Friday, December 4, 2015

November jobs report: truly a mixed report, but enough for the Fed

- by New Deal democrat


  • 211,000 jobs added to the economy
  • U3 unemployment rate unchanged at 5.0%
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 -416,000 from 6.052 million to 5.636 million
  • Part time for economic reasons: up 319,000 from 5.767 million to 6.086 million
  • Employment/population ratio ages 25-54: up from 77.2% to 77.4%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.01 from $21.18 to $21.19,  up +2.0%YoY. (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.)
September was revised upward by 8,000.  October was also revised upward by 27,000, for a net change of +35,000.

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.

  • the average manufacturing workweek was unchanged at 41.7 hours.  This is one of the 10 components of the LEI.
  • construction jobs 46,000.  YoY construction jobs are up 259,000.  
  • manufacturing jobs fell by -1,000, and are up 28,000 YoY.
  • Professional and business employment (generally higher-paying jobs) increased by 28,000 and are up 298,000 YoY.

  • temporary jobs - a leading indicator for jobs overall decreased by -12,300.

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - rose by 80,000 from 2,326,000 to 2.406,000.  The post-recession low was set 3 months ago at 2,095,000.

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

  • Overtime was unchanged at 3.2 hours.

  • the index of aggregate hours worked in the economy fell by -0.1% from  104.4 to 104.3. 
  • The broad U-6 unemployment rate, that includes discouraged workers rose by  0.1% from 9.8% to 9.9%. 
  •  the index of aggregate payrolls rose by 0.1%  from 125.6 to 125.7-.
Other news included:      
  • the alternate jobs number contained in the more volatile household survey increased by 244,000  \jobs.   This represents an increase  of 2,031,000  jobs YoY vs. 2,609,000 in the establishment survey.  
  • Government jobs rose  by 14,000.  
  • the overall employment  to population ratio for all ages 16 and above was unchanged at 59.3% both m/m and  YoY.  The labor force participation rate rose by 0.1 from  62.4%  to 62.5%  and is down -0.3% YoY (remember, this incl udes droves of retiring Boomers).  


This was actually a mixed report, with some good positives and some nasty negatives.

The positives, in addition to the headline jobs number, included substantial upward revisions in hours and jobs to last month. Those not in the labor force, but who want a job now, dropped by over 400,000 to a new post-recession low, more than outweighing the increase in involuntary part time workers. Construction and high paying professional and services jobs continue to increase. The prime age employment to population ration is now almost exactly halfway back to its peak almost a decade ago.

The negatives were first and foremost, wages, which after inflation, probably declined in November. The YoY change in wages for non-supervisory personnel is back to +2.0%.  My biggest fear is that in the next recession, this will actually go negative, i.e., there will be outright wage deflation. Aggregate hours dropped month over (upwardly revised) month, and aggregate payrolls rose a pathetic 0.1%..  The YoY change in job growth continues to decelerate from its peak a year ago, continuing to signal that we are later in the economic expansion.

This will presumably be enough for the Fed to raise rates, the lack of wage-push inflation be damned.  Hopefully they won't drive the economy into a new recession next year. .