Friday, December 5, 2014

November Jobs Report: Blowout on jobs, slight help on wages, participation still dismal

- by New Deal democrat


  • 321,000 jobs added to the economy
  • U3 unemployment rate unchanged at 5.8%
Wages and participation rates
  • Not in Labor Force, but Want a Job Now: up 8,000 from 6.537 million to 6.545 million
  • Employment/population ratio ages 25-54: unchanged at 76.9%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.04 (or +0.2%) from $20.70 to $20.74 up 2.1%YoY
September was revised upward by 15,000 to 271,000. October was revised upward by 29,000 from to 243,000. The net revision was +44,000.

Since the economic expansion is well established, in recent months my focus has shifted to wages and the chronic heightened unemployment.  The headline numbers for  November show strong jobs growth, continuing the trend all this year.  Real wages are slowly trending higher - but mainly due to lower inflation.  Participation rates are barely budging.

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.  Since Congress cut off extended unemployment benefits at the end of last year, they have actually risen, and this month were 6.545 million, over 750,000 higher than they were last November.

On the other hand, the participation rate in the prime working age group has made up over 40% of its loss from its pre-recession high, although it did not change this month.

After inflation, real hourly wages for nonsupervisory employees probably rose from October to November. The  nominal YoY% change in average hourly earnings is 2.1% somewhat better than the likely November YoY inflation rate of 1.5%.

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

  • the average manufacturing workweek rose from 40.9 to 41.1 hours.  This is one of the 10 components of the LEI, and will be a strong positive.

  • construction jobs increased by 20,000. YoY construction jobs are up 213,000.  

  • manufacturing jobs  were up 28,000, and are up 171,000 YoY.
  • Professional and business employment rose 86,000 and is averaging a 58,000 monthly gain for the last year.

  • temporary jobs - a leading indicator for jobs overall - increased by 22,700.

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - increased by 56,000 from 2,473,000 to 2,529,000, compared with last December's 2,255,000 low.

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

  • Overtime hours rose 0.1 hour to 3.5 hours.

  • the index of aggregate hours worked in the economy rose sharply from 101.6 to 102.2

  • The broad U-6 unemployment rate, that includes discouraged workers decreased from 11.5% to 11.4%

  • Part time jobs for economic reasons decreased by -177,000 to a total of  6.850 million.
Other news included:
  • the alternate jobs number contained in the more volatile household survey increased by a mere 4,000 jobs.  The total number of unemployed rose 114,000. This will be the number seized upon by Doomers this month.  But this still represents a 2,734,000 million increase in jobs YoY vs. 2,696,000 in the establishment survey. 

  • Government jobs increased by 7,000.
  • the overall employment to population ratio for all ages 16 and above remained unchanged at 59.2%,  and has risen by +0.6% YoY. The labor force participation rate was also unchanged at 62.8%, and is down -0.2% YoY  (remember, this includes droves of retiring Boomers).

First, a note of caution about seasonal adjustments. In the last several years, November jobs reports have tended to be somewhat outliers to the upside.  While any number over 300,000 is a great number, temper your enthusiasm a little.

All of the internals of the employment survey were strong.  Job gains were across the board, revisions remained strongly positive, and aggregate hours also increased sharply.

The relative weakness is in the household report, with its small gain in jobs, which is why the unemployment rate stayed neutral.  Those who have completely dropped out of the workforce but want a job now increased yet again, and is close to 800,000 since one year ago.  If that number had not increased, the unemployment rate would be about 0.5% higher than it is.  On the other hand, those who report that they are part time for economic reasons continues to decline.

Wages increased 0.2% in November.  Prices were probably flat or possibly declined, so real wages increased by about as much.

The bottom line:  Jobs growth remains strong, part time work is ebbing compared with full time work, real wages are still increasing slightly, but participation measures remain dismal.

From Bonddad

I have only one caveat to the report, which is expressed in this table from the Bank of America/Merrill Lynch Research Report issued on the jobs number.

We've had solid growth in the establishment numbers since the beginning of the year.  However, since June, the participation rate has been steady and the employment/population ratio has only increased .2%.  With such strong establishment numbers, you'd think we'd be seeing a better performance in the utilization metrics.
Now, these numbers are revised numerous times, to the upward revisions may be coming in the subsequent  months. 
Just food for thought.