February 3, 2017

January 2017 Employment Situation Summary (020317): 227K Payroll Jobs Added, Unemployment Rate Rises to 4.8 Pct.; (Seasonal Adjustments Inflate Reality; Over 800,000 Adults Disappear in Population Adjustments; Early Signs of a ‘Trump Effect’?)

Filed under: Economy,Taxes & Government — Tom @ 7:10 am

Econ Highlights of past several days:

  • ISM Manufacturing, though a inflated in my view, came in on Wednesday at a very expansionary 56.0 percent.
  • ADP’s Employment Report showed 246,000 seasonally adjusted private-sector jobs added in January.
  • December construction spending disappointed, declining by 0.2 percent when it was expected to increase, partially pulling back after strong increases in October and November.
  • January vehicle sales were down by 1.8 percent compared to January 2016. Cars were down 12.2 percent, but Light trucks, which are now 58 percent of the market, were up by 5.7 percent. GM (-3.9 percent) and Ford (-0.7 percent) had smallish year-over-year declines. Thanks to a heavier mix of light trucks, Ford probably had a decent revenue gain. Chrysler and Toyota fell by double-digit percentages. Honda, Nissan and Subaru had decent increases. VW had a big increase, but it’s coming off of a really rough 2016.
  • Unemployment claims remain very low.
  • Productivity increased by just 1 percent in 2016. Sadly, that’s the best performance since 2013. “US Productivity Growth Has Never Been This Low For This Long.”

Predictions:

Not seasonally adjusted benchmarks

January is a month when employment drops by well over 2 million. The question is how much more, and the best answer is “by as little as possible”:

NSAandSApayrolls0104to0116

Benchmarks for genuine improvement would be no more than 2.6 million total nonfarm jobs lost, and no more than 2.1 million private-sector jobs lost.

If the benchmarks are met, the seasonal adjusted figures should be well over 300,000. That’s not a prediction, though; it would be pretty stunning if these benchmarks are met, despite some indications that the seasonally adjusted numbers will come in somewhat better than the predictions cited above.

The report will be here at 8:30 a.m.

HERE IT IS (link with all tables): There’s limited “Trump Effect” evidence here, but it’s really early —

Total nonfarm payroll employment increased by 227,000 in January, and the unemployment rate was little changed at 4.8 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in retail trade, construction, and financial activities.

Household Survey Data

Both the number of unemployed persons, at 7.6 million, and the unemployment rate, at 4.8 percent, were little changed in January.

Among the major worker groups, the unemployment rate for Asians (3.7 percent) increased in January. The jobless rates for adult men (4.4 percent), adult women (4.4 percent), teenagers (15.0 percent), Whites (4.3 percent), Blacks (7.7 percent), and Hispanics (5.9 percent) showed little or no change over the month.

… After accounting for the annual adjustments to the population controls, the civilian labor force increased by 584,000 in January, and the labor force participation rate rose by 0.2 percentage point to 62.9 percent. Total employment, as measured by the household survey, was up by 457,000 over the month, and the employment-population ratio edged up to 59.9 percent.

… Establishment Survey Data

Total nonfarm payroll employment rose by 227,000 in January. Employment increased in retail trade, construction, and financial activities.

Retail trade employment increased by 46,000 over the month and by 229,000 over the year. Three industries added jobs in January–clothing and clothing accessories stores (+18,000), electronics and appliance stores (+8,000), and furniture and home furnishings stores (+6,000).

Employment in construction rose by 36,000 in January, following little change in December. Residential building added 9,000 jobs over the month, and employment continued to trend up among residential specialty trade contractors (+11,000). Over the past 12 months, construction has added 170,000 jobs.

Financial activities added 32,000 jobs in January, with gains in real estate (+10,000), insurance carriers and related activities (+9,000), and credit intermediation and related activities (+9,000). Financial activities added an average of 15,000 jobs per month in 2016.

In January, employment in professional and technical services rose by 23,000, about in line with the average monthly gain in 2016. Over the month, job gains occurred in computer systems design and related services (+13,000).

Employment in food services and drinking places continued to trend up in January (+30,000). This industry added 286,000 jobs over the past 12 months.

Employment in health care also continued to trend up in January (+18,000), following a gain of 41,000 in December. The industry has added 374,000 jobs over the past 12 months.

Employment in other major industries, including mining and logging, manufacturing, wholesale trade, transportation and warehousing, information, and government, showed little change over the month.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in January. In manufacturing, the workweek edged up by 0.1 hour to 40.8 hours, while overtime edged down by 0.1 hour to 3.2 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was 33.6 hours for the sixth consecutive month.

In January, average hourly earnings for all employees on private nonfarm payrolls rose by 3 cents to $26.00, following a 6-cent increase in December.

The change in total nonfarm payroll employment for November was revised down from +204,000 to +164,000, and the change for December was revised up from +156,000 to +157,000. With these revisions, employment gains in November and December combined were 39,000 lower than previously reported. …

Not seasonally adjusted results

Sorry folks, the raw results are very, very weak:

NSAandSApayrolls0104to0117

January 2017′s raw job losses in total nonfarm and in the private sector are each the second-worst (i.e., the second-highest number of job losses) since the recession ended.

The seasonal adjustment for total nonfarm, in the context of the past five years, was overly generous by 75K-150K. The smaller number ties into comparing this year to 2016, while the larger number ties into the preceding years.

On the private sector side, the seasonal adjustment was overly generous by 45K-100K. Again, the smaller number ties into a 2016 comparison, and the larger number ties into the preceding years.

More later, after review.

__________________________

UPDATE: The biggest news here is over 800,000 adults who disappeared from the civilian population, including almost 500,000 who were working but disappeared, after BLS revised its data to be in sync with the Census Bureau’s population numbers:

BLSdec2016popControlEffect0117

This mostly explains the January increase in the unemployment rate from December’s Household Survey-based 4.7 percent.

For the apologists who claim that Gross Domestic Product is understating “true” economic growth, this news undermines their contention. What the above table tells us is that overall employment was about 0.32 percent smaller at the end of the year than we thought it was a month ago. In other words, this brings the job market down to a level more closely in sync with GDP.

Having established that, the January figures show a significant level (+584K) of net re-entry into the workforce, and that a pretty high percentage of them (78 percent) found jobs. This is an early indication of those on the sidelines are getting back into the game — what might be preliminarily called a “sleeping giant wakes up” effect. I’m not firmly convinced, but I suspect the center-right won’t be able to resist giving Donald Trump credit for this. He wasn’t inaugurated yet (the survey period is from about January 12), but his active, economy-promoting transition period and the imminent departure of the economy-hostile Obama administration gives that argument some intuitive support.

UPDATE 1A, 2:30 p.m.: For those unfamiliar with the BLS employment report, the preceding discussion had to do with the Household Survey of people contacted at their residences and asked questions about their employment status.

That survey, whose primary purpose is to determine rates of employment and workforce participation, shows an employment gain of 457K and an increase in the labor force of 584K. Household Survey employment figures are very volatile from month to month but typically are not revised (except annually after considering the Census Bureau’s population figures). Household Survey figures are also seasonally adjusted, but those seasonal adjustments are independent of the Establishment (Payroll) Survey discussed just before the above Update.

The Establishment (Payroll) Survey is a separate survey of employers asking them how many employees they have, whether they are full- or part-time, what they’re being paid, etc. The job gains and losses in that survey are the headline numbers each month, because they are less volatile and considered somewhat more reliable. But the Establishment Survey does not pick up self-employed or contract workers, leaving a bit of a hole in every month’s analysis.

UDPATE 2: Other observations —

  • The unemployment rate for black men over 20, at 7.3 percent, is either as low as it’s even been or darned close to it. Unfortunately, their workforce participation still significantly trail their white counterparts.
  • Total Household Survey employment has gone up by only 1.548 million in the past 12 months, while payroll employment has increased by 2,243 million. Either there’s a significant out-of-sync situation here, or we have a combination of two things: the ranks of the self-employed have shrunk significantly and/or the number of part-timers who are appearing on multiple payrolls has sharply increased.
  • With all effects included, full-time employment increased in January by 457K. Part-time employment fell by 490K.
  • The growth in “Food Service and Drinking Places” employment continues (up 30K, a very disproportionate percentage of employment growth).
  • The wage news was really disappointing. Last month’s reported increase of 10 cents per hour fell to 6 cents. This month’s increases of 3 cents per hour and $1.03 per week are pathetic.

OVERALL: Though there are signs of the beginning of a revival when separating the population control effect discussed above from actual January changes, today’s release, especially on the payroll employment side, is a “less than meets the eye” report.

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3 Comments

  1. You are my go-to guy on this stuff, THANK YOU.

    Comment by Tracy Coyle — February 3, 2017 @ 9:10 am

  2. Thanks, Tracy. Was thinking about you a couple of days ago when some clown at another site went after me for my airtight definitions of racism vs. the press’s default polling treatment.

    Comment by Tom — February 3, 2017 @ 9:17 am

  3. :)

    Comment by Tracy Coyle — February 3, 2017 @ 10:47 am

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