Friday, May 8, 2015

April jobs report: much better, but an alarm on leading indicators

- by New Deal democrat


  • 223,000 jobs added to the economy
  • U3 unemployment rate down -0.1% to 5.4%
With the expansion firmly established, the focus has shifted to wages and the chronic heightened unemployment.  Here's the headlines on those:

Wages and participation rates
  • Not in Labor Force, but Want a Job Now: down -111,000 from 6.369 million to 6.258 million
  • Part time for economic reasons: down -125,000 from an upwardly revised 6.705 million to 6.580 million
  • Employment/population ratio ages 25-54: unchanged at 77.2% 
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up +0.1% from an upwardly revised $20.88 to $20.90,  up +1.9%YoY, a slight increase. (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)
February was revised higher by +2,000, but March was revised even lower, down -39,000 to +85,000, for a net of -37,000.

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 but with a negative bias for the third month in a row.

  • the average manufacturing workweek fell -0.1 hours from 40.9 hours to 40.8 hours.  This is one of the 10 components of the LEI and so will affect it negatively.

  • construction jobs rose by 45,000. YoY construction jobs are up 280,000.  

  • manufacturing jobs rose 1,000, and are up 178,000 YoY.
  • Professional and business employment (generally higher-paying jobs) rose 62,000 and are up  654,000 YoY.

  • temporary jobs - a leading indicator for jobs overall - rose by 14,100.

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - increased by 241,000 to  2,729,000, compared with December 2013's low of 2,255,000.

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

  • Overtime decreased by 0.1 hour from 3.3 hours to 3.2 hours

  • the index of aggregate hours worked in the economy rose 0.2 from a downwardly revised 102.8 to 103.0.

  • The broad U-6 unemployment rate, that includes discouraged workers decreased from 10.9% to 10.8%
  • the index of aggregate payrolls rose by 0.4% from a downwardly revised 121.9 to 122.3.
Other news included:
  • the alternate jobs number contained in the more volatile household survey increased by 192,000 jobs.  This represents a 2,799,000 million increase in jobs YoY vs. 2,982,000 in the establishment survey. 

  • Government jobs increased by 10,000.
  • the overall employment to population ratio for all ages 16 and above was unchanged at 59.3%,  and has risen by +0.4% YoY. The labor force participation rate also rose 0.1% from 62.7% to 62.8%  and is unchanged YoY (remember, this includes droves of retiring Boomers).


Of course this was welcome news after a bad March report, which got even worse with downward revisions. Still, the positive news in this report overcame even those revisions.

The best news in the report, beyond the headline numbers, was the positive movement in the underemployment statistics:  both those not in the labor force but who want a job now, and those part time for economic reasons, declined.  YoY wage growth increased, as did aggregate hours and payrolls. The big increase in construction jobs shows how the particularly nasty winter did affect employment.

But the leading portions of the employment report are sounding an alarm. The manufacturing workweek was down.  Overtime was down. Unemployment from zero to 5 weeks increased significantly.  Revisions to prior months were negative.  This is the third month of this negative trend in the leading indicators in the employment report.  In my "Weekly Indicators" column, for the last month I have said that the US is in a shallow manufacturing recession.  Today's report confirms that.

While the Oil patch weakness behind some of that may continue, the big unknown is whether the overly strong dollar continues to kill exports and the manufacturing behind those exports.  My best guess (or hope?) is that the dollar will weaken and the situation will stabilize or abate somewhat.