April jobs report: great headlines, signs of fraying around the edges

- by New Deal democrat

HEADLINES: 

• +263,000 jobs added
• U3 unemployment rate declined -0.2% to 3.6% (new expansion low) 
• U6 underemployment rate unchanged at 7.3%

Leading employment indicators of a slowdown or recession

I am highlighting these because many leading indicators overall strongly suggest that an employment slowdown is coming. The following more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were strongly positive on a m/m basis, but several showed deceleration YoY.

• the average manufacturing workweek was unchanged at 40.7 hours. This is one of the 10 components of the LEI. It is down -0.6 hours from its peak during this expansion.
• Manufacturing jobs rose by 4,000. YoY manufacturing is up 204,000, a big deceleration from last summer’s pace.
• construction jobs rose by 33,000. YoY construction jobs are up 256,000, also a big deceleration from last summer. Residential construction jobs, which are even more leading, however, actually declined by -2500, a signal that the housing slowdown from last year has finally bled through into jobs.   

• temporary jobs rose strongly by 17,900. YoY these are up +53,500.
• the number of people unemployed for 5 weeks or less declined by -222,000 from 2,126,000 to 1,904,000.  This is a new post-recession low.

Wages and participation rates

Here are the headlines on wages and the broader measures of underemployment:

• Not in Labor Force, but Want a Job Now: declined by -106,000 from 5.227 million to 5.121 million
• Part time for economic reasons: rose by 155,000 from 4.499 million to 4.654 million
• Employment/population ratio ages 25-54: down -0.1% from 79.8% to 79.7%
• Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $.07 from  $23.24 to $23.31, up +3.4% 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 an average of +4,000/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 declined by -400 for an average of +58/month in the past year vs. the last seven years of Obama's presidency in which an average of -300 jobs were lost each month

February was revised upward by 33,000. March was revised downward by -7,000, for a net change of 26,000.

Other important coincident indicators help  us paint a more complete picture of the present:

• Overtime was unchanged at 3.4 hours.
• Professional and business employment (generally higher-paying jobs) increased by 76,000 and  is up 535,000 YoY. This has decelerated slightly from last year’s pace.
• the index of aggregate hours worked for non-managerial workers rose by 0.2%

•  the index of aggregate payrolls for non-managerial workers rose by 0.5%  

Other news included:            

• the  alternate jobs number contained  in the more volatile household survey declined by -103,000  jobs.  This represents an increase of 1,429,000 jobs YoY vs. 2,720,000 in the establishment survey. Further, the survey has been negative for three of the last four months. This is a major disconnect and, because the household survey has a tendency to turn first, is a definite concern.
• Government jobs rose by 27,000.

• the overall employment to population ratio for all ages 16 and up was unchanged at 60.6% m/m and is up 0.3% YoY.          
• The labor force participation rate declined -0.2% from 63.0% to 62.8% and is unchanged YoY.

SUMMARY

There was another major disconnect between the headline jobs and unemployment numbers and the rest of the report.

Let me start with the additional good stuff. Temporary help and construction jobs rose stoutly, the former very much at odds with the private weekly data. Short term unemployment fell to a new low. Services employment in general was very strong. Aggregate hours and payrolls for non-supervisory workers rose strongly again.

Now, the negatives. Residential construction jobs declined. Involuntary part-time employment rose, a sign of some fraying at the edges. Both the labor force participation rate and the prime age employment to population ratio fell. In other words, the unemployment rate fell because there were fewer people in the labor force. But the biggest negative is the fact that employment as measured by the household report declined for the third time in four months, is down for the year, and is up only 63,000 for the past six months. 

Note that this survey was taken during the week when we had record low new jobless claims. In the two weeks since, those have jumped. I suspect we may see some similar payback in next month’s jobs report as well. So while we can celebrate the good headline and wage numbers, there are substantial signs of fraying around the edges.