Friday, October 05, 2018

Comments on September Employment Report

by Bill McBride on 10/05/2018 11:50:00 AM

The headline jobs number at 134,000 for September was below consensus expectations of 180 thousand, however the previously two months were revised up by a combined 87 thousand.  The unemployment rate fell to the lowest since December 1969.  Overall this was a solid report.

Earlier: September Employment Report: 134,000 Jobs Added, 3.7% Unemployment Rate

In September, the year-over-year employment change was 2.537 million jobs. This is solid year-over-year growth.

Average Hourly Earnings

Wage growth was above expectations in September. From the BLS:

"In September, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $27.24. Over the year, average hourly earnings have increased by 73 cents, or 2.8 percent."
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 2.8% YoY in September.

Wage growth has generally been trending up.

Prime (25 to 54 Years Old) Participation

Employment Population Ratio, 25 to 54Since the overall participation rate has declined 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 decreased in September to 81.8%, and the 25 to 54 employment population ratio was unchanged at 79.3%. .

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) increased by 263,000 to 4.6 million in September. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."
The number of persons working part time for economic reasons has been generally trending down, however the number increased in September. The number working part time for economic reasons suggests there is still a little slack in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 7.5% in September.

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 1.384 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 1.332 million in August.

Summary:

The headline jobs number was below expectations, however the previous two months were revised up.

The headline unemployment rate declined to 3.7%,  the lowest rate since 1969.  And wage growth was slightly above expectations.

Overall, this was a solid report.   For the first nine months of 2018, job growth has been solid, averaging 208 thousand per month.