December jobs report: late cycle mediocre growth reasserts itself

December jobs report: late cycle mediocre growth reasserts itself

  • +143,000 jobs added
  • U3 unemployment rate unchanged at 4.1%
  • U6 underemployment rate rose  +0.1% from 8.0% to 8.1%
Here are the headlines on wages and the chronic heightened underemployment:
Wages and participation rates
  • Not in Labor Force, but Want a Job Now: rose +43,000 from 5.265 million to 5.308 million
  • Part time for economic reasons: rose +64,000 from 4.851 million to 4.915 million
  • Employment/population ratio ages 25-54: rose +0.1% from 79.0% to 79.1%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: rose $.0.07 from  $22.23 to $22.30, up +2.3% YoY.  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)
Holding Trump accountable on manufacturing and mining jobs

 Trump specifically campaigned on bringing back manufacturing and mining jobs.  Is he keeping this promise?  
  • Manufacturing jobs rose by +25,000 for an average of  +17,500 a month vs. the last seven years of Obama’s presidency in which an average of 10,300 manufacturing jobs were added each month.
  • Coal mining jobs fell -400 for an average of -63 a month vs. the last seven years of Obama’s presidency in which an average of -300 jobs were lost each month

October was revised downward by -33,000. November was revised upward by +24,000, for a net change of -9,000.

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mixed.
  • the average manufacturing workweek fell -0.1 hour from 40.9 hours to 40.8 hours.  This is one of the 10 components of the LEI.
  • construction jobs increased by +30,000. YoY construction jobs are up +210,000.
  • temporary jobs increased by +7,000.
  • the number of people unemployed for 5 weeks or less decreased by -18,000 from 2,253,000 to 2,235,000.  The post-recession low was set over two years ago at 2,095,000.
Other important coincident indicators help  us paint a more complete picture of the present:
    • Overtime was unchanged at 3.5 hours.
    • Professional and business employment (generally higher- paying jobs) increased by  +19,000 and  is up +488,000 YoY.
  • the index of aggregate hours worked in the economy rose by 0.1%  from 115.9 to  116.0.
  •  the index of aggregate payrolls rose by  0.7%  from 172.2 to 172.9.

Other news included:
  • the  alternate jobs number contained  in the more volatile household survey increased by  +104,000  jobs.  This represents an increase of 1,267,000 jobs YoY vs. 2,055,000 in the establishment survey.
  • Government jobs rose by 2,000.
  • the overall  employment to  population ratio for all ages 16 and up was unchanged at 60.1 m/m  and is up + 0.3% YoY.
  • The  labor force participation  rate was unchanged m/m and is also unchanged YoY at 62.7%

This was a mediocre but not bad report.  There was growth in almost all sectors of employment. Participation measures were positive. Aggregate payrolls and hours increased.

But there were concerning signs of late cycle deceleration as well. The underemployment rate increased for the second month in a row, and the unemployment rate is up from two months ago. Involuntary part-time employment and those outside of the workforce who want a job now both increased. And wage growth is actually declining.
Bottom line: after several months of post-hurricane bounces, we are back to a late cycle dynamic.