Friday, February 5, 2016

U.S. jobs slow, but is market getting tight?

It was a mixed bag in today’s US jobs report. The total job gains on the payroll side were mediocre, but the household survey showed a drop in the unemployment rate, and a long-desired gain in wages. It adds to the theory that while the country is not in recession as of this time, we may be nearing the peak of this multi-year expansion.

We’ll start with the payrolls side, which had its lowest seasonally-adjusted gains since September, and was well below the 279,000 a month in gains that we averaged over the previous 3 months.
Total nonfarm payroll employment increased by 151,000 in January. Employment rose in several industries, led by retail trade, food services and drinking places, health care, and manufacturing. Private educational services and transportation and warehousing lost jobs. Mining employment continued to decline.
The lower job gain number is concerning, but we’ll need more time to see if it’s a one-month blip, or the start of a lower-growth trend.

The manufacturing increase is nice to see, as that sector added 29,000 jobs, and got back above the 7-year highs that manufacturing employment was at in July. We’ll see if it keeps gaining as oil stays low and the dollar stays strong, but at least for the last few months, the manufacturing recession that some of us was worrying about has held off (47,000 jobs gained there since September). Construction employment is also staying strong, up another 18,000 seasonally-adjusted jobs in January, and 314,000 since the end of 2014.

The better part of the report comes from the household survey, which had improvements in two key stats.
Both the number of unemployed persons, at 7.8 million, and the unemployment rate, at 4.9 percent, changed little in January. Over the past 12 months, the number of unemployed persons and the unemployment rate were down by 1.1 million and 0.8 percentage point, respectively….

After accounting for the annual adjustments to the population controls, the civilian labor force and total employment, as measured by the household survey, were little changed in January. The labor force participation rate, at 62.7 percent, was little changed. The employment-population ratio (59.6 percent) changed little over the month but was up by 0.3 percentage point since October.
Even better than that was the “missing link” in the Obama Recovery wasn’t so missing in the January jobs report.
The average workweek for all employees on private nonfarm payrolls rose by 0.1 hour to 34.6 hours in January. The manufacturing workweek edged up by 0.1 hour to 40.7 hours, and factory overtime was unchanged at 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.8 hours….

In January, average hourly earnings for all employees on private nonfarm payrolls increased by 12 cents to $25.39. Over the year, average hourly earnings have risen by 2.5 percent. In January, average hourly earnings of private-sector production and nonsupervisory employees rose by 6 cents to $21.33.
Very good to see wage growth get bumped up by 0.5% in a month, which should be well above the rate of inflation.

However, I’m going to be skeptical that this is a long-term trend where wage growth finally picks up, because 13 states had minimum-wage increases on or around January 1, which could account for some of those gains. Indeed, the low-wage leisure and hospitality sector had a hourly wage increase of 0.75%, and while “retail trade” only had an hourly wage increase of 0.34%, it had a weekly wage increase of 0.66%. By comparison, manufacturing had an hourly wage increase of 0.31%, and construction had no hourly wage increase at all (weekly wages in construction actually dropped), so let’s not think the great wage stagnation that we’ve seen over the past decade-plus has somehow come to an end.

Lastly, the January report also features annual benchmarking, which allows for changes to overall figures since 2011. The BLS notes that this actually changed very little for prior years (it lowered the total jobs figure by 206,000, or about 0.1%), and actually increased the job gains for 2015 by 85,000. This means 2015 ended with 2.735 million new jobs, and nearly 13.4 million have been added since the end of 2009.

The jobs charts have been updated accordingly, and it means that the Walker jobs gap grew by 31,600 last year to just over 100,000 jobs overall, and 106,000 in the private sector.

Bottom line, the January jobs report showed some good signs, as a tighter labor market and minimum wage increase likely contributed to good wage gains. But that lower job growth in January, lower GDP growth at the end of 2015, and a questionable economic outlook for 2016 means that we shouldn’t be comfortable, and bank on the good economic stats of the mid-2010s to continue this year.

No comments:

Post a Comment