January jobs report: a tale of two almost diametrically opposed components
January jobs report: a tale of two almost diametrically opposed components
- +304,000 jobs added
- U3 unemployment rate rose 0.1% from 3.9% to 4.0%
- U6 underemployment rate rose 0.5% from 7.6% to 8.1%
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 -73,000 from 5.327 million to 5.254 million
- Part time for economic reasons: rose +490,000 from 4.657 million to 5.147 million
- Employment/population ratio ages 25-54: rose +0.2% from 79.7% to 79.9%
- Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $.03 from $23.09 to $23.12, up +3.4% 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.)
Is a recession close?
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, with at very least a decelerating bias.
- the average manufacturing workweek fell -0.1 hours from 40.9 hours to 40.8 hours. This is one of the 10 components of the LEI.
- Manufacturing jobs rose by +13,000. YoY manufacturing is up +261,000.
- construction jobs rose by +52,000. YoY construction jobs are up +338,000.
- temporary jobs rose by +1000. YoY these are up +146,000.
- the number of people unemployed for 5 weeks or less rose by +199,000 from 2,126,000 to 2,325,000. The post-recession low was set eight months ago at 2,034,000.
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 an average of +22,000/month in the past year 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 -100 for an average of +150/month vs. the last seven years of Obama’s presidency in which an average of -300 jobs were lost each month
November was revised upward by +20,000, but December was revised downward by -90,000, for a net change of -70,000.
Other important coincident indicators help us paint a more complete picture of the present:
- Overtime declined -0.1 hour from 3.6 hours to 3.5 hours.
- Professional and business employment (generally higher-paying jobs) rose by 30,000 and is up +546,000 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 0.3%.
- the alternate jobs number contained in the more volatile household survey decreased by -438,000 jobs. This represents an increase of only 981,000 jobs YoY vs. 2,817,000 in the establishment survey.
- Government jobs rose by +8,000.
- the overall employment to population ratio for all ages 16 and up fell -0.1% to 60.7% m/m and is up 0.3% YoY.
- The labor force participation rate rose was unchanged at 63.2% and is up +0.4% YoY.
The establishment and household surveys told very different stories this month, encapsulated by the 304,000 monthly gain in the former vs. a -438,000 decline in the latter. While the former is up almost 3 million in the last 12 months, the latter fell below a 1 million gain over the same period. To some extent this is due to the government shutdown affecting the household report, but not the establishment report (per the BLS). But it doesn’t explain everything.
Most importantly, of the four leading components in the establishment survey, one fell (the manufacturing work week), and two of the other three (manufacturing, and temporary jobs), while positive, showed sharply decelerating growth.
On the other hand, the very lagging measure of wage growth did continue to rise at a 3.4% clip, and the prime age participation ratio also rose to an expansion high.
Since the December report was excellent in virtually all respects, to some extent January is probably just a giveback. But all the same, there are plenty of cautionary signals in this report going forward.
A single datapoint without at least 12 months graphs tells us nothing. Please provide them too.
Pictures do work at times. This is a dialogue which I understood.
Clearly something is causing employment “quality” to fall apart. Even a downward revision won’t likely help the quality.
If I had to guess, corporate consumption via capital income is collapsing which outside 1973(and a lessor extent 1969) is usually a laggard. 1973 has similar vibes with NFP with the slower than expected decline in single persons consumption and its relation to industrial production. NFP had some big tops as well then. Looks like single person consumption is more related to industrial production’s decline that corporate consumption.
Corporate consumption imo has been the big bubble this cycle. I know people have been wondering where the bubble has been……well, there you go. It also connects more to the service sector decline initially rather than a broad base industrial decline. So the U-6 says the labor market has weakened some, yet industrial indicators on average only began to weaken lately and don’t indicate recession.
Also remember that the peak of the millies is structurally starting to hit the LFPR. I wondered last month if the Boomer connection with retirements to future hiring wasn’t goosing NFP, it was…………and the collapse in corporate consumption is making employers leery, which is causing part time hiring to boom, workers you can easily get rid of in a few months.
as i noted on an earlier thread, the seasonally adjusted job count in the establishment survey was boosted by warm weather right up to the survey date that delayed normal wintertime layoffs in construction, leisure and hospitality and other seasonal work…meanwhile, there was so much screwy with the household survey i would just about dismiss it completely…here’s what i had on that:
(NB the household survey was impacted by the effects of the government shutdown during the survey week, wherein those on temporary layoff were supposed to be counted as unemployed…)
Reflecting the effects of the government shutdown, the January household survey indicated that the seasonally adjusted extrapolation of those who reported being employed fell by an estimated 251,000 to 156,694,000, while the estimated number of those unemployed rose by 241,000 to 6,535,000; which led to a rounded 11,000 decrease in the total labor force…however, those numbers were skewed from what they should have been because a number of federal workers were classified as employed but absent from work, who also should have been classified as unemployed on temporary layoff…about those “employed” workers, the BLS says “they are accepted as recorded” & that “no ad hoc actions are taken to reassign survey responses”…further complicating the January results, the benchmark revision to 2018’s civilian noninstitutional population indicated that December’s population had been overstated by 800,000, which meant that all the population dependent metrics had to be adjusted for that revision….with a January population increase of 151,000 partially offsetting that, that meant the number of employment aged individuals who were not in the labor force was down by 639,000 from previously published figures to 95,010,000, the labor force participation rate increased from 63.1% to 63.2%, and the employment to population ratio, which we could think of as an employment rate, increased from 60.6% in December to 60.7% in January, all despite fewer workers being employed.…at the same time, the increase in the number unemployed was large enough to increase the unemployment rate, as it rose from 3.9% to 4.0%, and it would have even been higher had the aforementioned furloughed federal employees been properly classified…meanwhile, the number of those who reported they were forced to accept just part time work, which includes many of those federal employees, rose by 490,000, from 4,657,000 in December to 5,147,000 in January, which was enough to increase the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 7.6% of the labor force in December to 8.1% in January…however, we can expect most of that to be reversed in February…
And automotive prepares to shed thousands with vehicle changes and movement of production.