Friday, May 5, 2017

April jobs report: a blowout -- except (sigh) for wages

- by New Deal democrat

  • +211,000 jobs added
  • U3 unemployment rate down -0.1% from 4.5% to 4.4%
  • U6 underemployment rate down 0.3% from 8.9% to 8.6%
Here are the headlines on wages and the chronic heightened underemployment:

Wages and participation rates
  • Not in Labor Force, but Want a Job Now:  down -74,000 from 5.781 million to 5.707 million   
  • Part time for economic reasons: down -281,000 from 5.553 million to 5.272 million
  • Employment/population ratio ages 25-54: up +0.1% from 78.5% to 78.6%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.06 from $21.90 to $21.96,  up +2.3% 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.)
Holding Trump accountable on manufacturing and mining jobs

Trump specifically campaigned on bringing back manufacturing and mining jobs.  Is he keeping this promise? 

  • Manufacturing jobs rose by +6,000 vs. the last severn years of Obama's presidency in which an average of 10,300 manufacturing jobs were added each month.   
  • Coal mining jobs rose by +200 vs. the last severn years of Obama's presidency in which an average of -300 jobs were lost each month
  February was revised upward by +13,000. March was revised downward by -19,000, for a net change of -6,000.  

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were positive with one exception.
  • the average manufacturing workweek rose +0.1 from 40.6 hours to 40.7 hours.  This is one of the 10 components of the LEI.
  • construction jobs increased by +5,000. YoY construction jobs are up +173,000.  
  • temporary jobs increased by +5,800.

  • the number of people unemployed for 5 weeks or less increased by +1,000 from 2,334,000 to 2,335,000.  The post-recession low was set nearly 18 months 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 is up +612,000 YoY.

  • the index of aggregate hours worked in the economy rose by 0.5 from 106.3 to 106.8 
  •  the index of aggregate payrolls rose by +0.7 from 132.8 to 133.7 . 
Other news included:         
  • the alternate jobs number contained  in the more volatile household survey increased by   +156,000 jobs.  This represents an increase of 2,128,000  jobs YoY vs. 2,237,000 in the establishment survey.    
  • Government jobs rose by +17,00.     
  • the overall employment to population ratio for all ages 16 and up rose +0.1% from  60.1% to 60.2 m/m  and is  up +0.5% Yo Y.     
  • The  labor force participation rate fell -0.1% m/m and is up +0.1% YoY from 62.8% to 62.9%.     

This was an excellent report in almost all respects. Not only were the headlines very positive, but so were most of the internals. Hours rose, aggregate payrolls rose, and the employment to population ratio continue to rise as well. People are coming off the sides maybe not in droves but pretty vigorously -- and they are finding jobs. Involuntary part-time employment is declining sharply.

There were a few pockets of softness, in short-duration employment, which hasn't made a new low in 18 months, and those outside of the labor force but who want a job, which also hasn't made meaningful progress in nearly 4 years (although recently it has declined sharply as well). The labor force participation rate also declined this month.
The other soft spot remains wages, which are only up +2.3% in nominal terms for nonsupervisory workers. This is probably in part due to the YoY increase in prime age participation (up over 1% from ages 25-54 in the last year), which means more competition for available jobs.

So, while this month is very good news, we are still at least 0.5%, and probably more like 1%, from reasonably "full" employment, and wages are still really soft. I will repeat, as I do every month now, that the biggest danger I see in the next downturn, whenever it hits, is that we have the first actual wage deflation since the 1930s.
Postscript: Is this employment report an affirmation of Trump and the GOP? Yes -- if by that you mean that they haven't really done anything to affect the economy as of yet, and so it continues on autopilot.