Monday, November 5, 2018

Great October jobs report and even wage growth! But the road ahead doesn't seem smooth

Given that I was busy and on the road some of last weekend, I never got to talk about the US jobs report from last Friday.

Not only did the United States continue at a near 50-year low at 3.7% unemployment for October, we got was a strong report on payrolls across the board.
Total nonfarm payroll employment increased by 250,000 in October, following an average monthly gain of 211,000 over the prior 12 months. In October, job growth occurred in health care, in manufacturing, in construction, and in transportation and warehousing. (See table B-1.)

Health care added 36,000 jobs in October. Within the industry, employment growth occurred in hospitals (+13,000) and in nursing and residential care facilities (+8,000). Employment in ambulatory health care services continued to trend up (+14,000). Over the past 12 months, health care employment grew by 323,000.

In October, employment in manufacturing increased by 32,000. Most of the increase occurred in durable goods manufacturing, with a gain in transportation equipment (+10,000). Manufacturing has added 296,000 jobs over the year, largely in durable goods industries.
Construction employment rose by 30,000 in October, with nearly half of the gain occurring among residential specialty trade contractors (+14,000). Over the year, construction has added 330,000 jobs.
I find the manufacturing and construction growth odd, because other recent reports have showed manufacturing growth slowing in October and new housing starts falling. That makes me wonder how long the job growth lasts, but for the time being, these businesses are still apparently hiring up.

And the item that likely got the biggest attention in the jobs report was this one.
In October, average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $27.30. Over the year, average hourly earnings have increased by 83 cents, or 3.1 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $22.89 in October.
We finally broke 3% for average hourly wages! Sadly, this is the first time since 2009 this has happened, but with gas and food prices dropping recently, it seems likely that this will lead to a very good number in real wage gains when inflation figures come out next week.

There are still some notable lags in that wage number, especially in one industry Trump was supposed to specifically improve – manufacturing.

12-month change, manufacturing wages
All manufacturing +1.46%
Durable goods manuf. +1.79%
Non-durable goods manuf +0.65%

But I admit, that is picking nits on a pretty good US jobs report. The revisions for prior months netted to 0 (up in August, down in September), so we also were 250,000 jobs ahead of where we thought we were last month. Those revisions also reiterate that Wisconsin continues to lag this growth, and it's worth remembering before tomorrow’s election that the final Walker jobs gap will be just under 150,000 jobs for these last 8 years, with that gap growing again in 2018.

No question, for the country at large it is still a strong economy at (or maybe above) full employment. But “the greatest economy in the history of our country?”, Mr. President? Cool it, Donny. It’s not even the best economy of this Gen Xer’s adult lifetime.

On the important metrics of how many people are working and increases in wages, today is well short of what the economy was doing 20 years ago, as well as in the Bubblicious times right before the last 2 recessions hit.

Employment-Population Ratio, 12-month wage change, and unemployment rates
Oct 2018 60.6% EPR, +3.1% wages, 3.7% UE
Jun 2007 63.0% EPR, +3.6% wages, 4.6% UE
Oct 2000 64.2% EPR, +3.8% wages, 3.9% UE
Oct 1998 64.1% EPR, +3.7% wages, 4.5% UE

In summary- the US economy continues to maintain its growth from the Obama years, and that should be acknowledged for the first 2 years of Trump/GOP in power, given that we would be expecting the 9+-year economic expansion to be ending by this point. But the “success” of low unemployment that Trump is pointing to is as much due to Boomers aging out of the workforce and not being replaced, as it is any kind of policy.

In addition, 1998, 2000, and even 2007 weren’t dealing with trillion dollar budget deficits like we are today, which allowed for more room to spend money to stabilize the economy once the inevitable recession hit. And it also seems clear that the GOP Tax Scam has blown a deficit-fueled Bubble into an already maxed-out economy that is likely to burst in the very near future. That deficit (and the increased borrowing that is required for it) has already played a major part in interest rates rising over the last few months (the 10-year note is back to the 3.2% range), and will likely make the next recession and attempts to recover from that bursting Bubble rougher than it would have been. Or should have been.

Lastly, if you think the strong October jobs report gives a big boost to the GOP's chances for tomorrow's midterms, let me go over some recent October job reports before a midterm.

Oct 2018 +250,000, +2.52 mil last 12 months
Oct 2014 +255,000, +2.76 mil last 12 months
Oct 2010 +267,000, +110,000 last 12 months (first growth in 2 1/2 years)
Oct 2006 +12,000, +2.21 mil last 12 months

The president's party lost at least 1 house of Congress in each of those previous 3 midterms. Just saying. t s

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