Thursday, July 3, 2014

June 2014 jobs report: excellent headline, meh internals, and still not good enough

- by New Deal democrat

  • Not in Labor Force, but Want a Job Now: down 323,000 to 6.115 million
  • Employment/population ratio ages 25-54: up from 76.4% to 76.7% equalling its recent high
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up +0.2% or $.04 to $20.58, Up 2.0% YoY
In June 288,000 jobs were added to the US economy.  The unemployment rate declined 0.2% to 6.1%.  April was revised upward by 22,000 to 304,000. May was also revised upward by 7,000 to 224,000. 

The headlines numbers were very good. But since we knew the general range of job growth and unemployment, I want to focus on the 3 above headline numbers as to "real" unemployment and wages.  Two of these three numbers for June have basically gone sideways since the beginning of the year, indicating that little headway has been made as to the chronic problem of stagnant wages.  The relative  bright spot is that we have a significant rebound in the employment population ratio in the prime working age group.

Those who want a job now, but weren't even counted in the workforce were 4.3 million at the height of the tech boom, and were at 7.0 million a couple of years ago.   This month declinled, but was still above February's and last November's number.  This is almost certainly due to the cutoff in extended unemployment benefits by Congress at the end of last year.

After inflation, real hourly wages for nonsupervisory employees were probably essentially flat from May to June, The YoY change in average hourly earnings is +2.0%.

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mixed.

  • the average manufacturing workweek was unchanged at 41.1.This is one of the 10 components of the LEI.

  • construction jobs increased by 6.000. YoY 192,000 construction jobs have been added.

  • manufacturing jobs  increased by 16,000, and are up 129,000 YoY.

  • temporary jobs - a leading indicator for jobs overall - increased by 10,100.

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - decreased by 149,000 to 2,410,000 compared with December's 2,255,000 low.

Other important coincident indicators help us paint a more complete picture of the present:

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

  • Overtime hours were unchanged at 3.5 hours.

  • the index of aggregate hours worked in the economy rose by 0.2 from 108.3 to 108.5. 

  • The broad U-6 unemployment rate, that includes discouraged workers decreased from 12.2% to 12.1%.

  • The workforce increased by 81,000.  Part time jobs for economic reasons increased by 275,000.
Other news included:
  • the alternate jobs number contained in the more volatile household survey increased by 407,000 jobs.  The household survey jobs numbers had been lagging the establishment survey numbers, but as expected this difference has now been almost entirely made up, with the household survey showing a 2,146,000 increase in jobs YoY.

  • Government jobs increased by 26,000.
  • the overall employment to population ratio for all ages 16 and above rose 0.1% from 58.9% to 60.0%, and has risen by +0.3% YoY. The labor force participation rate was unchanged at 62.8%, and has fallen by -0.7% YoY (but remember, this includes droves of retiring Boomers).

In summary, this report was yet another very good report, based on the standard of the last decade.  as to the headline numbers and revisions.  It is a still a mediocre report when measured against a longer timeframe. Further, many of the internals of this number were unchanged, although some of the forward looking numbers (workers in construction, manufacturing, and temp services) were positive.

We have made no headway since the beginning of this year in dealing with chronic underemployment as shown by discouraged workers, and very little headway on real wages.  The relative bright spot is the significant headway on the percentage of prime working age people being employed, which has rebounded by over 1/3 from its recession low to its pre-recession peak.