Friday, February 7, 2014

US Employment : Wow, Another Weak Report.

First, I have the rather unenviable task of filling in for NDD on this issue.  That does mean you'll get my somewhat different opinion about the employment report's importance.  I've grown to be less and less a fan of the monthly "US employment report" release for several reasons.  First, people only focus on the unemployment rate rather than the entire employment picture which includes such things as employer behavior (which is derived from the JOLTs report), employee confidence and labor utilization.  Second, this report is usually revised multiple times, so the first number could be an accurate number -- or nowhere near was happening.

In addition, this report as several one off points to deal with.  The first is the weather.  The entire country has been hit by massive weather disruptions over the last month or so.  We've seen this effect the ISM reports, housing numbers and auto sales.  In addition, this report has the deal with the effects of the expiration of unemployment benefits and the annual revision to the numbers.  This FT story explains this issue in more detail.

And we're off.  Let's start, well, at the beginning:

Total nonfarm payroll employment rose by 113,000 in January, and the unemployment rate was little changed at 6.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment grew in construction, manufacturing, wholesale trade, and mining. 

Total nonfarm payroll employment increased by 113,000 in January. In 2013, employment growth averaged 194,000 per month. In January, job gains occurred in construction, manufacturing, wholesale trade, and mining.  

These are not wonderful numbers.  First, 113,000 is simply a weak number.  And the 194,000/month of growth for the last year is OK but we would do better.  What is interesting is the economy was growing strongly in the last two quarters of 2013, yet the employment growth numbers were still weak.

Both the number of unemployed persons, at 10.2 million, and the unemployment rate, at 6.6 percent, changed little in January. Since October, the jobless rate has decreased by 0.6 percentage point.

The good news here is the number didn't increase.  The bad news is it didn't meaningfully decrease, either.  This is where I think the weather did play at least a marginal role.  Let's face facts: heavy snowstorms would make is difficult to get to a job interview etc...

After accounting for the annual adjustment to the population controls, the civilian labor force rose by 499,000 in January, and the labor force participation rate edged up to 63.0 percent. Total employment, as measured by the household survey, increased by 616,000 over the month, and the employment-population ratio increased by 0.2 percentage point to 58.8 percent.

This is where some of the re-benchmarking issues come into play.  The household survey number is very impressive.  Also remember this household employment number tends to lead the establishment survey.

Overall job growth was fair (see tables here).  There simply wasn't enough of it.  This is also the third month in a row when the total number of professional service jobs added has been weak.

In January, the average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours. The manufacturing workweek declined by 0.2 hour to 40.7 hours, and factory overtime edged down by 0.1 hour to 3.4 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.5 hours. 

Average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $24.21. Over the year, average hourly earnings have risen by 46 cents, or 1.9 percent. In January, average hourly earnings of private-sector production and nonsupervisory employees increased by 6 cents to $20.39.

The hours worked decline is disappointing.  However, the 5 cents/hour increase is good news.  But -- just to throw a cold blanket on that number -- hourly earnings only increased 1.9% over the last 12 months.

The market view this report as disappointing.  However, I would add the important caveat that here the weather is probably playing a role in the slowdown.

NDD will add his comments later today.