September jobs report: excellent in coincident and lagging sectors, cautionary in leading sectors

 - by New Deal democrat

HEADLINES: 

• +136,000 jobs added (+135,000 ex-Census)
• U3 unemployment rate declined -0.2% from 3.7% to 3.5% (NEW LOW)
• U6 underemployment rate declined -0.3% from 7.2% to 6.9% (NEW LOW)

Leading employment indicators of a slowdown or recession

I am highlighting these because many leading indicators overall strongly suggest that an employment slowdown is coming. The following 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 declined -0.1 from 40.6 hours to 40.5 hours. This is one of the 10 components of the LEI and is negative.

• Manufacturing jobs declined by -2,000. YoY manufacturing is up 117,000, a deceleration from 2018’s pace.
• construction jobs rose by 7,000. YoY construction jobs are up 156,000, also a deceleration from summer 2018. Residential construction jobs, which are even more leading, rose by 500.

• temporary jobs rose by 10,200. (NOTE: July, which was originally reported at +10,500, is now shown at -2,200. August was revised down by -900 to +14,500).
• the number of people unemployed for 5 weeks or less declined by -339,000 from 2,207,000 to 1,868,000. (NEW EXPANSION LOW)

Wages and participation rates

Here are the headlines on wages and the broader measures of underemployment:

• Not in Labor Force, but Want a Job Now:  declined by -270,000 from 5.150 million to 4.880 million (NEW EXPANSION LOW)
• Part time for economic reasons: declined by -31,000 from 4.381 million to 4.350 million 
• Employment/population ratio ages 25-54:  rose +0.1% from 80.0% to 80.1%. 
• Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $.04 to $23.65, up +3.5% YoY. This is still a slight decline from the recent YoY% change peak.  (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 an average of +9,750/month in the past year vs. the last seven years of Obama's presidency in which an average of +10,300 manufacturing jobs were added each month.   
• Coal mining jobs rose 200, an average of 125 jobs/month in the past year vs. the last seven years of Obama's presidency in which an average of -300 jobs were lost each month

July was revised upward by 7,000. August was also revised upward by 38,000, for a net change of 45,000.

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

• Overtime was unchanged at 3.2  hours
• Professional and business employment (generally higher-paying jobs) rose by +34,000 and  is up +437,000 YoY. 
• the index of aggregate hours worked for non-managerial workers rose by 0.1%

•  the index of aggregate payrolls for non-managerial workers rose by 0.3%  

Other news included:            

• the  alternate jobs number contained  in the more volatile household survey rose by 371,000  jobs.  This represents an increase of 2,200,000 jobs YoY vs. 2,147,000 in the establishment survey. 
• Government jobs rose by 22,000 (21,000 ex-census).

• the overall employment to population ratio for all ages 16 and up rose 0.1% to 61.0% m/m and is up 0.6% YoY.    
• The labor force participation rate was unchanged at 63.2% and is up 0.5% YoY.

SUMMARY

This was a excellent report in almost all respects outside of the headline jobs number. New expansion lows were set for unemployment, underemployment, short term unemployment, and those who want a job now but have not looked. New expansion highs were set for prime age employment, participation, and aggregate hours and payrolls. Non-supervisory wages improved tepidly m/m, but growth remains at expansion highs YoY.

The only fly in the ointment, aside from the headline number, was as I expected in the leading sectors of the establishment survey. Manufacturing hours fell, as did manufacturing employment. Construction employment rose slightly, especially as to the most leading residential construction sector. And while temporary employment rose “strongly,” August was revised down slightly, and July, which was originally reported up 2,200, is now shown as a decline of -10,500.

In short, a great report in the coincident and lagging aspects, with some pronounced weakness in the leading aspects.