Employment Report
The BLS just wished the Obama administration a very merry Christmas with a very encouraging employment report. It was still a report that things are worsening at a lesser rate as far as employment was concerned, but other employment reports were positive. The unemployment rate fell to 10.0% as payroll employment was essentially unchanged at -11,000 and household employment rose 227,000. This data is consistent with initial unemployment claims falling below the 500,000 level as it has over the past few weeks.
Hours worked rose 0.6% from 98.5 to 99.1. This means that the fourth quarter will be starting with hours worked above the prior quarters level for the first time since 2007. Roughly, productivity growth plus hours worked is equal to private sector real GDP growth.Average hourly earnings only rose 0.1 so wage growth remains very weak– implying that unit labor cost are not creating inflationary pressures.
But the combination of weak average hourly earnings and a big jump in hours worked generated a 0.7% — about 8% on an annualized basis — increase in average weekly earnings. This should generate a very large jump in real weekly earnings going into the important Christmas shopping season.
Just on a technical note, both the payroll and manufacturing diffusion indices are moving up nicely, confirming the other signs of a bottom.
Interestingly, the payroll employment indicator appears to be turning ahead of the household survey data. Normally at bottoms the household survey leads. This unusual development probably reflects the difficulty small firms are experiencing obtaining bank loans.
A week ago I ran regressions – unemployment on continuing claims and employment on initial claims – and posted the following forecasts for the November employment numbers: unemployment = 10%, change in payroll employment = -10,795. Not bad! I think you are right to interpret this in an optimistic light (a lot of commentators seem very Grinchy). This is a sign that the recovery is going to be stronger than people think. More analysis at my blog. http://gecon.blogspot.com/
Spencer – can i just thank you? Your charts & presentation of the data throughout this dismal stretch have been clearer, more informative, and more thought-provoking than ANYTHING i’ve seen on any other blog. Outstanding work!
It’s such a relief to finally see the index of aggregate hours worked finally turn. That and the net change in payroll employment turning positive are the two biggest early indicators i’ve been looking for that the very long labor market recession (which i’d argue has been going on for most of the past 9 years, not just since the start of the GDP recession in late 2007) may finally be coming to an end. Great Christmas gift, indeed.
I’ll take 10.0 versus 10.2 as an improvement in the employment situation. In recovery I tend to believe the household survey more since I believe its better at picking up employment that may not be included in the survey of established businesses.
Without the stimulus unemployment would probably be at around 10.4 percent. So it’s doing something positive. However, I would like for the administration to commit to keeping the long run business climate positive with low taxes and fairly liberal regulation of business.
Maynard,
You got to call it before the results come out or it does not count as a forecast.
A big part of the improvement was in services outside of retail. Both in November and in the revisions to September and October. There is a great deal of seasonality in the service sector – need to watch what happens in January and February.
Temp workers account for a fair peice of the improvement in trend in payroll employment in H2. Temps tend to lead. Goods sector activity also tends to lead, but while we are seeing more positive inventory and orders figures, improvement in hiring is largely a service sector affair.
Can’t expect everything to go smoothly through the turn, though.
Cantab:
He did call it on November 25th
http://raphaelkahan.blogspot.com/2009/11/unemployment-might-be-peaking-sooner.html
KH, agree with the Jan-Feb time line. If we see some of these temps being converted to longer term/permanent jobs then we can begin to celebrate.
I also worry that some of these are holiday hires. While retail adds hundreds of thousands of workers during Q4 (NSA), services add millions (NSA). Many of them are aimed at making Christmas happen. We could be seeing holiday hiring (less firing after seasonal adjustment) among firms that had earlier cut to the bone. We also know that retail firms are relying on unconventional hiring methods for the holiday, and that may include hiring through temp agencies.
The trajectory of job loss was reduced in September through November in today’s release. That 159k revision to September and October is, for now, more solid than November’s small job loss. The better trajectory is, I think, better news than a one-time slowing in job loss that may prove transitory.
On the bias in the media beat.
I like it that unemployment fell from 10.2 percent down to 10 percent but look at the headline in the New York Times:
Jobs Report Is Strongest Since the Start of the Recession
http://www.nytimes.com/2009/12/05/business/economy/05jobs.html?hp
What a silly headline. This reminds me of Bonfire of the Vanities where an alchoholic journalist takes a street thug and elevates him to the status of honor student. I would say all the single diget undemployment numbers were stronger then current 10 percent number.
The article goes on to say the Obama administration saved or created 1.6 million jobs. I’m sure the author had a source but this is not what’s on receovery.gov (they still have the 640,329 number from the end of October).
So I was wondering who is this Louis Uchitelle (real live version of Peter Fallow) character. Well 4 years ago Larry Kudlow found him so biased and misleading he was motivated to write the
following column.
There They Go Again
Times coverage of GDP is completely misleading.
http://www.nationalreview.com/kudlow/kudlow200502010857.asp
So this guy is not just an optimist, he’s a spinner.
On the bias in the media beat.
I like it that unemployment fell from 10.2 percent down to 10 percent but look at the headline in the New York Times:
Jobs Report Is Strongest Since the Start of the Recession
http://www.nytimes.com/2009/12/05/business/economy/05jobs.html?hp
What a silly headline. This reminds me of Bonfire of the Vanities where an alchoholic journalist takes a street thug and elevates him to the status of honor student. I would say all the single diget undemployment numbers were stronger then current 10 percent number. The article goes on to say the Obama administration saved or created 1.6 million jobs. I’m sure the author had a source but this is not what’s on receovery.gov (they still have the 640,329 number from the end of October).
So I was wondering who is this Louis Uchitelle (real live version of Peter Fallow) character. Well 4 years ago Larry Kudlow found him so biased and misleading he was motivated to write the
following column.
There They Go Again
Times coverage of GDP is completely misleading.
http://www.nationalreview.com/kudlow/kudlow200502010857.asp
So this guy is not just an optimist, he’s a spinner.
Critizing and analynising help us nothing. We have view things beyond the box and tell the government what to do.
This is my opinion.
1) Let all the government jobs share by two to three people. Government jobs pay by taxes payer’s money should use to benifit as many people as possibl at this moment.
2) don’t spend funding that bail out bank or don’t use that to stimulate consumption. We don’t bother to repair road, bridges either. Instead we can build 10,000 retirement homes in all over the country. That construciton projects will create 100,000 jobs immidiatly. We then provide free housing to the people who willing to retire early, incase each retirement homes has 100 rooms, 10,000 retirement home will help 10,000,000 people retire and leave 10,000,000 jobs open.
3) Substitute the free housing with social security checks that worth $700. In case one retirement home has one hundred rooms which totally cost 3 million dollars, within four years government will have the investment back. The retirement home can use for subtituting social security checks for at least f 50 years. That means a building will bring in 40 million dollars indirectly for the government. The whole concept is that government accumulate asset with their fund and use that asset to help people meanwhile bring in profit for the government. We can use people who are collecting unemployment check to join the construction work. Grovernment will provide free land in suburbs for the retirement homes and will have trips arrange to city and other place every week. Over there it will provide computer, cooking, dancing, garden, poker activity there. People can register with friends and can transfer to different places one a while. Retirement home can have different level base on the retirment check amount people entitle to get. People who don’t want to join the program go no retirement payment before 68 years old. We need socialist project run by capitalist concept to save our country.Chinese retire at 55 years old we have to work to 68 years old. Isn’t that sad?
kharris,
That’s my concern too. I’ve got my fingers crossed through.
He did not call it here so it still does not count. If he was off by a couple of points he would not have highlighted his results. If you want bragging right you have to lay down a marker before the fact.
Cantab:
Once again, you didn’t do your homework and got caught. Maynard called it right and you just didn’t check his blog which he referenced. Childish . . . .