This was another disappointing employment report It is looking more and more like the stronger numbers last winter stemmed more from the mild weather rather than a strengthening of underlying trends.
The headline or payroll report showed a gain of 115,000 jobs– 130,000 in private jobs and a 15,000 drop in government employment.
The work week was unchanged so the index of aggregate hours worked only rose 0.1%. The previous report was revised higher so that hours worked versus trend looks a little better than it did last month.
My thesis from last month that the slowing of employment growth was partially a product of firms trying to rebuild productivity growth still looks valid. In the productivity report, the growth in unit labor costs slowed from 3.1% to 2.1% while the increase in the nonfarm business deflator slowed from 2.1%
to 1.8% So the spread between unit labor cost is now only 0.3 percentage points versus 1.1 percentage points a quarter ago. Given that labor compensation is 58.7% of costs this should be consistent with single digit profits growth.