While the employment report was weak, it was among the best we have seen this cycle. Nonfarm payroll employment rose by 151,000 and the unemployment rate was unchanged at 9.6%. Compared to the historic norm in earlier recoveries this employment gain was very weak, but compared to the same point in the last two jobless recoveries is was OK. Despite all the noise about uncertainty, employment growth is better than it was in the last cycle.
16 months from the end of the recession the index of payroll employment is down 0.1% as compared to a 0.8% drop at the same point in the last cycle. So if uncertainty is causing firms not to increase employment this cycle, what caused firms to not expand hiring the last cycle? It look to me like the change in the cycle commonly called the “great moderation” has caused a massive structural change in recoveries, not some political development.
The index of aggregrate hours worked increased 0.4% because both employment increased and the average work week expanded by 0.1%. This was the largest increase in hours worked since April. The smoothed, compound growth rate is now 2.4% versus 1.5% last cycle. This implies that the fourth quarter real GDP report could show stronger growth than last quarter.
Average hourly earnings and average weekly wages also improved this month so that last months actual decline in nominal personal income is unlikely to be repeated.
More significantly, average hourly earnings growth is showing signs of bottoming as the three month growth rate of 2.2% is now higher than the year over year gain of 1.7% over the last two months.