Friday, December 07, 2018

Comments on November Employment Report

by Bill McBride on 12/07/2018 10:00:00 AM

The headline jobs number at 155 thousand for November was below consensus expectations of 190 thousand, and the previous two months were revised down 12 thousand, combined. The unemployment rate was unchanged at 3.7%.  Still this was a decent report.

Earlier: November Employment Report: 155,000 Jobs Added, 3.7% Unemployment Rate

In November, the year-over-year employment change was 2.443 million jobs. This is solid year-over-year growth.

Seasonal Retail Hiring

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.

Seasonal Retail HiringClick on graph for larger image.

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 464 thousand workers (NSA) net in November.   Note: this is NSA (Not Seasonally Adjusted).

Just like last year, there was a surge in seasonal hiring in November.

Average Hourly Earnings

Wage growth was close to expectations in November. From the BLS:

"In November, average hourly earnings for all employees on private nonfarm payrolls rose by 6 cents to $27.35. Over the year, average hourly earnings have increased by 81 cents, or 3.1 percent."
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 3.1% YoY in November.

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 November to 82.2%, and the 25 to 54 employment population ratio was unchanged at 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), at 4.8 million, changed little in November. 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 increased in November. 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 7.6% in November. This is the highest level for U-6 since June.

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

Summary:

The headline jobs number was below expectations.  The headline unemployment rate was unchanged at 3.7%, tying the previous two month for the lowest rate since 1969.  And wage growth was at expectations, and above 3% YoY for the second consecutive month.

Overall, this was a decent report.   For the first eleven months of 2018, job growth has been solid, averaging 206 thousand per month.