by Calculated Risk on 1/06/2019 08:01:00 AM

If the government shutdown continues through this coming week, then the unemployment rate in the January report will be negatively impacted. This is a key week since it is the reference week for the BLS report (contains the 12th of the month). If the shutdown continues through next weekend, Federal employees who are on furlough will be counted as unemployed in the January report (CPS, Household survey).

However, the furloughed employees still have jobs, so their positions will still be counted in the CES (Establishment survey).  So the headline employment number will not be directly impacted.

The closest example to the current situation is the October 2013 government shutdown that lasted from October 1st through October 17th (there are differences in what was shutdown). From the October 2013 employment report:

Among the unemployed, however, the number who reported being on temporary layoff increased by 448,000. This figure includes furloughed federal employees who were classified as unemployed on temporary layoff under the definitions used in the household survey.

If the government shutdown continues, then the unemployment rate will probably bump up to 4.0% or 4.1% in the January report.    Assuming the shutdown ends soon thereafter, the change in the unemployment rate will be reversed in the February report.

Update Jan 10, 2019: As far as the headline jobs number from the CES (Establishment survey), the jobs were people who are working without pay will still be counted. For the furloughed employees, it is different. Since they are not being paid, the positions will not be counted - UNLESS - legislation is passed that provides for back pay.    If the legislation is passed, even after the reference week, the furloughed positions will be counted in the CES (headline jobs number). This is what has happened in previous shutdowns.

So, for the unemployment number, it depends on what happens this week.

For the headline jobs number, it depends on what legislation is eventually passed.

by Calculated Risk on 1/05/2019 08:11:00 AM

Special Note on Government Shutdown: If the Government shutdown continues, then some releases will be delayed. As an example, this week, the report on International Trade (trade deficit)  will not be released if the government remains shutdown.

The key report this week is the December CPI report on Friday.

----- Monday, Jan 7th -----
10:00 AM: the ISM non-Manufacturing Index for December.  The consensus is for a decrease to 58.4 from 60.7.

----- Tuesday, Jan 8th -----
6:00 AM: NFIB Small Business Optimism Index for December.

8:30 AM: Trade Balance report for November from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is the trade deficit to be $53.9 billion.  The U.S. trade deficit was at $55.5 billion in October.

10:00 AM ET: Job Openings and Labor Turnover Survey for November from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in October to 7.079 million from 6.960 million in September.

The number of job openings (yellow) were up 17% year-over-year, and Quits were up 9% year-over-year.

3:00 PM: Consumer Credit from the Federal Reserve.

----- Wednesday, Jan 9th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

2:00 PM: FOMC Minutes, Meeting of Dec 18-19

----- Thursday, Jan 10th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 222 thousand initial claims, down from 231 thousand the previous week.

8:30 AM: The Producer Price Index for December from the BLS.

12:45 PM: Discussion, Fed Chair Jerome Powell, At the Economic Club of Washington, D.C., Washington, D.C.

----- Friday, Jan 11th -----
8:30 AM: The Consumer Price Index for November from the BLS. The consensus is for 0.1% decrease in CPI, and a 0.2% increase in core CPI.

----- List of Key Delayed Releases ----
New Home Sales (Census) for November from the Census Bureau. The consensus was for 560 thousand SAAR, up from 544 thousand in October.

Construction Spending (Census) for November. The consensus was for a 0.3% increase in construction spending.

Light vehicle sales (BEA) for December. The consensus was for light vehicle sales to be 17.2 million SAAR in December, down from 17.4 million in November (Seasonally Adjusted Annual Rate).

by Calculated Risk on 1/04/2019 06:11:00 PM

From the Association of American Railroads (AAR) Rail Time Indicators. Graphs and excerpts reprinted with permission.

U.S. freight rail traffic in December and the full year 2018 was mixed, but for the most part was positive. Intermodal finished the year strong, rising 5.0% in December 2018. The first and second weeks of December (weeks 49 and 50 of the year) were the two highest-volume intermodal months in history, exceeding 300,000 units in a single week for the first time. Intermodal set a new annual record in 2018: total volume was 14.47 million containers and trailers, up 5.5%, or 751,217 units, over 2017. Total carloads, meanwhile, rose 2.9% in December 2018 over December 2017, their 9th year-over-year increase in 2018. For the full year, total carloads were up 1.8%, or 238,857 carloads.
emphasis added

Click on graph for larger image.

This graph from the Rail Time Indicators report shows U.S. average weekly rail carloads (NSA).  Light blue is 2018.

Rail carloads have been weak over the last decade due to the decline in coal shipments.

U.S. railroads (excluding the U.S. operations of Canadian railroads) originated 1.022 million carloads in December 2018, up 2.9%, or 29,139 carloads, over December 2017. December was the ninth yearover- year monthly increase for total carloads in 2018 and reversed a slight decline in November. Total carloads averaged 255,495 per week in December 2018, the most for December since 2014.

The second graph is for intermodal traffic (using intermodal or shipping containers):

U.S. railroads originated 1.10 million containers and trailers in December 2018, up 5.0% over December 2017. Weekly average intermodal volume in December 2018 was 274,029, easily the highest weekly average for December for intermodal in history. In fact, the first and second weeks of December 2018 (weeks 49 and 50 of the year) were the highest volume intermodal weeks in history for U.S. railroads, regardless of month, with 303,225 and 301,407 intermodal units originated, respectively. That’s the first time ever that intermodal originations exceeded 300,000 in a single week. So much for intermodal peaking in September or October. The top 10 intermodal weeks in history were all in 2018, as were nine of the top ten intermodal months

2018 was another record year for intermodal traffic.

by Calculated Risk on 1/04/2019 05:04:00 PM

By request, here is another update of tracking employment during Presidential terms.  We frequently use Presidential terms as time markers - we could use Speaker of the House, Fed Chair, or any other marker.

NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I'll just stick to the beginning of each term.

Important: There are many differences between these periods. Overall employment was smaller in the '80s, however the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). Presidents Carter and George H.W. Bush only served one term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (dark blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (dark red) took office.

There was a recession towards the end of President G.H.W. Bush (light purple) term, and Mr Clinton (light blue) served for eight years without a recession.

Click on graph for larger image.

The first graph is for private employment only.

Mr. Trump is in Orange (23 months).

The employment recovery during Mr. G.W. Bush's (red) first term was sluggish, and private employment was down 804,000 jobs at the end of his first term.   At the end of Mr. Bush's second term, private employment was collapsing, and there were net 391,000 private sector jobs lost during Mr. Bush's two terms. 

Private sector employment increased by 20,964,000 under President Clinton (light blue), by 14,717,000 under President Reagan (dark red), 9,041,000 under President Carter (dashed green), 1,509,000 under President G.H.W. Bush (light purple), and 11,907,000 under President Obama (dark blue).

During the first 23 months of Mr. Trump's term, the economy has added 4,475,000 private sector jobs.

 A big difference between the presidencies has been public sector employment.  Note: the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010. 

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).  However the public sector declined significantly while Mr. Obama was in office (down 266,000 jobs).

During the first 23 months of Mr. Trump's term, the economy has added 92,000 public sector jobs.

The third graph shows the progress towards the Trump goal of adding 10 million jobs over his 4 year term.

After 23 months of Mr. Trump's presidency, the economy has added 4,567,000 jobs, about 225,000 behind the projection.

by Calculated Risk on 1/04/2019 01:57:00 PM

FAQ: How can the unemployment rate rise if the economy is adding so many jobs?

The BLS reported this morning that the economy added 312,000 jobs, but the unemployment rate increased to 3.9% from 3.7% in November.

This data comes from two separate surveys. The unemployment Rate comes from the Current Population Survey (CPS: commonly called the household survey), a monthly survey of about 60,000 households.

The jobs number comes from Current Employment Statistics (CES: payroll survey), a sample of approximately 634,000 business establishments nationwide.

These are very different surveys: the CPS gives the total number of employed (and unemployed including the alternative measures), and the CES gives the total number of positions (excluding some categories like the self-employed, and a person working two jobs counts as two positions).

A couple of key concepts (from the BLS):

The CES employment series are estimates of nonfarm wage and salary jobs, not an estimate of employed persons; an individual with two jobs is counted twice by the payroll survey. The CES employment series excludes employees in agriculture, private households, and the self-employed.
emphasis added

And the CPS:

Employed people are those who worked as paid employees; were self employed in their own business, profession, or farm; worked without pay for at least 15 hours in a family business or farm; or were temporarily absent from their jobs.

The household survey - employment measure includes categories of workers that are not covered by the payroll survey:
the self-employed
workers in private households
agricultural workers
unpaid workers in family businesses
workers on leave without pay during the reference period

Unemployed people are those who had no employment (as defined above) during the reference week; were available for work at that time; and had made specific efforts to find employment in the prior 4 weeks. People laid off from a job and expecting to be recalled are included among the unemployed but unlike the other unemployed, they need not have been looking for employment.

So in December, the headline CES number showed a gain of 312,000 non-farm private jobs (by the definitions above). The CPS showed an increase of 142,000 employed people.

These two surveys are almost always different, and both are useful.

But the unemployment rate increased, even though the CPS showed an increase in employed people. How can that be?

The CPS also showed an increase in the Civilian Labor Force Level by 419,000. And an increase in the number of unemployed people (U-3) of 276,000.

The unemployment rate is a ratio, with the numerator the number of unemployed, and the denominator the Civilian Labor Force - so these changes in both numbers increased the unemployment rate to 3.9% (rounded).

Here are the numbers (000s):

	November	December	Change
Civilian Labor Force	162,821	163,240	419
Unemployed	6,018	6,294	276
Unemployment Rate	3.70%	3.86%	0.16%

If you want more details, see Monthly Employment Situation Report: Quick Guide to Methods and Measurement Issues

So remember, the jobs and unemployment rate come from two different surveys and are different measurements (one for positions, the other for people). Some months the numbers may not seem to make sense (added jobs and increasing unemployment rate), but over time the numbers will work out.

by Calculated Risk on 1/04/2019 12:24:00 PM

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 2.5% for 2018:Q4 and 2.1% for 2019:Q1. [Jan 4 estimate]
emphasis added

And from the Altanta Fed: GDPNow

TThe GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2018 is 2.6 percent on January 3, down from 2.7 percent on December 21. The nowcasts of fourth-quarter real consumer spending growth and fourth-quarter real private fixed investment growth decreased from 3.7 percent and 2.7 percent, respectively, to 3.6 percent and 2.4 percent, respectively, after this morning’s Manufacturing ISM Report On Business from the Institute for Supply Management. [Jan 3 estimate]

CR Note: These estimates suggest GDP in the mid-2s for Q4.

by Calculated Risk on 1/04/2019 10:00:00 AM

The headline jobs number at 312 thousand for December was well above consensus expectations of 180 thousand, and the previous two months were revised up 58 thousand, combined. However, the unemployment rate increased to 3.9%. This was a strong report.

Earlier: December Employment Report: 312,000 Jobs Added, 3.9% Unemployment Rate

In December, the year-over-year employment change was 2.638 million jobs. That is solid year-over-year growth, and makes 2018 the third best year for employment growth in the current expansion (behind 2014 and 2015).

Average Hourly Earnings

Wage growth was above expectations in December. From the BLS:

"In December, average hourly earnings for all employees on private nonfarm payrolls rose 11 cents to $27.48. Over the year, average hourly earnings have increased by 84 cents, or 3.2 percent."

This 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 December.

Wage growth has generally been trending up.

Prime (25 to 54 Years Old) Participation

Since 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 82.3%, and the 25 to 54 employment population ratio was unchanged at 79.7%.

Part Time for Economic Reasons

From the BLS report:

"The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 4.7 million, changed little in December but was down by 329,000 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 has been generally trending down.  The number decreased in December. 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 was unchanged at 7.6% in December.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.306 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 1.259 million in November.

Summary:

The headline jobs number was well above expectations.  However, the headline unemployment rate increased to 3.9%. Also wage growth was above expectations, and above 3% YoY for the third consecutive month.

Overall, this was a strong report.   For 2018, job growth was been solid, averaging 220 thousand per month.

by Calculated Risk on 1/04/2019 08:43:00 AM

From the BLS:

Total nonfarm payroll employment increased by 312,000 in December, and the unemployment rate rose to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, food services and drinking places, construction, manufacturing, and retail trade.
...
The change in total nonfarm payroll employment for November was revised up from +155,000 to +176,000, and the change for October was revised up from +237,000 to +274,000. With these revisions, employment gains in October and November combined were 58,000 more than previously reported.
...
In December, average hourly earnings for all employees on private nonfarm payrolls rose 11 cents to $27.48. Over the year, average hourly earnings have increased by 84 cents, or 3.2 percent.
emphasis added

Click on graph for larger image.

The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes).

Total payrolls increased by 312 thousand in December (private payrolls increased 301 thousand).

Payrolls for October and November were revised up 58 thousand combined.

This graph shows the year-over-year change in total non-farm employment since 1968.

In December the year-over-year change was 2.638 million jobs.

The third graph shows the employment population ratio and the participation rate.

The Labor Force Participation Rate increased in December to 63.1%. This is the percentage of the working age population in the labor force.   A large portion of the recent decline in the participation rate is due to demographics and long term trends.

The Employment-Population ratio was unchanged at 60.6% (black line).

I'll post the 25 to 54 age group employment-population ratio graph later.

The fourth graph shows the unemployment rate.

The unemployment rate increased in December to 3.9%. 

This was well above the consensus expectations of 180,000 jobs added, and October and November were revised up 58,000, combined.  A strong report.

I'll have much more later ...

by Calculated Risk on 1/03/2019 08:02:00 PM

My December Employment Preview

Goldman: December Payrolls Preview

Friday:
• At 8:30 AM, Employment Report for December.   The consensus is for 180,000 jobs added, and for the unemployment rate to be unchanged at 3.7%.

• Early, Reis Q4 2018 Mall Survey of rents and vacancy rates.

• At 10:15 AM to 12:15 PM, Federal Reserve chairs: Joint Interview, Neil Irwin of the NY Times will interview Fed Chair Jay Powell, and former Fed Chairs Ben Bernanke and Janet Yellen.

by Calculated Risk on 1/03/2019 03:55:00 PM

A few brief excerpts from a note by Goldman Sachs economists Choi and Hill:

We estimate nonfarm payrolls increased 195k in December, somewhat above consensus of +180k. Our forecast reflects a modest slowdown in the trend of job growth, and a weather-related boost worth 25k or more. …

We expect the unemployment rate to remain at 3.7% ... We estimate average hourly earnings increased 0.3% month-over-month and 3.0% year-over-year...
emphasis added