Saturday, April 8, 2017

March jobs were disappointing- or great!

Your thoughts on yesterday's March jobs report probably depended on which number you looked at, and which political party you tend to support. A reminder that the jobs report is split into two measurements- a household survey of individuals (which is shown in the stats that include the unemployment rate), and a survey of business establishments (which is reflected in the total number of jobs reported to be gained or lost), and these numbers were very different in this report.

The household survey indicated that March was great, and continued the strong reports of January and February.
The unemployment rate decreased by 0.2 percentage point to 4.5 percent in March, and the number of unemployed persons declined by 326,000 to 7.2 million. Both measures were down over the year. (See table A-1.)

In March, the number of persons unemployed less than 5 weeks declined by 232,000 to 2.3 million. The number of long-term unemployed (those jobless for 27 weeks or more) was little changed over the month at 1.7 million and accounted for 23.3 percent of the unemployed. Over the past 12 months, the number of long-term unemployed was down by 526,000. (See table A-12.)

The labor force participation rate remained at 63.0 percent in March, and the employment-population ratio, at 60.1 percent, changed little. The employment-population ratio has edged up over the year, while the labor force participation rate has shown no clear trend.
Not only did the number of people unemployed drop by 326,000, but the number of people defining themselves as employed went up by 472,000.

Yet the headlines in most reports also included this part of the equation.
The 98,000 increase followed a 219,000 rise in February that was less than previously estimated, a Labor Department report showed Friday in Washington. The median forecast in a Bloomberg survey of economists called for a 180,000 advance.
And that 180,000 projected increase in the business establishment survey was based on the previous numbers. The Bureau of Labor Statistics added that the first two months of 2017 had their gains revised down by quite a bit.
The change in total nonfarm payroll employment for January was revised down from +238,000 to +216,000, and the change for February was revised down from +235,000 to +219,000. With these revisions, employment gains in January and February combined were 38,000 less than previously reported. Monthly revisions result from additional reports received from businesses since the last published estimates and from the recalculation of seasonal factors. Over the past 3 months, job gains have averaged 178,000 per month.
Which basically means that we only gained 60,000 jobs compared to what we thought we had going in- a major miss and the 2nd lowest total of job gains in a month over the last 2 years.

One sector in particular dragged down the job figures last month.
Retail trade lost 30,000 jobs in March. Employment in general merchandise stores declined by 35,000 in March and has declined by 89,000 since a recent high in October 2016.
And this is before we get to the larger waves of store closings (Payless ShoeSource is the latest to announce massive shutterings), which will happen in the coming months. There is a clear structural change happening where people are choosing to buy online and/or at Wal-Mart type megastores as opposed to department stores and other brick-and-mortar retail. In addition to the job losses, the dropping property values and empty lots may have significant effects on property tax bills in communities that have had these large stores be a cornerstone of their city.

So what's really happening with the job market? I'm not certain myself. It doesn't seem like wages are going way up (+0.2% for the month, +2.7% for the last 12 months), which would be happening if the labor market was as tight as the household survey indicates. But I also don't see things suffering a major slowdown, as a gain of 180,000 jobs a month for 2017 is largely in line with the 2.2 million total jobs that have been added in the last 12 months. In fact, the large gains in the household survey may just reflect them catching up to the previously-larger gains reported in the payrolls survey, and it still is quite a bit behind.

Job gains last 12 months
Household survey 1.7 million
Payrolls survey 2.2 million

So I'd say we're still in wait-and-see mode on whether we go up or down from the good-but-not-great job growth that we've seen for the better part of the last 2 years. The only thing I feel relatively strong about is that Q1 2017 is going to be nowhere near the 3.5-4% GDP growth that Donald Trump promised the rubes- indeed, the Atlanta Fed is now predicting that growth will be less than 1% when it's reported later this month. And if things don't pick up soon, then we'll see the negative effects for states like Wisconsin that relied on a potential Trump Boom to fill in the gaps of their budgets.

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