September jobs report: a mixed report with different implications in different timeframes

September jobs report: a mixed report with different implications in different timeframes

HEADLINES:

• +134,000 jobs added
• U3 unemployment rate declined -0.2% from 3.9% to 3.7%
• U6 underemployment rate rose from 7.4% to 7.5%

Here are the headlines on wages and the broader measures of underemployment:

Wages and participation rates

• Not in Labor Force, but Want a Job Now:  declined -152,000 from 5.379 million to 5.237 million
• Part time for economic reasons: rose +263,000 from 4.379 million to 4.642 million
• Employment/population ratio ages 25-54: unchanged at 79.3%
• Average Weekly Earnings for Production and Nonsupervisory Personnel: rose $.07 from  $22.74 to $22.81, up +2.7% 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.)

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mainly positive.

• the average manufacturing workweek declined by -0.1 hours to 40.8 hours.  This is one of the 10 components of the LEI.
• construction jobs rose by +23,000. YoY construction jobs are up +315,000.

• temporary jobs rose by +10,600.
• the number of people unemployed for 5 weeks or less decreased by -143,000 from 2,208,000 to 2,065,000.  The post-recession low was set four months ago at 2,034,000.

Other important coincident indicators help  us paint a more complete picture of the present:

• Overtime declined -0.1 hour from 3.5 hours to 3.4 hours.
• Professional and business employment (generally higher-paying jobs) increased by +54,000 and  is up +560,000 YoY.
• the index of aggregate hours worked for non-managerial workers rose by 0.2%.

•  the index of aggregate payrolls for non-managerial workers rose by 0.4%.

Other news included:

• the  alternate jobs number contained  in the more volatile household survey decreased by  -420,000  jobs.  This represents an increase of 1,638,000 jobs YoY vs. 2,537,000 in the establishment survey.
• Government jobs increased by +13,000.

• the overall employment to population ratio for all ages 16 and up increased 0.1% from 60.3% m/m to 60.4% and is unchanged YoY.
• The labor force participation rate was unchanged at 62.7% and is down -0.3% YoY.

SUMMARY

This was a mixed report with different implications over different time frames: good in the present and the near term  future, but consistent with weakness to come in a longer timeframe.  The relatively poor monthly increased was balanced by large upward revisions of the last two months, and continued good progress in aggregate hours and payrolls.  The good YoY establishment number was balanced by the poor YoY household number.

The near term leading aspects of the report were mainly solidly positive: the decline in the short term unemployment and the unemployment rate (foreshadowed by multi-decade record lows in initial jobless claims), the continuing increase in temporary employment, construction, and manufacturing.

But other, longer-term aspects *maybe* revealed fraying around the edges: the rise in those who aren’t even in the labor force but want a job now, the stalling of the YoY employment to population ratio, and the decline below 2 million in the YoY household number (at turning points, the household survey has a tendency to lead the establishment survey.

I am expecting the employment gains to slow down substantially over the next 9 to 12 months. This report was consistent with that forecast, even though for the next few months, it continues to suggest the economy will be quite good.