Friday, November 02, 2018

Comments on October Employment Report

by Bill McBride on 11/02/2018 09:31:00 AM

The headline jobs number at 250,000 for October was above consensus expectations of 190 thousand (probably boosted by some bounce back from Hurricane Florence), and the previous two months were unrevised combined. The unemployment rate was unchanged at 3.7%. Overall this was a strong report.

Earlier: October Employment Report: 250,000 Jobs Added, 3.7% Unemployment Rate

In October, the year-over-year employment change was 2.516 million jobs. This is solid year-over-year growth.

Average Hourly Earnings

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

"In October, average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $27.30. Over the year, average hourly earnings have increased by 83 cents, or 3.1 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 3.1% YoY in October.

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 increased in October to 82.3%, and the 25 to 54 employment population ratio increased to 79.7%.

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 essentially unchanged at 4.6 million in October. 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.  The number decreased slightly in October. 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 decreased to 7.4% in October.

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 1.373 million workers who have been unemployed for more than 26 weeks and still want a job. This was down slightly from 1.384 million in September.

Summary:

The headline jobs number was above expectations.  The headline unemployment rate was unchanged at 3.7%,  tying last month for the lowest rate since 1969.  And wage growth was above expectations, and above 3% YoY for the first time in over 9 years.

Overall, this was a strong report.   For the first ten months of 2018, job growth has been solid, averaging 213 thousand per month.