Friday, November 01, 2019

Comments on October Employment Report

by Calculated Risk on 11/01/2019 01:31:00 PM

The headline jobs number at 148 thousand for October ex-Census (128K total including temp Census hires and layoffs) was above consensus expectations of 93 thousand, and the previous two months were revised up 95 thousand, combined. The unemployment rate increased to 3.6%.

Earlier: October Employment Report: 148,000 Jobs Added ex-Census, 3.6% Unemployment Rate

In October, the year-over-year employment change was 2.093 million jobs including Census hires (note: this will be revised down in February with the benchmark revision).

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 137 thousand workers (NSA) net in October.   Note: this is NSA (Not Seasonally Adjusted).

This is more than last year in October.

Average Hourly Earnings

Wage growth was below expectations. From the BLS:

"In October, average hourly earnings for all employees on private nonfarm payrolls rose by 6 cents to $28.18. Over the past 12 months, average hourly earnings have increased by 3.0 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 3.0% YoY in October.

Wage growth had been generally trending up, but has weakened recently.

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 was increase in October to 82.8% from September at 82.6%, and the 25 to 54 employment population ratio was increased to 80.3% from 80.1%.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:
"The number of persons employed part time for economic reasons, at 4.4 million, changed little 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 increased in October to 4.438 million from 4.350 million in September.   The number of persons working part time for economic reason has been generally trending down.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 7.0% 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 1.264 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.314 million in September.

Summary:

The headline jobs number was above expectations, and the previous two months were revised up.  The headline unemployment rate increased to 3.6%; and, wage growth was below expectations. Factoring in the temporary Census fires, the GM strike, and the upward revisions to prior months, this was a solid report.

In 2019, the economy has added 1.662 million jobs through October 2019 ex-Census, down from 2.256 million jobs during the same period of 2018 (although 2018 will be revised down with benchmark revision to be released in February 2020).   So job growth has slowed.