Friday, January 5, 2007

Solid Employment Report , +167,000

From the BLS:

Nonfarm employment increased by 167,000 in December, and the unemployment rate was unchanged at 4.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Job gains occurred in several service- providing industries, including professional and business services, health care, and food services. Average hourly earnings rose by 8 cents, or 0.5 percent, in December.

This is a solid number, especially when the consensus was lower. Let's look at the details.

Construction was -3000. I have a hard time squaring this number with all of the 1000+ layoffs the DOL reported in their weekly unemployment claims. Yesterday alone we have 12 states that reported more than 1000 layoffs in manufacturing and construction. I am guessing they will revise this number higher.

Manufacturing was -11,000: One of the untold stories of this expansion is the incredible inverse relationship between manufacturing output increases and manufacturing employment decreases. Manufacturing output is now above the 2001 pre-recession level, but employment has not followed suit. In short, the productivity increases have seriously eaten into manufacturing employment growth.

Retail was -9000. This jibes with the weak retail numbers we saw yesterday. Obviously retailers were either expecting a slower season or were trying to cut costs to increase profits during a slow season, or a combination of both.

Employment in retail trade was little changed over the month after rising by 39,000 in November. Building and garden supply stores lost 8,000 jobs in December. Over the year, retail trade employment edged down.

Translation: Home Depot and Lowe's laid people off. Interestingly, retail employment has trended down this year, despite an increase in consumer spending. Any thoughts on why?

Professional and Business +50,000. Another solid gain in this area. We have seen these numbers perform well for awhile now. Here is some more detail from the report:

Job gains occurred in services to buildings and dwellings (13,000) and in management and technical consulting services (7,000). Employment continued to trend up in architectural and engineering services and in computer systems design and related services.

There seem to be a fair amount of real estate related gains here.

Education and Health Services, +43,000. This has also been a constant trend for this expansion. I would expect this trend to continue for a long time as the US population grows older. I do wish the BLS would break these numbers out -- that is, separate education from health services. Here is more from the report:

Employment rose in ambulatory health care services (14,000), hospitals (11,000), and nursing and residential care facilities (7,000).

Leisure and Hospitality, +31,000. This is another area where we have seen a large amount of job growth. While people do have to eat somewhere, I have to wonder who is filling these jobs. 23,000 of these jobs were in food services and drinking places -- bars and restaurants.

The .5% increase in wages may scare the Fed, which is still very concerned about inflation.

One final note. In late 2006, the BLS revised jobs created by +800,000 plus (or somewhere near that number). In other words, there was a serious methodological flaw somewhere in the BLS' system. I do not know if they have taken care of that issue.