Friday, January 08, 2016

Comments: Another Strong Employment Report

by Bill McBride on 1/08/2016 09:39:00 AM

This was a strong employment report with 292,000 jobs added, and employment gains for October and November were revised up.

However wages were mostly unchanged, from the BLS: "In December, average hourly earnings for all employees on private nonfarm payrolls, at $25.24, changed little (-1 cent), following an increase of 5 cents in November. Over the year, average hourly earnings have risen by 2.5 percent."

Earlier: December Employment Report: 292,000 Jobs, 5.0% Unemployment Rate

Note: The warm weather might have had a positive impact on this report.  As an example, very few people reported they had a full time job, but worked part time due to bad weather (an indicator of the impact of weather).

A few more numbers:  Total employment is now 4.9 million above the previous peak.  Total employment is up 13.6 million from the employment recession low.

Private payroll employment increased 275,000 in December, and private employment is now 5.3 million above the previous peak. Private employment is up 14.1 million from the recession low.

In December, the year-over-year change was 2.65 million jobs.

Seasonal Retail Hiring

Seasonal Retail HiringClick on graph for larger image.

Typically retail companies start hiring for the holiday season in October, and really increase hiring in November. Here is a graph that shows the historical net retail jobs added for October, November and December by year.

This graph really shows the collapse in retail hiring in 2008. Since then seasonal hiring has increased back close to more normal levels. Note: I expect the long term trend will be down with more and more internet holiday shopping.

Retailers hired 746 thousand workers (NSA) net in October, November and December.  Note: this is NSA (Not Seasonally Adjusted).

This is slightly below the number last year, and suggests retailers were reasonably optimistic about sales.

Employment-Population Ratio, 25 to 54 years old

Employment Population Ratio, 25 to 54Since the overall participation rate declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate increased in October to 80.9%, and the 25 to 54 employment population ratio was unchanged at 77.4%.  The participation rate for this group might increase a little more (or at least stabilize for a couple of years) - although the participation rate has been trending down for this group since the late '90s.

Average Hourly Earnings

Wages CES, Nominal and RealThis graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.5% YoY in December - and although the series is noisy - it does appear wage growth is trending up.

Note: CPI has been running under 2%, so there has been some real wage growth.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed at 6.0 million in December but was down by 764,000 over the year. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.
The number of persons working part time for economic reasons was little changed in December. This level suggests slack still in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged at 9.9% in December.

Unemployed over 26 Weeks

Unemployed Over 26 Weeks This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 2.08 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 2.05 million in November.

This is generally trending down, but is still high.

State and Local Government

State and Local GovernmentThis graph shows total state and government payroll employment since January 2007. (Note: Scale doesn't start at zero to better show the change.)

In December 2015, state and local governments added 13 thousand jobs. State and local government employment is now up 209,000 from the bottom, but still 549,000 below the peak.

State and local employment is now increasing.  And Federal government layoffs appear to have ended and, with the recent budget deal, Federal employment will probably increase in 2016. (Federal payrolls increased by 4,000 in December, and Federal employment was up 17,000 in 2015).

Overall this was another strong employment report.