Friday, February 07, 2020

Comments on January Employment Report

by Calculated Risk on 2/07/2020 09:44:00 AM

The headline jobs number at 225 thousand for January was above consensus expectations of 162 thousand, and the previous two months were revised up 7 thousand, combined. The unemployment rate increase to 3.6%. Note: It appears weather boosted employment in January - I'll have more on this later.

Earlier: January Employment Report: 225,000 Jobs Added, 3.6% Unemployment Rate

In January, the year-over-year employment change was 2.052 million jobs including Census hires.

The annual benchmark revision showed a reduction in jobs in March 2019 of 505 thousand (close to the preliminary estimate of the downward revision).

With these revisions, the record job streak remained alive - although February 2019 was revised down to just +1 thousand jobs added.  (Note: Excluding temporary Census hiring, the job streak ended in February 2019 - since the Census hired +1 thousand workers in Feb 2019).

Average Hourly Earnings

Wage growth was below expectations. From the BLS:

"In January, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $28.44. Over the past 12 months, average hourly earnings have increased by 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 January.

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 January to 83.1%, and the 25 to 54 employment population ratio increased to 80.6%.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:
"The number of persons employed part time for economic reasons, at 4.2 million, was essentially unchanged in January. 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 January to 4.182 million from 4.148 million in December.   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 6.9% 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 1.166 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.186 million in December.

This was the lowest level for long term unemployed since June 2007.

Summary:

The headline jobs number was above expectations, and the previous two months were revised up slightly.  The headline unemployment rate increase to 3.6%; wage growth picked up to 3.1% year-over-year.  Overall this was a solid report, although there was probably some boost from the weather.