Friday, February 3, 2017

January jobs report: good headline, but participation and wages lag

- by New Deal democrat

  • +227,000 jobs added
  • U3 unemployment rate up +0.1% from 4.7% to 4.8%
  • U6 underemployment rate up +0.2% from 9.2% to 9.4%
Here are the headlines on wages and the chronic heightened underemployment:

Wages and participation rates
  • Not in Labor Force, but Want a Job Now: rose +77,000 from 5.662 million to 5.739 million   
  • Part time for economic reasons: up +242,000 from 5.598 million to 5.840 million
  • Employment/population ratio ages 25-54: unchanged at 78.2% 
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.04 from $21.80 to $21.84,  up +2.5% 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.)
November was revised downward by -40,000, and December was revised upward by +1,000, for a net change of -39,000. 

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mainly positive.
  • the average manufacturing workweek rose +0.1 from 40.7 to 40.8 hours.  This is one of the 10 components of the LEI, and is a positive.
  • construction jobs increased by +36,000. YoY construction jobs are up +170,000.  
  • manufacturing jobs increased by +5,000, but are down -53,000 YoY
  • temporary jobs increased by 14,900.

  • the number of people unemployed for 5 weeks or less increased by +89,000 from 2,379,000 to 2,468,000.  The post-recession low was set over 1 year ago at 2,095,000.
Other important coincident indicators help  us paint a more complete picture of the present:
  • Overtime fell -0.1 from 3.3 to 3.2 hours.
  • Professional and business employment (generally higher- paying jobs) increased by +39,000 and are up 574,000 YoY.

  • the index of aggregate hours worked in the economy rose by +0.2  from  106.2 to 106.4 
  •  the index of aggregate payrolls rose by +0.3 from 132.0 to 132.3. 
Other news included:         
  • the alternate jobs number contained  in the more volatile household survey increased by  +547,000 jobs.  This represents an increase  of 1,548,000  jobs YoY vs. 2,,344,000 in the establishment survey.    
  • Government jobs fell by -10,000.     
  • the overall employment  to  population ratio  for all ages 16 and up rose from  59.7%  to 59.9 m/m  and i s up +0.-% YoY.   
  • The  labor force participation  rate rose  from 62.7% to 62.9%  and is up +0.2%  YoY (remember, this includes droves of retiring Bsoomers).     

This was  a good report with most of the internals supporting the positive headline jobs number. Both the unemployment and underemployment rates rose, but this was due to a big number of people coming off the sidelines and entering the labor force.

The big concerns remain the same ones we have seen for years: an elevated number of involuntary part-time workers and people outside of the work force who want a job now, leading to a lagging recovery in the prime age labor participation rate.  Wages also are showing no signs of further acceleration in this report. Since YoY wage growth typically declines by over 2% in recessions, I continue to worry about actual wage deflation when the next one hits.