Given the other recent economic data that suggested the economy was improving and that the economy might actually be achieving self-sustained growth the November employment report was a major disappointment as the unemployment rate ticked up from 9.6% to 9.8%.
Payroll employment continues to look much like it did in the last two recoveries that were also jobless recoveries. Since the emergence of the “Great Moderation” the nature of economic recoveries has changed drastically as this chart demonstrates.
The average workweek was unchanged at 34.3 hours so the index of aggregate hours worked barely changed. This index did move up sharply last month so the three month growth rate of hours worked is still 2.4%, about the same as it was last month.
But the gain in average hourly earnings only rose $0.01 so the increase in average hourly earnings continues to weaken. The year over year gain is only 1.6%. Moreover, with the weakness in the workweek last months strength in average weekly earnings reversed.
The impact of the weakness in weekly earnings can be seen in the following chart comparing the growth in real income excluding transfer payments and the rebound in real retail sales.
Several factor go into determining real retail sales including lagged monetary policy, inflation and consumer confidence. But after the initial bounce off the bottom that is normally driven by lower inflation, improved confidence and easier money the growth in real retail sales is highly dependent on solid growth in real incomes. The weakness in average weekly earnings calls into question the sustainability of the recent rebound in real retail sales. In November, for example auto and light trucks sales at 12.26 million were essentially from October. The data on real retail sales is only through October.