Friday, May 3, 2013

April employment: a good report with crappy leading internals

- by New Deal democrat

I dubbed last month's report "the best awful employment report I've ever seen." This month was somewhat the reverse. The headline jobs number slightly beat expectations at 165,000, and the unemployment rate declined -0.1% to 7.5%. (BTW, a long long time ago the Pied Piper of Doom said he'd consider an unemployment rate of under 8% an actual recovery. I must've missed the celebration.).

Anyway, while the headline jobs number and unemployment rate sketch out where the economy is. As usual for me, let's look first at the more leading numbers in the report which tell us about where the economy is likely to be a few months from now - and that's where the problem comes in:
  • The good news is that temporary jobs - a leading indicator for jobs overall - increased by 31,000. The bad news is that all of the other leading components of the report were unchanged or weakened.

  • construction jobs declined -6,000

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - rose 10,000 from 2,464,000 to 2,474,000. Nevertheless, both March and April have been near a new post-recession low.

  • the average manufacturing workweek declined -0.1 hour from 40.8 hours to 40.7 hours. This is one of the 10 components of the LEI and will affect that number

  • manufacturing jobs were unchanged.

Now here are some of the other important coincident indicators filling out our view of where we are now - and the internals here are decidedly mixed:
  • the average workweek decreased from 34.6 to 34.4 hours

  • overtime hours decreased by -0.1 hours

  • The broad U-6 unemployment rate, that includes discouraged workers, actually rose from 13.8% to 13.9%

  • the index of aggregate hours worked in the economy fell -0.4 from 98.2 to 97.8

  • government continued to shed jobs, -11,000 this month
Good news included:
  • the alternate jobs number contained in the more volatile household survey showed a gain of 293,000 jobs

  • 31,000 people entered the labor force, so the declining unemployment rate was unambiguously good.

  • February's report was revised up 44,000 to 332,000. This was the first 300,000+ number of the recovery, and a number Paul Krugman once said he would consider unambiguously good. March was revised up 50,000 to 138,000. Positive revisions like this happen in recoveries, not at the onset of recessions.

  • average hourly earnings increased $.04 to $23.87. The YoY change rose from +1.8% to +1.9%. When the CPI for April is reported (possibly as low as -0.5%) we are probably going to find that real, inflation adjusted hourly earnings are the most positive in several years.

The decline in the unemployment rate was certainly good news, but remember that it is a lagging indicator. The best news in the report was the revision to January, finally giving us a 300,000+ report in the recovery. None of the numbers indicate we're in a recession now - and, special memo to ECRI, your meme that employment can rise in a recession is now busted, since the longest that happened is 8 months after a peak, and we're now 9 months past the month you are claiming was the peak.

Nevertheless, the leading components of the report almost all weakened.