Friday, May 05, 2017

Comment: A Solid Employment Report

by Bill McBride on 5/05/2017 09:59:00 AM

The headline jobs number was above expectations, however there were combined small downward revisions to the previous two months.

There was plenty of good news - especially with the unemployment rate falling to 4.4% (although the participation rate declined slightly), and U-6 falling to 8.6%. Overall this was a solid report.

Earlier: April Employment Report: 211,000 Jobs, 4.4% Unemployment Rate

In April, the year-over-year change was 2.24 million jobs. Decent job growth.

Average Hourly Earnings

Wages CES, Nominal and RealClick on graph for larger image.

This 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 April.

Wage growth has generally been trending up.

Employment-Population Ratio, 25 to 54 years old

Employment Population Ratio, 25 to 54Since the overall participation rate has 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 was unchanged in April at 81.7%, and the 25 to 54 employment population ratio increased to 78.6%.

The participation rate has been trending down for this group since the late '90s, however, with more younger workers (and fewer older workers), the participation rate might move up some more.

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) declined by 281,000 to 5.3 million in April. 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 full-time jobs.
The number of persons working part time for economic reasons decreased in April. The number working part time for economic reasons suggests a little slack still in the labor market. This is the lowest level since April 2008.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 8.6% in April. This is the lowest level for U-6 since November 2007.

Unemployed over 26 Weeks

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

According to the BLS, there are 1.63 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.69 million in March.

This was the lowest number since June 2008.

This is generally trending down, but still a little elevated.

Although U-6,the number of persons employed part time for economic reasons, and the number of long term unemployed are still a little elevated, it appears the economy is nearing full employment. Overall this was a solid report.