Friday, May 2, 2014

April jobs report: a blowout (almost)

- by New Deal democrat

In April 288,000 jobs were added to the US economy.  The unemployment rate fell from 6.7% to 6.3%, a new post-recession low.  January and February were revised upward by 36,000, with both now over the 200,000 threshhold as well.

As usual, first, let's look at the more leading numbers in the report which tell us about where the economy is likely to be a few months from now. These were mixed but with a tilt towards positive.

  • the average manufacturing workweek fell from 41.1 hours to 40.8 .This is one of the 10 components of the LEI, and will contribute significantly towards a negattive number.

  • construction jobs increased by 32.000. YoY 189,000 construction jobs have been added.

  • manufacturing jobs  rose by 12,000.

  • temporary jobs - a leading indicator for jobs overall - increased by 24,000.

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - declined by 14,000 to 2,447,000, compared with December's 2,255,000 low.

Now here are some of the other important coincident indicators filling out our view of where we are now:

  • The average workweek for all nonsupervisory workers was unchanged at 33.7 hours.

  • Overtime hours were also unchanged at 3.5 hours.

  • the index of aggregate hours worked in the economy rose by 0.3 from 108.1.  This is a new record.

  • The broad U-6 unemployment rate, that includes discouraged workers decreased from 12.7% to 12.3%, also a post-recession low.

  • The workforce declined by 806,000. Part time jobs decreased by 276,000.
Other news included:
  • the alternate jobs number contained in the more volatile household survey decreased by 73,000 jobs.  The household survey jobs numbers had been lagging the establishment survey numbers, but as expected this difference has now been entirely made up, with the household survey showing a 1,993,000 increase in jobs YoY.

  • Government jobs increased by -15,000.

  • February was revised upward from 197,000 to 222,000.  March was also revised upward by 11,000 to 203,000  Upward revisions happen in expansions, and after a weak spot in late 2013, these revisions in the last several months have all been positive.

  • average hourly earnings were unchanged at $24.31. The YoY change is +1.9%.  As a result, YoY average real wages probably fell slightly in April, given the expected slight rise in consumer prices due to the weakening of the Oil choke collar.

  • the employment to population ratio was unchanged at 58.9%, and has risen +0.3% YoY. The labor force participation rate declined from 63.2% to 62.8%, and has fallen by 0.6% YoY.  The usual  caveats about discouraged workers and Boomer retirements apply, but the comparison of the two measures, i.e., a greater percentage of the population is employed, but a smaller percentage of the population is in the labor force, looks very much like Boomer retirements are moving to the fore.
  • the number of people who are not in the labor force but want a job now (the best measure of long time discouragement) declined 245,000 and now totals 3,125,000.
This was a blowout report by the standards of the last 7 years.  This would not be seen as a blowout by any standards prior to 2000, however.  With one exception, all of the metrics moved substantially and positively.  We may have sub-6% unemployment, finally, by the end of this year.  The Doomer memes of part-time employment and discouraged workers both took a hit, as it appears that, excepting Boomer retirements, participation is increasing and discouragement is decreasing.

The big decrease in the civilian labor force will probably get lots of attention this month, but no obvious reason for the decline besides monthly noise appears on the surface.

The one big caveat to this report is wages. They are stalling and in real terms are declining again slightly. The YoY comparison, which had been as high as 2.5%, has faded back under 2%.  This is not good, especially over 4 years into a jobs recovery.  What happens to wages the next time there is an economic downturn.  That is the problem that worries me the most.

From Bonddad:

These are my thoughts, in no order of importance:

Let me begin with this curmudgeonly caveat: I really don't like the monthly employment number report.  The US labor market is wide and deep, and has many nooks and crannies.  And those various nuances are still pretty negative: under-utilization is high, confidence is low and utilization is weak.  However, the market loves this number and report, so let's dive into the details.

Wow.  288,000.  That's a great headline number.  Overall growth was far more tilted to the service sector as 220/288 (or about 76%) of the jobs were added in that sector.  Considering the harsh winter weather, that's to be expected.  Manufacturing only added 12,000 jobs, but considering the high degree of automation involved with US manufacturing now, that's really not a bad number.  And construction only added 32,000.  My guess is contractors are still trying to regroup after the winter.  Hopefully we'll see a stronger increase in this number as the weather warms up and housing starts, well, start.

There were some interesting developments in the household survey.  The civilian non-institutional population increased 181,000 but the labor force dropped by 806,000.  That's a really big drop.  On the good side, the number of unemployed decreased by 733,000 but the total number of employed dropped by 73,000.  These rather interesting internals explain the sharp drop in the unemployment rate and participation rate.  These internal numbers are a bit odd; I'd like to see a hard-core statistician explain them. 

Total hours worked and total wages paid were stagnant.  While this is usually a bad thing, I would offer the following explanation: rather than increase hours and pay, maybe employers started to add to payrolls instead?  That's just a thought.

February and March were revised a higher by a combined amount of 36,000.  This tells us the initial weakness from those readings is still intact; but we weren't as weak as we thought initially. 

I agree with NDD that, when judged from the perspective of this expansion, this is a good report.  However, when we broaden that base of comparison, it's not that great.