to population ratio for all ages 16 and up rose 0.3% to 60.4  m/m  and is up 0.4% YoY.          
  • The  labor force participation  rate rose 0.3% to 63.0  m/m and is up 0.1% YoY  

This was a a blowout positive report as to nearly all metrics. All important categories of employment rose strongly, as well as aggregate hours and aggregate payrolls, the employment to population ratio and the labor force participation rate. Among prime age workers, the e/p ratio is now only -0.9% under its 2006 high, although it is still about 2% under its all time high from 1999. 

Even the "soft" data of the unemployment and underemployment rates is largely explained by the surge in labor force participation -- i.e., more people entering the jobs market to find work.

Negatives remain the persistently high number of people who are not even in the labor force but say they want a job now, and the increase in involuntary part-time employment.

Wage growth for ordinary workers remains little better than flaccid, up 2.5% YoY this month. Last month's much ballyhooed 2.9% YoY increase for all workers fell back to a 2.6% rate. In the past, a surge in labor force participation has meant a short-term deceleration in wage growth .

So in sum this was an excellent report. But it does nothing to assuage my longer term concern about what will happen to wages in the next recession.