September 8, 2018

This Week’s Employment News: Very Good (But Not ‘On Fire’)

Filed under: Economy,Taxes & Government — Tom @ 10:01 am

On Thursday, ADP’s national employment report estimated that the economy added 163,000 seasonally adjusted private-sector jobs in August. July’s original reported 219K figure remained essentially the same at 217K, as did June’s original 177K, which is not 178K.

In ADP’s press release, Mark Zandi stated that “The job market is hot. Employers are aggressively competing to hold onto their existing workers and to find new ones. Small businesses are struggling the most in this competition, as they increasingly can’t fill open positions.”

One would think the that this situation might indicate that wage increases which beat inflation by a significant margin might finally be occurring.

Did we see that in Friday’s Employment Situation Summary from the government? Well, the news certainly got better, as seen in the second-last paragraph of that report, which had some other news which was less than encouraging:

Total nonfarm payroll employment increased by 201,000 in August, and the unemployment rate was unchanged at 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, wholesale trade, transportation and warehousing, and mining.

Household Survey Data

The unemployment rate remained at 3.9 percent in August, and the number of unemployed persons, at 6.2 million, changed little.

Among the major worker groups, the unemployment rates for adult men (3.5 percent), adult women (3.6 percent), teenagers (12.8 percent), Whites (3.4 percent), Blacks (6.3 percent), Asians (3.0 percent), and Hispanics (4.7 percent) showed little or no change in August.

The number of long-term unemployed (those jobless for 27 weeks or more) was little
changed in August at 1.3 million and accounted for 21.5 percent of the unemployed. Over the year, the number of long-term unemployed has declined by 403,000.

Both the labor force participation rate, at 62.7 percent, and the employment population ratio, at 60.3 percent, declined by 0.2 percentage point in August.

Establishment Survey Data

Total nonfarm payroll employment increased by 201,000 in August, in line with the
average monthly gain of 196,000 over the prior 12 months. Over the month, employment
increased in professional and business services, health care, wholesale trade,
transportation and warehousing, and mining.

Professional and business services added 53,000 jobs in August and 519,000 jobs over the year.

In August, health care employment rose by 33,000, with job gains in ambulatory health care services (+21,000) and hospitals (+8,000). Health care has added 301,000 jobs over the year.

Wholesale trade employment increased by 22,000 in August and by 99,000 over the year. Durable goods wholesalers added 14,000 jobs over the month and accounted for about two-thirds of the over-the-year job gain in wholesale trade.

Employment in transportation and warehousing rose by 20,000 in August and by 173,000 over the past 12 months. Within the industry, couriers and messengers added 4,000 jobs in August.

Mining employment increased by 6,000 in August, after showing little change in July. Since a recent trough in October 2016, the industry has added 104,000 jobs, almost entirely in support activities for mining.

Employment in construction continued to trend up in August (+23,000) and has increased by 297,000 over the year.

Manufacturing employment changed little in August (-3,000). Over the year, employment in the industry was up by 254,000, with more than three-fourths of the gain in the durable goods component.

Employment showed little change over the month in other major industries, including retail trade, information, financial activities, leisure and hospitality, and government.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in August. In manufacturing, the workweek held steady at 41.0 hours, and overtime was unchanged at 3.5 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was 33.8 hours for the fifth consecutive month.

In August, average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents to $27.16. Over the year, average hourly earnings have increased by 77 cents, or 2.9 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $22.73 in August.

The change in total nonfarm payroll employment for June was revised down from +248,000 to +208,000, and the change for July was revised down from +157,000 to +147,000. With these revisions, employment gains in June and July combined were 50,000 less 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 185,000 per month over the last 3 months.

The downward revisions to June and July were a bit disappointing, as were the declines in the workforce participation rates BLS cited. These should temper the “economy’s on fire” enthusiasm headline currently at Drudge. Very strong, yes. On fire, no (especially see the first point in “Other Notes” below).

Reinforcing the “very strong” evaluation, the BizzyBlog Jobs Report Reality Check tells us that the total nonfarm seasonal conversion understated the underlying not seasonally adjusted reality by 44,000 jobs, while the private-sector figure was almost spot-on. In the bigger picture, the year-to-date figures presented at the bottom of the graphic tell us that the nonfarm conversions have understated the underlying strength by a not-insignificant amount, which the private-sector conversions have been pretty close (graphics seen in previous months have been revised to reflect all subsequent-month BLS revisions):

BizzyBlogNSAandSArealityCheckAug2018

Other notes on the jobs report (references are to seasonally adjusted figures unless otherwise indicated):

  • The two biggest negatives driving the participation declines noted in BLS’s report were declines in the labor force and Household Survey employment of 469K and 423K, respectively. Single-month movements in the Household Survey are sometimes misleading — and in this case, let’s hope that’s so. Otherwise, they might be precursors of significant weakness.
  • Black unemployment fell to 6.3 percent from 6.6 percent.
  • Hispanic unemployment ticked up to 4.7 percent, but remains historically very low.
  • Full-time employment fell back significantly in August (-444K), as did part-timers (-79K). But in the past 12 months, FT employment is up by almost 2.7 million, which is significantly higher than the number of jobs being added annually — meaning that employers have become less reluctant to take on full-timers than they were several years ago.
  • Seasonally adjusted “fully-loaded” U-6 unemployment fell to 7.4 percent — a level not seen since April 2001.
  • The 10-cent wage increase reported in August was very good news. If that continued for a year, that would be about a 4.5 percent annual increase. We also shouldn’t overlook average weekly earnings, which, at 3.2 percent in the past 12 months, have outperformed average hourly earnings (up by 2.9 percent).

OVERALL, this week’s employment news was strong (but not “on fire”), with an indication that wages are finally going up decently — accompanied by a caveat that the weak numbers in the labor force and Household Survey employment mean that next month’s figures in these areas need to be closely watched.

Share

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.