September jobs report: a positive - if stale - report

 

 - by New Deal democrat

First things first: the jobs data we received this morning, like the official data reported earlier this week, is “stale news.” The period canvassed giving rise to this data was over two months ago. As such, aside from the fuller texture which it provides to us, the most important question is how well the alternative data sources accorded with this data.

In a more medium term context, even before this year, my focus had been on whether the economy would have a “soft” or “hard” landing, i.e., recession. The last two reports before the government shutdown were very much “hard landing” reports. Thus my focus now, as it would have been two months ago, is whether the more leading components, as well as the headline numbers, accord with a near term or even imminent start of a recession.

Below is my in depth synopsis.

HEADLINES:

• 119,000 jobs added. Private sector jobs increased 97,000. Government jobs rose 22,000. The three month average rose to +62,000.
• The pattern of downward revisions to previous months continued. July was revised downward by -9,000 to +70,000, and August was revised downward by -26,000 to -4,000, for a net declined of -35,000. 
• The alternate, and more volatile measure in the household report, rose by 251,000 jobs. On a YoY basis, this series increased 1,843,000 jobs, or an average of 154,000 monthly.
• The U3 unemployment rate rose 0.1% to 4.4%, the highest since October 2021, but well below the “Sahm rule” threshold for confirming a recession.
• The U6 underemployment rate declined -0.1% to 8.0%.
• Further out on the spectrum, those who are not in the labor force but want a job now declined by -421,000 to 5.933 million, the lowest since May.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn. For the second month in a row they were sharply negative:

• The average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, rose 0.1 hours to 41.0 hours, but is down -0.6 hours from its 2021 peak of 41.6 hours.

• Manufacturing jobs decreased by -6,000, the fifth decline in a row. This series declined sharply in the second half of 2024 before stabilizing earlier this year. It is now at a 3+ year low.
• Truck driving, which had briefly rebounded earlier this year, declined -6,800.
• Construction jobs rose 19,000.
• Residential construction jobs, which are even more leading, rose 3,900, the first increase after 5 straight declines.
• Goods producing jobs as a whole rose 10,000, after declining for 4 months in a row. 

• Temporary jobs, which have declined by over -650,000 since late 2022, declined again this month, by -15,900, a new post-pandemic low.
• The number of people unemployed for 5 weeks or fewer declined -249,000 to 2,227,000.

Wages of non-managerial workers 

• Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.08, or +0.3%, to $31.53, for a YoY gain of +3.8%, its lowest YoY% gain in 4 years. Nevertheless, this continues to be significantly above the 3.0% YoY inflation rate through September.

Aggregate hours and wages: 

• The index of aggregate hours worked for non-managerial workers rose 0.3%, and is up 1.0% YoY, about average for the past two years.

• The index of aggregate payrolls for non-managerial workers rose 0.6%, and is up 4.8% YoY, near its post-pandemic lows.

Other significant data:

• Professional and business employment declined another -20,000. These tend to be well-paying jobs. This is the fifth decline in a row, and is the lowest number in over 3 years. It is also lower YoY by -0.3%, which in the past 80+ years - until now - has almost *always* meant recession. This is vs. last spring when it was down -0.9% YoY.
• The employment population ratio rose 0.1% to 59.7%, vs. 61.1% in February 2020.
• The Labor Force Participation Rate increased +0.1% to 62.4% , vs. 63.4% in February 2020.

SUMMARY

This was a respite from the last few gloomy reports, as a number of series, most importantly the headline jobs number, rebounded nicely. Construction and goods producing jobs increased, and even government jobs increased , while discouraged workers who want a job and the short term unemployed declined sharply. Real wages and hours held steady, while real aggregate payrolls for nonsupervisory workers rose significantly. The employment population and labor force participation rates also rose. Of note, the headline number for private employment rose by more than all of the alternative data sets that were necessary to use during the shutdown.

But there were negative signs as well. Manufacturing continued to shed jobs, as did trucking, temporary help, and professional and business jobs. The unemployment rate also rose to a new multi-year high, although this was in large part due to the sharp increase in the labor force. Also of note, this report confirmed two negative readings in the last five months. During those five months, payrolls have risen only 193,000 in total, or 38,600 per month on average.

All things considered, this was a positive - if stale - report.

Partially updated jobless claims data suggest unemployment rate at or near top end of 2025 range

 

 - by New Deal democrat

There was no new official data reported this morning, including the normal monthly report on housing permits, starts, and construction. Yesterday the Department of Labor did partially update several weeks of jobless claims data, which helps us estimate what might happen with the unemployment rate when the September jobs report is finally released tomorrow.

Unadjusted initial claims were reported as 237,750 for the last week (a grand total of 38 claims higher than my calculation, probably reflecting the inclusion of the Virgin Islands. This translated to 232,000 as adjusted. Unadjustted continuing claims for the last two weeks were reported as 1,674,170 and 1,708,565 respectively, both of which were significantly lower than the number I was able to tabulate from the data reported by the States. This translated into 1.947 and 1.957 claims as adjusted, very close to my estimates.

In any event, although several weeks of data remain missing for now, here is what the updated graph of each looks like:

Continuing claims (right scale) are near the top of their 2025 range, while initial claims (left scale) are in roughly the middle of theirs.

Remember that initial claims are the more leading but noisier indicator for the unemployment rate, while continuing claims are closer to coincident, but carry more signal. When we compare continuing claims (right scale) with the unemployment rate through August (left scale), it suggests that in tomorrow’s report the unemployment rate is likely to be 4.2% or 4.3%:

This would be in line with the top range of the unemployment rate this year so far.

Tomorrow will be a busy day, as in addition to the delayed jobs report, we are likely to get the first timely updated jobless claims report (possibly with more back details) as well as existing home sales from the NAR.

August factory orders rebounded from early summer lows

 

 - by New Deal democrat

As with yesterday, the good news is that important official economic data is being reported again. The bad news is that it is very stale, as in covering last August.

Still, one important area that private data did not cover well during the shutdown was orders and spending on durable goods, both for manufacturers and consumers. So even if the data is stale, at least it gives us more information than we had before.

To wit, durable goods orders for August confirmed what we have been seeing in some of the manufacturing indexes, which is a slight rebound from this spring. Headline durable goods orders increased 2.9%, while total manufacturing orders increased 1.4%. Core capital goods orders (subtracting defense and aircraft) rose 0.4%:

Here is what the post-pandemic view looks like (normed to 100 as of February 2020):

And here is what the monthly change in new orders looks like (*4 for scale) compared with the more up-to-date regional Fed metrics from NY and Philly:

Finally, one marker of a recession is when sales go down, but inventories increase - because that means cutbacks in manufacturing and layoffs of employees. In August, shipments declined by a little over -0.1%, while the tiny increase in inventories rounded to unchanged:

Again, with the important caveat that this data is almost three months old, it suggests that  manufacturing found its footing after this spring’s chaotic uncertainty about tariffs, and the national trend is likely to follow the slightly improving trend we have seen from the regional data during the shutdown.

August construction spending: strong nominal headline masks neutral real trend in the deep rear view mirror

 

 - by New Deal democrat

The good news is, with the end of the government shutdown, economic data reporting resumed this morning. The bad news is, we are now in the latter part of November, and the construction spending report issued this morning was for all the way back in August. In fact, the last time I updated this information here was back at the beginning of September. So, since the information in this morning’s report is already stale, I am going to keep this brief.

When we last got information, for July, it continued the trend of declining since the summer of 2024 once we adjusted for the cost of construction materials.

In nominal terms, together with revisions, in August that reversed. For the month, total construction spending (blue in the graph below) rose 0.2%,  while residential construction spending (red, right scale) increased 0.8%, the third advance in a row for both metrics in nominal terms:

Adjusted by the cost of construction materials, however, residential construction spending declilned slightly, by less than -0.1%:

Although this is higher than readings this past spring, it looks more like stabilization than an actual turnaround - and once again, we are talking about August data, so it gives us almost no currently significant insight.

Finally, the boom in spending on building manufacturing plans continued to wane, after an explosive boom following the Biden infrastructure bill:

The August decline of -0.9% is the 10th decline in the past 12 months. While the buildout of new plants continues at a very strong pace, the trend (which is more important for the direction of the economy) is a decline.

Although the nominal headline increases are nice, I take this as no better than a neutral report

Jobless claims continue slightly elevated YoY

 

 - by New Deal democrat

Hopefully for the last time . . . As I have done since the beginning of the government shutdown, the unadjusted number of initial and continuing claims can be calculated based on reporting by the States, plus DC, and Puerto Rico. Then, by applying the same adjustment as was used for the same week last year, the seasonally adjusted number can also be estimated closely as well. This post covers initial claims for the week ending November 8, and continuing claims ending November 1.

Since my forecasting method relies on the YoY% changes, it is almost never an affected by that seasonality.  So tabulated, for the week ending November 8, unadjusted initial claims totaled 237,712 vs. 230,810 in 2024, an increase of 3.0%.  

Last year this week the seasonal multiplier was *0.94853. Applying it gives us an estimated seasonally adjusted number of 226,000.

We can similarly calculate the four week moving average, since the last four weeks of claims were 230,000, 220,000, and 225,000, as well as this week’s 226,000. That gives us an average of 225,250, which is 3,750, or 1.7% higher than the 221,500 of one year ago.

Using the same methodology, unadjusted continuing claims for the week ending November 1 totaled 1,715,989 vs. 1,647,230 last year, an increase of 4.2%.

The seasonal adjustment for the applicable week last year was *1.13645. Applying it gives us an estimate of 1.950 million continuing claims, or -4,000 lower than one week ago. Still, continuing claims throughout the government shutdown have all been close to their highest levels since 2021, which was 1.968 million this past July. 

Aside from the 2024 hurricane related distortions during October, this continues the general neutral trend that was in place before the shutdown, i.e. higher than one year ago but much less than 10% higher, forecasting a weakly expanding economy for the next several months.

Weekly Indicators for November 10 - 14 at Seeking Alpha

 

 - by New Deal democrat

My “Weekly Indicators” post is up at Seeking Alpha.

The trends of strong retail spending, a weak US$, and strength in commodity prices all continue. But in recent weeks withholding tax payments have waned. While there can be a number of causes for that, it definitely merits a caution flag as to job creation.

As usual, clicking over and reading will bring you up to the virtual moment at to the state of the economy, and reward me with a little lunch money for my efforts in collecting and collating it for you.