Friday, January 10, 2020

Comments on December Employment Report

by Calculated Risk on 1/10/2020 09:27:00 AM

The headline jobs number at 145 thousand for December was below consensus expectations of 160 thousand, and the previous two months were revised down 14 thousand, combined. The unemployment rate was unchanged at 3.5%.

Earlier: December Employment Report: 145,000 Jobs Added, 3.5% Unemployment Rate

In December, the year-over-year employment change was 2.108 million jobs including Census hires.

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 76 thousand workers (NSA) net in December.   Note: this is NSA (Not Seasonally Adjusted).

In October, November and December combined, retailers hired more seasonal workers than in the previous two years.

Average Hourly Earnings

Wage growth was below expectations. From the BLS:

"In December, average hourly earnings for all employees on private nonfarm payrolls rose by 3 cents to $28.32. Over the last 12 months, average hourly earnings have increased by 2.9 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 2.9% YoY in December.

Wage growth had been generally trending up, but weakened in 2019.

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 increased in December to 82.9%, and the 25 to 54 employment population ratio increased to 80.4%.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:
"The number of persons employed part time for economic reasons, at 4.1 million, changed little in December but was down by 507,000 over the year. 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 decreased in December to 4.148 million from 4.288 million in November.   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 decreased to 6.7% in December.

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 1.186 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.219 million in November.


The headline jobs number was below expectations, and the previous two months were revised down.  The headline unemployment rate was unchanged at 3.5%; wage growth was well below expectations.  Overall this was a disappointing report.

In 2019, the economy added 2.108 million jobs, down from 2.679 million jobs during 2018 (although 2018 will be revised down with benchmark revision to be released in February 2020).   So job growth has slowed.