- by New Deal democrat
In the past few months, my focus has been on whether jobs gains are most consistent with a “soft landing,” i.e., no further deterioration, or whether deceleration is ongoing; and more specifically:
- Whether there is further deceleration in jobs gains compared with the last 6 month average, or weather gains have held steady. In February, they held steady.
- Whether the unemployment rate is neutral or decreasing; or whether there is further weakness. The recent excellent reports in initial claims suggested this rate would decline. To the contrary, it increased to a new 2 year high; and
- Based on the leading relationship of the quits rate to average hourly earnings, whether YoY wage growth would continue to decline slightly. It did decline, and is tied for a 2.5 year low.
Here’s my in depth synopsis.
HEADLINES:
- 275,000 jobs added. Private sector jobs increased 223,000. Government jobs increased by 52,000.
- Both December and January were revised downward, by -43,000 and -124,000 respectively, for a total of -167,000. After a break last month, this resumes the pattern from nearly every month last year, when there were a steady drumbeat of downward revisions.
- The alternate, and more volatile measure in the household report, declined by -184,000. On a YoY basis, in this series only 667,000 jobs, or 0.4%, have been gained. This is the lowest since the pandemic lockdowns.
- The U3 unemployment rate rose 0.2% to 3.9%. As indicated above, this is a 2 year high.
- The U6 underemployment rate increased +0.1% to 7.3%, 0.8% above its low of December 2022.
- Further out on the spectrum, those who are not in the labor force but want a job now declined -121,000 to 5.672 million, down from its highest level since September 2022, vs. its post-pandemic low of 4.925 million set last March
Leading employment indicators of a slowdown or recession
These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn. With two exceptions, these were negative, generally reversing last month’s gains:
- the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, reversed last month’s decline, and was up sharply, by 0.3 hours to 40.5, but is still down -1.0 hour from its February 2022 peak of 41.5 hours.
- Manufacturing jobs declined -4,000.
- Within that sector, motor vehicle manufacturing jobs declined -400.
- Construction jobs increased by 23,000.
- Residential construction jobs, which are even more leading, declined by -200 from last month’s post-pandemic high.
- Goods jobs as a whole rose 19,000 to another new expansion high. These should decline before any recession occurs. After revisions, these are up 1.1% YoY, the lowest growth since early in the pandemic, but which is nevertheless average compared with most of the last 40 years.
- Temporary jobs, which have generally been declining late 2022, fell by another 15,400, and are down about -250,000 since their peak in March 2022.
- the number of people unemployed for 5 weeks or fewer rose 186,000 to 2,326,000.
Wages of non-managerial workers
- Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.07, or +0.2%, to $29.71, a YoY gain of +4.5%. This is tied with December for a 2.5 year post-pandemic low.
Aggregate hours and wages:
- the index of aggregate hours worked for non-managerial workers increased a strong 1.0%, reversing last month’s big decline. This metric is now up 1.2% YoY.
- the index of aggregate payrolls for non-managerial workers rose 1.3%, and is now up 5.9% YoY. This is 2.8% above the most recent YoY inflation rate. This is powerful evidence that average working families continue to see gains in “real” spending money.
Other significant data:
- Leisure and hospitality jobs, which were the most hard-hit during the pandemic, rose another 58,000, which is only -17,000, or -0.1% below their pre-pandemic peak.
- Within the leisure and hospitality sector, food and drink establishments rose 41,600,. This sector has completely recovered from its pandemic downturn.
- Professional and business employment increased a meager 9,000. These tend to be well-paying jobs. This series had generally been declining since last May, but in the last 3 months has resumed its increase.
- The employment population ratio declined -0.1% to 60.1%, vs. 61.1% in February 2020.
- The Labor Force Participation Rate was unchanged at 62.5%, vs. 63.4% in February 2020.
SUMMARY
This month’s report, as is so often the case, was a study in marked contrasts between the Establishment Survey, which reported generally strong numbers, and the Household Survey, which was very weak. Nowhere was this more apparent than in the comparative YoY gains. In the former survey, jobs have increased 1.8%, while in the latter they are up a paltry 0.4%. With the exception of 1952, and isolated months in 1996, 2011, and 2013, the latter is downright recessionary.
The poor showing in the Household survey also included the number of unemployed, which increased. Together with the declined in employed people, this gave rise to a new 2 year high in the unemployment rate - very much NOT what initial claims have been forecasting.
There were some negatives in the Establishment Survey as well. In addition to most of the leading jobs sectors, which as indicated above showed declines, the drumbeat of downward monthly revisions resumed.
But the positives in the Establishment Survey were powerful as well. In addition to the headline number, wage increases are still very good, as were aggregate hours and payrolls. And until goods employment declines, despite the poor Household Survey, it is hard to conceive that any recession is near.
So I will give this a decidedly mixed grade, and be on the lookout for a reversal in the noisier Household Survey.
