Category Archives: employment

worrying about productivity

May 8, 2015 By in economics, employment, wage gains Tags: , , , , , , , Leave a comment

getting GDP growth

Looking at GDP from a labor perspective, growth comes either from having more workers or from more productivity, that is, from workers creating more stuff per hour on the job.  (Yes, you can get more output by not letting workers go home and forcing them to work 100 hours a week.  But that’s not going to last long, so economists generally ignore this possibility.)

The trend growth rate of the population in the US is, depending on who we ask, somewhere between +.7% and +1.0% per year. For reasons best known to itself,  Congress spends an inordinately large amount of time, in my view, devising ways to keep a lid on this paltry number by prohibiting immigration.  So, as a practical matter, the only way to get GDP to expand in the US by more than 1% is through productivity growth.

 

The weird thing about productivity is that it’s a residual.  We don’t see it directly.  Productivity is a catchall term for the “extra” GDP that a country delivers above what can be explained by growth in the number of people employed.  Economists figure it’s the result of employers providing better machinery for workers to use, technological change, and improved education + on the job training.

Productivity peaked in the US shortly after the turn of the century at around +2% per year, accounting for the lion’s share of national GDP growth.  It has been falling steadily since.  Over the December 2014 and March 2015 quarters, productivity dipped into negative territory.  This is hopefully a statistical quirk and not the sudden onset of mass senior moments throughout the workplace.

why worry?

Over the long term, the disappearance of growth through productivity gains implies economic stagnation in the US.  (My personal view is that the productivity number are the aggregation of a highly productive tech-oriented sector and a low/no-productivity rest of us hobbled by a weak public education system   …but, as a practical matter, who knows?   By the way, productivity figures don’t include government.)

The more pressing issue is that no productivity gains means employers aren’t finding ways to make their employees create more output per hour worked.  That is, they have no way of offsetting  higher wages other than to try to pass costs on by raising prices.

the bottom line for investors

Conventional wisdom is that the Fed will take a long time to shift from extreme economic stimulation through emergency-low interest rates back to normality.  Both stock and bond prices also seem to me to have imbedded in them the idea that “normal” will be lower in nominal terms than it has been in the past.

A bout of inflation induced by rising wages could change that thinking in a heartbeat.

To be clear, dangerously accelerating inflation isn’t my base case for how the economy will play out.  And no one is thinking that the US will only grow at about 1% annually from now on.  All the more reason to keep a close eye on how productivity figures evolve.

Friday’s bad jobs report

April 6, 2015 By in employment, Employment Situation report, stock market Tags: , , , , , Leave a comment

Last Friday morning, the Bureau of Labor Statistics (BLS) issued its monthly Employment Situation report for March.

The numbers were bad.

At a gain of +126,000 positions for the month (+129,000 jobs in the private sector, -3,000 in government), the growth in  jobs was less than half the monthly gains over the past year, which averaged close to +270,000.

Revisions to January and February were also negative.  The February figure was revised down by -31,000 jobs to +264,000 and the January number by -38,000 to +201,000.

Among industries:

–retail trade continued to perk along,

–business and professional services and healthcare continued to expand, although at a slower rate

–most other industries showedd little change in employment, and

–mining fell by -11,000 jobs–presumably as a result of the slowdown in oil and gas drilling.

Although there was no equities trading in the US on Friday, the stock index futures market was open for business until 9:15.  Futures for the S&P 500, NASDAQ and the Dow all dropped by about a percentage point on the ES report.

 

As I’m writing this at about 8:30 today, futures have recovered around a third of Friday’s decline.

 

The most likely explanation for the March weakness is the unusually cold and stormy weather in many of the most highly populated parts of the country during the month.  The revisions to the very strong figures of the two prior months–also plagued by awful weather–are curious only in that they suggest that the firms that were suffering most during the quarter also the ones who dragged their feet in reporting.

To my mind, the weak March ES has no real economic significance.

Today’s reaction to the report in stock trading on Wall Street will be interesting, though,  It will give us some insight into the mood of the market.  A bullish market would shake the news off and end the day up.  A skittish one would use the figures as an occasion to sell off.  So it will be important, I think, to see whether  the market ends up or down, and where the areas of strength and weakness are.

more employment: the February Employment Situation from the Bureau of Labor Statistics

March 6, 2015 By in Current Market Thoughts, economics, employment, Employment Situation report Tags: , , , , , , Leave a comment

The Bureau of Labor Statistics released its monthly Employment Situation report for February this morning at the usual 8:30am eastern time.  In contrast to the ADP report made public on Wednesday, the BLS figures were unambiguously strong.

The economy gained 295,000 new jobs during February, despite the unfavorable weather.  All but 7,000 were in the private sector.  Revisions of the prior two months subtracted 18,000 jobs from the advance–not a good sign, not a bad one either; the unemployment rate fell to 5.5%.

To me, the key development is that S&P 500 futures are down by more than seven points since the release.  I interpret this as meaning that worries about the ES figures being weak are not a key driver of the stock market any more.

I think the current market lull is mostly a technical phenomenon. But today’s figures certainly make it easier for the Fed to begin the upward march of interest rates from the current emergency lows toward normal at mid-year rather than later.  That idea probably also has some sort-term traders on edge.

the US Employment Situation, January 2015

February 6, 2015 By in economics, employment, Employment Situation report Tags: , , , , , Leave a comment

the best laid plans…

I’d intended to write about the oil industry today, no matter what the results of the monthly Bureau of Labor Statistics monthly Employment Situation report released this morning.  How good/bad could it be?, I thought.  If anything, there might be a negative impact from layoffs in the oilfields.

Turns out, the January 2105 ES is really good, so I’m writing about that instead.  Different varieties of oil stocks on Monday.

large job gains

The economy added 257, 000 jobs in January, +267,000 in the private sector and -10,000 in government.  That’s significantly more than economists had been forecasting, although I’ve come to think that forecasters don’t tend to put their best efforts into coming up with these numbers.  It’s also the latest in a long string of  monthly gains that are way above the +125,000 or so needed to absorb new workers leaving school and entering the workforce for the first time.

very large positive revisions

More important, the revisions to prior months’ job gain estimates are positive   …and enormous.

November 2014 new positions were originally reported as +321,000.  That figure was revised up to +353,000 last month.  The just-released final figure is +423,000.

December 2014 new positions were reported as +252,000.  That has been revised up this month to +329,000.

Add revisions to the January new job total and the economy turns out to be employing a whopping 404,000 more people than we thought a month ago.

unemployment rate up

The unemployment rate rose slightly in January to 5.7%, despite the jobs gains.  That’s because the labor force grew by over a million workers during the month.  This is also good news.  It implies that large numbers of unemployed people who had stopped looking for work–and thus dropped out of the workforce–now think there’s a good chance they can find a position and are back job hunting again.  The return of discouraged workers is another positive sign that had been missing up until now in the rebound from recession.

salary news still mixed

Wages grew by 2.2% over the past year.  December had shown a drop of $.05 an hour in average wages; January recovered that and added another $.07 to $24.75.

So far S&P 500 stock index futures have gained about six points in the pre-market–a tepid, but positive, response.  I think this news deserves better.

the December 2014 Employment Situation

January 9, 2015 By in Current Market Thoughts, economics, employment, Employment Situation report, wage gains Tags: , , , , , , , Leave a comment

The Bureau of Labor Statistics, part of the Labor Department, published its monthly Employment Situation for December at 8:30am est.

The report continued the recent string of exceptionally strong results.  The economy added 252,000 new positions (240,000 in the private sector) during December, or +12,000 better than consensus estimates of a 240,000 jobs gain.

Revisions to the two prior months’ data were unusually good, as well.  In its initial update to November data, the BLS now says the US gained 353,000 new jobs that month, +32,000 more than initially thought–even though the initial November figures were a huge positive surprise.  The agency now puts October job gains at +261,000–a boost of another +18,000 positions over its November estimate.

The unemployment rate fell from 5.8% to 5.6%; the number of unemployed fell by 383,000.

 

No sign of wage increases yet.  Average hourly earnings (now $24.57 for private non-farm workers) are up by 1.7% year-on-year.  Hourly wages fell by a nickel in December, after rising by 6¢ in November.

No sign of net layoffs in energy-related industries, although it may be too soon for this to be happening.  Still, there are no signs that validate the (odd, to my mind) conclusions of statistically-driven economic researcher that a declining oil price is a harbinger of recession.