Employment Situation

The employment report showed little evidence that the trends of the past year have changed.
Over the past three months private payroll employment grew some 72,000, 191,000 and 104,000
while government employment fell 132,000, 33,000 and 24,000.
The one encouraging signs was the third strong month of employment growth reported in the household survey. Over the last three month it has shown gains of 331,000, 398,000 and 277,000.
After slowing earlier this year the growth of employment reported by the household survey is
reaccelerating. Because the household survey often leads the payroll survey this is a significant trend change to watch.

The average weekly hours was unchanged at 33.4 so the index of aggregrate hours worked only increased 0.1% as compared to a 0.5% gain last month and a -0.2% drop in the previous month.
But overall the trend of modest gains in hours worked has not changed.

Average hourly earnings growth continued to moderate and wage growth is approaching the record low of late 2003. It looks like the slowdown is accelerating, not reversing.

With the small change in the workweek the slowing of average hourly earnings means that average weekly earnings growth is also slowing. While the European situation earns the headlines and the market is reacting strongly to those headlines it still looks to me like the major risk to the economy and the markets is weak income growth. The third quarter improvement in consumer spending and the economy stemmed from consumers drawing down savings and taking on debt as the savings rate fell significantly.