Friday, October 7, 2016

September jobs not so great, but sure beats Sept '08

A few reactions from today’s September jobs report for the US, courtesy of the Bureau of Labor Statistics.

First of all, we continue to gain jobs at a decent rate, although it is slower than the strong growth we had last year.
Total nonfarm payroll employment rose by 156,000 in September. Thus far this year, job growth has averaged 178,000 per month, compared with an average of 229,000 per month in 2015. In September, employment gains occurred in professional and business services and in health care….

The change in total nonfarm payroll employment for July was revised down from +275,000 to +252,000, and the change for August was revised up from +151,000 to +167,000. With these revisions, employment gains in July and August combined were7,000 less than previously reported. Over the past 3 months, job gains have averaged 192,000 per month.
I don’t see any major cause for concern or celebration in these figures, although if you dig inside the sectors you find some interesting things. For example, American manufacturing continues to be a bad spot for the overall economy, likely due to the strong dollar and general structural changes that seem to be going on. On the flip side, the health care and bar/restaurant parts of the economy are standout gainers.

Manufacturing employment
Aug 2016-Sept 2016 -13,000
July 2016-Sept 2016 -29,000
Sept 2015-Sept 2016 -47,000

Health Care employment
Aug 2016-Sept 2016 +32,700
July 2016-Sept 2016 +55,000
Sept 2015-Sept 2016 +445,100

Food Services and Drinking Places
Aug 2016-Sept 2016 +29,700
July 2016-Sept 2016 +59,300
Sept 2015-Sept 2016 +300,200

Another interesting quirk is the local government-education sector (generally K-12 school teachers and staff). This figure was “down” on a seasonally adjusted basis in September, but it’s likely just a reflection of more states starting their schools earlier in August, which means that teachers and staff were counted in that month compared to September’s, which translated into seasonally-adjusted “gains” in August which offset September’s “decline.”

Local government-education employment
non-seasonally adjusted
Aug 2016 +208,800
Sept 2016 +844,400

Aug 2016 +15,500
Sept 2016 -14,300
Net change +1,200

So if you distribute that 1,200 gain in local govt-education over those 2 months (600 apeice), the total job gains for August end up near 171,000 for September and near 152,000 for August. Which would have left September’s figure as a decent improvement from the previous right in line with estimates, instead of being labeled “disappointing” by certain media outlets.

Another misleading “disappointment” was the fact that the unemployment rate was up to 5.0% for the first time in 5 months. But oddly, this rise in unemployment may not be bad at all, and not only because it’s basically a reflection of rounding (the unemployment rate only rose 0.04% in September, from 4.92% to 4.96%). There have been a large number of people re-entering the work force both in the last month and the last year, and overwhelmingly, those people are finding jobs when they do it. This is also reflected with increases in the labor participation rate, and employment-population ratio.

Change in labor force, employment
Sept 2016
Labor force +444,000

Sept 2015-Sept 2016
Labor force +3.040 million
“Employment” +3.026 million

Change in participation rate, EPR
Sept 2015
Participation rate 62.4%
Employ-pop ratio 59.3%

Sept 2016
Participation rate 62.9%
Employ-pop ratio 59.8%

So that right-wing talking point of “lower labor participation rate” seems to be BS, at least over the last year. And that’s no small feat, given the increasing numbers of Boomers hitting retirement age.

Wages continued a slow but above-inflation advance as well, both on an hourly and weekly level.
The average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.4 hours in September. In manufacturing, the work week increased by 0.1 hour to 40.7 hours, while overtime was unchanged at 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.5 hours.

In September, average hourly earnings for all employees on private nonfarm payrolls rose by 6 cents to $25.79. Over the year, average hourly earnings have risen by 2.6 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 5 cents to $21.68 in September.
All of these stats indicate the US has an employment situation that’s still chugging along with decent growth as the 2016 elections approach. In fact, the real concern seems to be that we are at or near full employment, which helps explain the slowdowns in growth and the slight uptick in wages vs previous years, as well as the fact that the many new entrants to the labor force are generally finding jobs.

And if there is no further room to grow, the challenge becomes in figuring out how to keep things moving along. But that’s a much better situation than the one we faced 8 years ago, when we were also trying to fill an open spot for President. In Sept 2008, we lost 452,000 jobs in that month alone, had lost 1.335 million jobs in the last year, and would lose over 6.5 million jobs in the next 12 months. Throw in the fact that unemployment was at 6.1% and on the way up, and I’ll live with September 2016’s “tepid” job gains and 5.0% unemployment. I would assume you would as well.

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