by Calculated Risk on 6/05/2015 10:01:00 AM

Earlier: May Employment Report: 280,000 Jobs, 5.5% Unemployment Rate

This was a solid employment report with 280,000 jobs added, and March and April were revised up by a combined 32,000 jobs.

There was even some hints of wage growth, from the BLS: "In May, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $24.96. Over the year, average hourly earnings have risen by 2.3 percent." Weekly hours were unchanged.

A few more numbers:  Total employment increased 280,000 from April to May and is now 3.3 million above the previous peak.  Total employment is up 12.0 million from the employment recession low.

Private payroll employment increased 262,000 from April to May, and private employment is now 3.8 million above the previous peak. Private employment is up 12.6 million from the recession low.

In May, the year-over-year change was just under 3.1 million jobs.

Overall this was a very positive report.

Employment-Population Ratio, 25 to 54 years old

Since the overall participation rate declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, an important graph 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 unchanged in May at 81.0%, and the 25 to 54 employment population ratio was unchanged at 77.2%.  As the recovery continues, I expect the participation rate for this group to increase a little more (or at least stabilize for a couple of years) - although the participation rate has been trending down for this group since the late '90s.

Average Hourly Earnings

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 increased 2.3% YoY, and the pace is increasing.  Wages will probably pick up a little more this year.

Note: CPI has been running under 2%, so there has been some real wage growth.

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) was about unchanged at 6.7 million in May and has shown little movement in recent months. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.

The number of persons working part time for economic reasons increased in May to 6.65 million from 6.58 million in April.  This suggests slack still in the labor market.  These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged at 10.8% in May.

Unemployed over 26 Weeks

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

According to the BLS, there are 2.502 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 2.525 million in April.

This is trending down - and is at the lowest level since November 2008 - but is still very high.

State and Local Government

This graph shows total state and government payroll employment since January 2007. State and local governments had lost jobs for four straight years. (Note: Scale doesn't start at zero to better show the change.)

In May 2015, state and local governments added 15,000 jobs. State and local government employment is now up 160,000 from the bottom, but still 598,000 below the peak.

State and local employment is now generally increasing - slowly.  And Federal government layoffs appear to have ended (Federal payrolls added 3,000 jobs in May, and Federal employment is up 6,000 year-to-date).

This was a solid employment report for May.

by Calculated Risk on 6/05/2015 08:42:00 AM

From the BLS:

Total nonfarm payroll employment increased by 280,000 in May, and the unemployment rate was essentially unchanged at 5.5 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, leisure and hospitality, and health care. Mining employment continued to decline.
...
The change in total nonfarm payroll employment for March was revised from +85,000 to +119,000, and the change for April was revised from +223,000 to +221,000. With these revisions, employment gains in March and April combined were 32,000 more than previously reported.
...
In May, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $24.96. Over the year, average hourly earnings have risen by 2.3 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 280 thousand in May (private payrolls increased 262 thousand).

Payrolls for March and April were revised up by a combined 32 thousand.

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

In May, the year-over-year change was almost 3.1 million jobs.

This is a solid year-over-year gain.


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

The Labor Force Participation Rate increased in May to 62.9%. 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.

The Employment-Population ratio increased to 59.4% (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 May to 5.5%.

This was above expectations of 220,000 jobs, and combined revisions were up ... a strong report.

I'll have much more later ...

by Calculated Risk on 6/04/2015 08:00:00 PM

Here is the employment preview I posted earlier: Preview: Employment Report for May

And some comments on various employment indicators: Public and Private Employment Data

Goldman Sachs is forecasting 210,000 jobs added, and for the unemployment rate to be unchanged at 5.4%.

Merrill Lynch is forecasting 220,000 jobs added in May, and the unemployment rate at 5.4%, and 0.3% mom increase hourly earnings

Nomura is forecasting 190,000 jobs, a 0.28% increase in wages mom, and a 5.4% unemployment rate.

Friday:
• At 8:30 AM ET, the Employment Report for May. The consensus is for an increase of 220,000 non-farm payroll jobs added in May, up from the 213,000 non-farm payroll jobs added in April. The consensus is for the unemployment rate be unchanged at 5.4%.

• At 3:00 PM, Consumer Credit for April from the Federal Reserve. The consensus is for an increase of $16.0 billion in credit.

by Calculated Risk on 6/04/2015 04:21:00 PM

From Housing economist Tom Lawler:

Earlier this week the Census Bureau released its annual report on the Characteristics of New Housing Units Completed/Sold for 2014. The report, based on data collected from the Survey of Construction, includes (among a lot of other things) estimates for the number of housing units completed or sold by square feet of floor area, number of bath rooms, and number of bedrooms. On the single-family home front, one of the most striking statistics for the last few years (including 2014) is the incredibly small number of moderately-sized (and priced) homes built. Here is a table from the report showing the number of single-family homes completed by square feet of floor area from 1999 to 2014.

Compared to 2000, the number of single-family homes completed in 2014 was down by 50%. The number of homes completed in 2014 with square footage below 1,800 was down by a staggering 70%, while the number of homes completed with square footage of 4,000 or more last year was unchanged from 2000! And the number of single family homes completed with square footage below 1,800 last year showed no increase from 2013’s record low.

Square Feet of Floor Area in New Single-Family Houses Completed1
(Components may not add to totals because of rounding)
	Number of houses (in thousands) by square feet
Year	Total	Under 1,400	1,400 to 1,799	1,800 to 2,399	2,400 to 2,999	3,000 to 3,999	4,000 or more
1999	1,270	197	276	370	211	157	59
2000	1,242	178	268	363	208	158	66
2001	1,256	167	261	359	222	172	75
2002	1,325	172	283	375	240	180	76
2003	1,386	179	279	401	251	199	77
2004	1,532	186	311	433	291	219	92
2005	1,636	165	317	467	306	262	119
2006	1,654	164	312	452	326	263	137
2007	1,218	120	220	335	227	202	115
2008	819	104	146	219	138	127	84
2009	520	66	106	139	89	72	48
2010	496	66	96	135	87	75	37
2011	447	57	84	111	79	76	40
2012	483	53	83	126	93	88	40
2013	569	46	89	154	115	110	56
2014	620	48	87	162	131	127	66
1Includes houses built for rent, not shown separately

Below is a longer-run chart showing the median square footage of single-family homes completed. (I can’t show a longer-run chart by similar square-footage ranges, as Census changed its ranges.)

During most of the 1970’s and the first half of the 1980’s, over half of new single-family homes completed had square footage at or below 1,600.

While the de minimus production of moderately sized and priced new single-family home production over the past few years almost certainly reflects extremely low purchase volumes from entry-level buyers, there is some debate regarding how much of this weak production/sales reflects weak demand, and how much reflects “supply” issues (e.g., an inability of many builders in many markets to produce small, moderately-priced homes at high enough profit margins to make it worth there while.)

Those looking for an eventual rebound in single-family housing production to more “normal” unit levels should realize that such a rebound is extremely unlikely without a major increase in the production of smaller, more moderately priced homes.

by Calculated Risk on 6/04/2015 02:19:00 PM

Some readers have wondered about the accuracy of the monthly BLS employment report. The report is based on a survey of households, and reports from businesses - for differences see: Household vs. Establishment Series - and the establishment report is benchmarked annually to state unemployment insurance tax reports.

On a monthly basis, the establishment report may have a large margin of error, but - with the annual benchmarks - the report should track payroll employment very well over time.

Another public source of employment related data is the initial and continuing weekly unemployment reports.  The initial weekly unemployment claims report shows unemployment claims are near all time lows.

The good news is private sources of employment data are suggesting similar gains in employment (for those who doubt the accuracy of government data).

The most followed private source is from ADP.  However, ADP makes some adjustment based on data from the BLS report and from the Philadelphia Federal Reserve’s Aruoba-Diebold-Scotti Business Conditions Index. So this isn't entirely independent series.

Another private source is the ISM surveys of manufacturing and non-manufacturing companies.   Although these surveys are based on the number of companies hiring (or laying off workers), the index has tracked changes in private BLS employment over time.

For small business, the Intuit index is very useful - and the NFIB monthly surveys also provides information on hiring.  From NFIB: Small Business Hiring Strong for 5th Consecutive Month

“May continued to show solid, but not spectacular hiring, continuing the trend of previous months in 2015. For the second time this year, a high of 29 percent had openings they couldn’t fill; a high we hadn’t seen since April 2006. This is a strong indication that the unemployment rate will decline further.

“Small employers are starting to feel the economy picking up and they are working hard to meet this demand."

Other sources of private data include:
• TrimTabs (based on analysis of daily income tax deposits)

• The Conference Board's labor differential (a spread between the share of households reporting jobs are plentiful versus hard to get).

• The Chicago PMI (a regional survey).

• The Challenger, Gray & Christmas report on planned layoffs. From Reuters today: US job cuts plunged 33% to 41,034 in May: Challenger

Job cuts announced by U.S.-based companies declined sharply in May as the energy sector took another pause following successive rounds of big payroll reductions.

Employers laid off 33 percent fewer workers in May from the previous month, global outsourcing firm Challenger, Gray & Christmas reported Thursday. Companies announced 41,034 cuts in the last four weeks, compared with 61,582 in April.

There are other sources too. The bottom line is all of the data - both private and public - is telling a similar story on employment.