Employment Situation, March 2017

The Bureau of Labor Statistics released its monthly Employment Situation report earlier this morning.

With an addition of +98,000 jobs, the figures were a little more than half the rate of gain or recent months.  Revisions to data from the prior two months clipped another -38,000 positions from the total.

Although the report isn’t great reading for stock market bulls, we’ve seen over the past eight years of economic recovery that bad months occasionally occur, even in the midst of a sharply upsloping trend.  In addition, although the monthly figures are seasonally adjusted, the weather during 1Q17 has been so unusual in the populated regions of the US–unusually mild in January-February, ugly in March–that the first two months probably look better than they should and March worse.

The only really eyebrow-raising aspect of this report, in my view, is that despite the unemployment rate being at a very low 4.5%, there is still no sign of acceleration in wages.  This implies no urgency for the Fed to raise interest rates aggressively.

Employment Situation, January 2017

This morning at 8:30 est, the Bureau of Labor Statistics of the Labor Department issued its monthly Employment Situation report for January 2017.

The important parts, in my view:

on the positive side

— the +227,000 new jobs added is an above recent trend figure

–the workforce expanded by around half a million people during January, implying that sa significant number of previously discouraged workers are resuming their search for employment

–wages are rising at a 2.5% annual rate.  Some have expressed disappointment that wages aren’t rising faster, pointing out that the ES estimate of wage gains was higher a month ago.  On the other hand, the overall trend is in the right direction and these numbers can be quirky month-to-month.

on the negative

–the situation for the long-term unemployed is little changed over the past year

—-The number of long-term unemployed (those out of work for 27 weeks or more) is down by about a quarter-million.  But it’s still 1.9 million people, and makes up about 25% of all unemployed

—-The number marginally attached to the workforce (meaning have looked for work sometime within the past year, but not within the last four weeks) is down by 15%.  But their number is still 1.8 million.  Of that figure, 532,000 are discouraged workers (people not looking for work because they think no one will hire them), the same as this time in 2016.

 

As I’m writing this, the reaction of Wall Street is to emphasize the positive.  However, as the presidential election results show, the economically left behind are increasingly making their voices heard demanding help.

 

 

Employment Situation, December 2016

The Bureau of Labor Statistics of the Labor Department issued its monthly Employment Situation  this morning at 8:30 est.

According to the release, the economy gained 156,000 new jobs in December, more than enough to absorb new entrants into the workforce.  Revisions to October figures were -7,000 jobs, to November’s, +26,000, meaning the net revision to the prior two months’ data was +19,000 new positions.

While this is a so-so result, we should consider how much may be due to random statistical variations in the data and, more importantly, how much comes from the difficulty employers are apparently having in finding qualified candidates who are currently unemployed.

More evidence that the latter is becoming a more significant issue comes from the rising trend in average hourly wages the BLS is also reporting.  for the 12 months ending in December, wages have been increasing at an inflation-beating 2.9% rate.  If we, methodologically incorrectly, take the December wage gains alone, the year on year increase is 4.6%.

The bottom line:  good news, and evidence the Fed will likely take as prompting it to raise the Fed Funds rate again sooner rather than later.

The Employment Situation, November 2016

The Bureau of Labor Statistics of the Labor Department released its monthly Employment  Situation report at 8:30 est this morning, as usual.

The results were good.  178,000 net new positions were filled during the month, which is right at the average monthly gain so far this year.  Net revisions were slightly negative, subtracting -2000 positions from prior months’ employment estimates.  The BLS also said wages made no upward progress during November, after having jumped a lot the month before.

The only out-of-the-ordinary figure was the unemployment rate, which fell to 4.6% from 4.9% in October.  We’ll likely find next month that the November figure comes from transitory statistical strangeness that will have already disappeared.

What to make of this ES?

Nothing, really.  In fact, I think that as stock market investors, we should no longer be monitoring the ES for signs of potential labor market weakness.  Instead, we should be on the lookout for indications of surprising strength, possibly in the number of new hires, but more likely in the rate of wage gains.

That’s because I think we’re well past the point where we’ve got to guard against economic weakness.  Instead, we’ve got to be alert for signs of the more likely threat–that the pace of interest rate rises will accelerate from the currently anticipated once-in-a-long-while pace..

The first step in adopting this new mindset, I think, is to consider what the endpoint for increases in the Fed Funds rate–and the resulting terminal interest rate point for 10-year Treasuries, which is the closer substitute for stocks in long-term investors’ portfolios–will be.

More on this topic on Monday.

Employment Situation, October 2016

The Bureau of Labor Statistics of the Labor Department issued its monthly Employment Situation earlier today.  The results were not spectacular, but they were good:

–the economy added +161,000 new jobs last month

–revisions to the prior two months’ figures were both positive, totaling +44,000 positions.

Nothing in this to derail the Fed from raising the Fed Funds rate next month.

wage gains

Average hourly non-farm wages in the US were $25.92 in October.  That’s $0.10/hr more than in September and $.18 more than in August.  This doesn’t sound like much.  But the year-on-year growth in wages over the past year has been $.71/hr, which is a wage growth rate of 2.8%.  If we were to annualize the results of the past two months–not a calculation you’d want to bet the farm on–the growth rate is 4.2%.

Maybe too preliminary, but also maybe an early warning of rising wage pressure in the US.  The importance of that is that we would have (finally) reached full employment–meaning also that the Fed switching to rate-raising mode is at best timely.  At worst, it would mean that the Fed is at least a little late to the party.

Of course, given the scary example of Japan repeatedly tightening policy prematurely and snuffing out economic rebounds over the past quarter-century, the Fed has from the outset deliberately decided that later is better than sooner.  Nevertheless, further wage gains will translate into more aggressive Fed tightening moves.