Friday, October 4, 2019

Decent jobs report lowers recession fear. But trends still aren't great in many places

Well, recession isn’t here yet, as the Bureau of Labor Statistics says job growth was fine for September.
Total nonfarm payroll employment increased by 136,000 in September. Job growth has averaged 161,000 per month thus far in 2019, compared with an average monthly gain of 223,000 in 2018. In September, employment continued to trend up in health care and in professional and business services.

The change in total nonfarm payroll employment for July was revised up by 7,000 from +159,000 to +166,000, and the change for August was revised up by 38,000 from +130,000 to +168,000. With these revisions, employment gains in July and August combined were 45,000 more than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 157,000 per month over the last 3 months.
A net gain of 177,000 since the last report sounds like a jobs market that’s still humming along, and the household survey showed unemployment dropping to a 50-year low of 3.5%, with a seasonally adjusted 391,000 more people saying they had work.

Yeah, I was surprised by that too, given how shaky most economic reports for August and September had been. So I dug further into the BLS report to figure out what made the overall numbers so good. And it was because the growth was heavily concentrated in a few areas.

US jobs report, September 2019
Health Care/Social Assistance +41,400
Professional and business services +34,000
Government +22,000

In fact, government has been a significant source of job growth over the last 3 months, with a total of 112,000 jobs added in the public sector since June (small govt conservatism!).

By comparison, private sector job growth declined in the first part of 2019 and has stayed soft. To the point that we are now adding half the private sector jobs that we were adding at the start of this year.

Another way Trumponomics isn’t working out as promised is that the slowdown in the 3 goods-producing sectors continued. UW's Menzie Chinn noted that the manufacturing declines continued for September, even with gains elsewhere.

And the October survey is likely to include effects of the GM strike. Uh oh.

The other 2 goods sectors weren't doing well either. When August's revisions were included, there were fewer jobs in both construction and mining than what we had out of the report we saw last month.

Jobs report, Sept 2019, Aug 2019 revisions
Sept 2019 +7,000
Aug 2019 revision -11,000

Mining and Logging
Sept 2019 No change
Aug 2019 revision -1,000

In a report that had several contrasting numbers, here was an oddball that especially stood out.

Amusements, gambling and recreation, Sept 2019
Seasonally adjusted +13,400
Non-seasonally adjusted -309,700

I don’t know if that’s an effect of football kicking off in a year where sports betting is legal in more places for the first time, or if something’s happened with seasonal attractions that has them go longer into Fall. But it didn’t reflect a growing consumer sector in general.

That’s because retail continued to lose jobs (-11,400, -60,900 over last 12 months), and food services/bars/lodging barely added anything (+1,000 in Sept total).

The other main bit of news with the jobs report is that average hourly wages hit a wall after a few months of decent gains.
In September, average hourly earnings for all employees on private nonfarm payrolls, at $28.09, were little changed (-1 cent), after rising by 11 cents in August. Over the past 12 months, average hourly earnings have increased by 2.9 percent. In September, average hourly earnings of private-sector production and nonsupervisory employees rose by 4 cents to $23.65.
That’s the first time in more than a year that the 12-month gain in average hourly wages has been below 3%, and the 2.6% increase in weekly earnings is the smallest since 2017.

And for manufacturing and construction, it was just as soft on the hourly side, although construction has had a longer work week to make up the difference.

12-month change in average wages, Sept 2019
Sept 2019 hourly +2.65%
Sept 2019 weekly +1.65%

Sept 2019 hourly +2.19%
Sept 2019 weekly +4.02%

In all, it was a good report that should at least put the recession concerns to rest for today, and Wall Street responded with a relief rally of 372 points, cutting October's losses in half. But there are also signs of sputtering in much of the private sector and in wage growth that indicate the job market isn’t likely to pick up for the last 3 months of 2019, either.

So stay tuned, especially because while job totals are usually one of the last indicators to decline for a recession, when it happens, it becomes hard to stop.

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