Friday, February 01, 2019

Comments on January Employment Report

by Calculated Risk on 2/01/2019 12:04:00 PM

The headline jobs number at 304 thousand for January was well above consensus expectations of 158 thousand, however the previous two months were revised down 70 thousand, combined. The unemployment rate increased to 4.0%, due to government employees on furlough being counted as unemployed in the household survey (but jobs counted in the establishment survey). Overall this was a strong report.

Earlier: January Employment Report: 304,000 Jobs Added, 4.0% Unemployment Rate

In January, the year-over-year employment change was 2.807 million jobs. That is solid year-over-year growth.

Average Hourly Earnings

Wage growth was at expectations in January. From the BLS:

"In January, average hourly earnings for all employees on private nonfarm payrolls rose by 3 cents to $27.56, following a 10-cent gain in December. Over the year, average hourly earnings have increased by 85 cents, or 3.2 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 3.2% YoY in January.

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 December to 82.6%, and the 25 to 54 employment population ratio was unchanged at 79.9%.

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 about one-half million to 5.1 million in January. Nearly all of this increase occurred in the private sector and may reflect the impact of the partial federal government shutdown."
The number of persons working part time for economic reasons has been generally trending down.  The number increased sharply in January, probably as a result of the government shutdown. 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 sharply to 8.1% in January.

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 1.252 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.306 million in January.

Summary:

The headline jobs number was well above expectations, however the previous two months were revised down.  The headline unemployment rate increased to 4.0% due to the government shutdown.

Some of the quirky aspects of the employment report were due to the government shutdown (rise in the unemployment rate, sharp rise in "Part Time for Economic Reasons" workers, and the sharp rise in U-6.)    My guess is most of the rise in Part Time was related to private sector workers getting fewer hours due to the shutdown, however some of the increase might be related to government workers taking part time jobs to pay the bills (as a reminder, the establishment report is for jobs - and government employees on furlough taking part time jobs would be counted as having two jobs).

Overall, this was a strong report.