Wednesday , September 18 2019
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August jobs report: for once, the underwhelming headline masked very good internals

Summary:
- by New Deal democrat HEADLINES:  +130,000 jobs added (+105,000 ex-Census) U3 unemployment rate unchanged at 3.7% U6 underemployment rate rose 0.2% to 7.2% 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. These were positive. the average manufacturing workweek rose +0.2 from 40.4 hours to 40.6 hours. This is one of the 10 components of the LEI and is positive (note last month was -0.3 so on net this is still -0.1 hours from two months ago). Manufacturing jobs rose by 3,000. YoY manufacturing is up 138,000, a deceleration from last summer’s

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 - by New Deal democrat

HEADLINES
  • +130,000 jobs added (+105,000 ex-Census)
  • U3 unemployment rate unchanged at 3.7%
  • U6 underemployment rate rose 0.2% to 7.2%
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. These were positive.
  • the average manufacturing workweek rose +0.2 from 40.4 hours to 40.6 hours. This is one of the 10 components of the LEI and is positive (note last month was -0.3 so on net this is still -0.1 hours from two months ago).
  • Manufacturing jobs rose by 3,000. YoY manufacturing is up 138,000, a deceleration from last summer’s pace.
  • construction jobs rose by 14,000. YoY construction jobs are up 177,000, also a deceleration from last summer. Residential construction jobs, which are even more leading, rose by 7,000.
  • temporary jobs rose by 15,400 (note this *may* reflect census hiring).
  • the number of people unemployed for 5 weeks or less rose by 6,000 from 2,201,000 to 2,207,000. The post-recession low was four months ago.

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: rose by 107,000 from 5.043 million to 5.150 million
  • Part time for economic reasons: rose by 397,000 from 3.984 million to 4.381 million 
  • Employment/population ratio ages 25-54: rose +0.5% from 79.5% to 80.0%. THIS IS A NEW EXPANSION HIGH.
  • Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $.11 from  $23.48 to $23.59, up +3.5% YoY. This is still a slight decline from the recent YoY% change peak.  (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 +11,500/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 +1200, an average of +117 jobs/month in the past year vs. the last seven years of Obama's presidency in which an average of -300 jobs were lost each month
June was revised downward by -15,000. July was also revised downward by -5,000, for a net change of -20,000.

Other important coincident indicators help  us paint a more complete picture of the present:
  • Overtime fell -0.1 hours to 3.2  hours.
  • Professional and business employment (generally higher-paying jobs) rose by +37,000 and  is up +449,000 YoY. 
  • the index of aggregate hours worked for non-managerial workers rose by +0.3%
  •  the index of aggregate payrolls for non-managerial workers rose by +0.8%  
Other news included:            
  • the  alternate jobs number contained  in the more volatile household survey rose by 590,000  jobs.  This represents an increase of 2,274,000 jobs YoY vs. 2,074,000 in the establishment survey. 
  • Government jobs rose by 28,000 (up +3,000 ex-census).
  • the overall employment to population ratio for all ages 16 and up rose 0.9% to 60.9% m/m and is up 0.6% YoY.          
  • The labor force participation rate rose 0.2% to 63.2% m/m and is up 0.5% YoY.

SUMMARY

This report was the mirror image of most others we have seen this year: the establishment report was mediocre, while the household report was excellent.

The deceleration in jobs growth was well in evidence in the headline number. The last three months, ex-census hiring, has only been +147,000. But construction and manufacturing jobs both did increase. Non-supervisory wage gains increased to +3.5% YoY. On the other hand, if census hiring was included in the temporary jobs number, that decreased significantly.(UPDATE:  Census hiring was not included therefore the positive number is real, but temporary jobs remain significantly below their December 2018 peak.)  It is also concerning that the revisions to prior months continue to be downward. This is something that tends to happen near turning points.

The household survey, on the other hand, was generally very strong. Almost 600,000 new jobs were added in that report, and the YoY gains now exceed the establishment report. The prime age employment to population ratio increased to its highest level since January 2008. It is only because of this big addition to the labor force that the unemployment rate stayed steady (vs. going lower) and the underemployment rate increased. Aggregate hours and payrolls both jumped. 

So, despite the underwhelming headline number, this was overall a very good report.

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