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March jobs report: good nowcast, concerning forecast

Summary:
- by New Deal democrat HEADLINES:  +196,000 jobs added U3 unemployment rate unchanged at 3.8%  U6 underemployment rate unchanged at  7.3% Leading employment indicators of a slowdown or recession I am highlighting these because many leading indicators overall strongly suggest that an employment slowdown is coming. The following more leading numbers in the report tell us about where the economy is likely to be a few months from now. With one exception, these either decelerated or outright declined. the average manufacturing workweek was unchanged 40.7 hours. This is one of the 10 components of the LEI. It is down -0.6 hours from its peak during this expansion. Manufacturing jobs declined by -.6,000. YoY manufacturing is up 209,000, a big deceleration from last summer’s pace.

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 - by New Deal democrat

HEADLINES
  • +196,000 jobs added
  • U3 unemployment rate unchanged at 3.8% 
  • U6 underemployment rate unchanged at  7.3%

Leading employment indicators of a slowdown or recession

I am highlighting these because many leading indicators overall strongly suggest that an employment slowdown is coming. The following more leading numbers in the report tell us about where the economy is likely to be a few months from now. With one exception, these either decelerated or outright declined.
  • the average manufacturing workweek was unchanged 40.7 hours. This is one of the 10 components of the LEI. It is down -0.6 hours from its peak during this expansion.
  • Manufacturing jobs declined by -.6,000. YoY manufacturing is up 209,000, a big deceleration from last summer’s pace.
  • construction jobs rose by 16,000. YoY construction jobs are up 246,000, also a big deceleration from last summer.   
  • temporary jobs declined by -5400. YoY these are up +44,900. These are only up 3700 in the past 5 months, a big slowdown.
  • the number of people unemployed for 5 weeks or less fell by -68,000 from 2,194,000 to 2,126,000.  The post-recession low was set 10 months ago at 2,034,000.

Wages and participation rates

Here are the headlines on wages and the broader measures of underemployment:
  • Not in Labor Force, but Want a Job Now: increased by 5,000 from 5.222 million to 5.227 million
  • Part time for economic reasons: increased by 189,000 from 4.310 million to 4.499 million
  • Employment/population ratio ages 25-54: declined -0.1% from 79.9% to 79.8%
  • Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $.06 from  $23.18 to $23.24, up +3.4% YoY.  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)  

Holding Trump accountable on manufacturing and mining jobs

 Trump specifically campaigned on bringing back manufacturing and mining jobs.  Is he keeping this promise?  
  • Manufacturing jobs rose an average of +22,000/month in the past year vs. the last seven years of Obama's presidency in which an average of +10,300 manufacturing jobs were added each month.   
  • Coal mining jobs rose by 100 for an average of 150/month vs. the last seven years of Obama's presidency in which an average of -300 jobs were lost each month
January was revised upward by 1,000. February was also revised upward by 13,000, for a net change of 14,000.

Other important coincident indicators help  us paint a more complete picture of the present:
  • Overtime declined -0.1 hour to 3.4 hours.
  • Professional and business employment (generally higher-paying jobs) increased by 34,000 and  is up +534,000 YoY. This has also decelerated from last year’s pace.
  • the index of aggregate hours worked for non-managerial workers rose by 0.5%
  •  the index of aggregate payrolls for non-managerial workers rose by 0.7%  
Other news included:            
  • the  alternate jobs number contained  in the more volatile household survey declined by -201,000  jobs.  This represents an increase of 1,158,000 jobs YoY vs. 2,537,000 in the establishment survey. This is a big difference and, because the household survey has a tendency to turn first, is a definite concern.    
  • Government jobs rose by 14,000.
  • the overall employment to population ratio for all ages 16 and up declined -0.1% from 60.7% to 60.6% m/m and is up 0.2% YoY.          
  • The labor force participation rate declined -0.2% from 63.2% to 63.0% and is up +0.1% YoY.

SUMMARY

The headline jobs number was very good, although a little below the pace of last year. But the internals were generally neutral to negative.

To begin with, all three of the jobs sectors I am watching closely - construction, manufacturing, and temporary jobs - showed a marked slowdown in growth. All three have declined over the last two months, and temporary jobs are at a virtual standstill over the last five months. Another source of concern is that the household survey’s number showed an outright loss of jobs for the month, for the second time in four months. This measure has grown by only an average of 130,000 per month for the last year. All of this heightens concern that a big slowdown in jobs growth has probably already begun.

Unemployment, underemployment, labor force participation, and the prime age employment/population ratio all either stalled or, in the last case, declined slightly.

On the bright side, wages for ordinary workers grew at 3.4% YoY, a slight slowdown from their recent best pace. Perhaps the best news was the continued strong pace of growth in aggregate hours and payrolls.


To sum up, the jobs nowcast is very good. The jobs forecast is for a significant slowdown, the scope of which is not clear yet.

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