December jobs report:
December jobs report: I told you so – jobs actually declined in December, BUT employment primed for takeoff once pandemic abates
Important: There was a huge amount of seasonality in this report. This is common for December, but the issue was greatly exacerbated because of the outsized impact of the pandemic. Take the large changes in some of the data with many grains of salt.
I have been warning for almost 4 weeks that the December employment report might have a negative number. It did. At the same time, the internals are not nearly so bad as the headline.
- -140,000 million jobs lost, 95,000 of which were in the private sector and 55,000 were in government. Comparatively, there were 22.1 million job losses in March and April. The alternate, and more volatile measure in the household report indicated a gain of 21,000 jobs, which factors into the unemployment and underemployment rates below.
- U3 unemployment rate was unchanged at 6.7%, compared with the January low of 3.5%.
- U6 underemployment rate fell -0.3% from 12.0% to 11.7%, compared with the January low of 6.9%.
- Those on temporary layoff increased 277,000 to 3,039,000.
- Permanent job losers decreased by -348,000 to 3,370,000.
- October was revised upward by 44,000. November was also revised upward by 95,000 respectively, for a net gain of 135,000 jobs compared with previous reports.
Leading employment indicators of a slowdown or recessionI am still highlighting these because of their leading nature for the economy overall. These were generally positive:
- the average manufacturing workweek was unchanged at 40.2 hours. This is one of the 10 components of the LEI.
- Manufacturing jobs increased by 38,000. Manufacturing has still lost -543,000 jobs in the past 10 months, or -4.2% of the total. About 60% of the total loss of 10.6% has been regained.
- Construction jobs increased by 51,000. Even so, in the past 10 months -226,000 construction jobs have been lost, -30% of the total. About 80% of the worst loss of 15.2% loss has been regained.
- Residential construction jobs, which are even more leading, rose by 8,900. Since February there have now been actual job *gains,* to the tune of 6,400 jobs, to a new 10 year+ high.
- temporary jobs rose by 67,600. Since February, there have still been -213,500 jobs lost, or -7.3% of all temporary help jobs.
- the number of people unemployed for 5 weeks or less rose by 849,000 to million, compared with April’s total of 14.283 million.
- Professional and business employment rose by 161,000, which is still -858,000, or about 4% below its February peak.
Wages of non-managerial workers
- Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $0.20 from $24.89 to $25.09, which is a gain of 5.2%(!) in the 10 months since the pandemic began. As with last March and April, these gains reflect that job losses occurred primarily among lower wage earners, who since May had been disproportionately recalled to work.
Aggregate hours and wages:
- the index of aggregate hours worked for non-managerial workers declined by -0.1%. In the past 10 months combined this has nevertheless fallen by about -6%.
- the index of aggregate payrolls for non-managerial workers rose by 0.7%. In the past 10 months combined this has nevertheless fallen by about -1.6%. Still, about 90% of the loss from February to April has been made back up.
Other significant data:
- Full time jobs gained 397,000 in the household report.
- Part time jobs declined -471,000 in the household report.
- The number of job holders who were part time for economic reasons decreased by -332,000 to 4.891 million. This is still an increase since February of 1,772,000.
While the headline was a negative number, this was almost entirely due to huge declines of -372,000 in food and beverage establishments, and another -92,000 in amusement and recreation. Private education lost -63,000, and there were also sizable losses in local and state government.
In contrast, all of the leading job groups showed equally sizable gains, and residential construction employment made a new decade-plus high. Among leading employment indicators, only the increase in short term unemployment was negative.
Full-time jobs also showed gains, while part-time jobs showed losses. Aggregate and average payrolls also rose sharply. While the average hourly wage increase can be put down to the heavily skewed nature of the new job losses, the aggregate increase which includes the total from all jobs, is a big positive, probably reflecting some annual raises.
This is an absolutely poor report as to current conditions, particularly 10 months into the pandemic. On the other hand, the leading sectors once again show that the economy – including employment – is primed for takeoff once the pandemic is brought under control.
The Most Important Thing Biden Can Learn From the Trump Economy
NY Times – Neil Irwin – January 11
For all the problems that President Trump’s disdain of elite expertise has caused over the last four years, his willingness to ignore economic orthodoxy in one crucial area has been vindicated, offering a lesson for the Biden years and beyond.
During Mr. Trump’s time in office, it has become clear that the United States economy can surpass what technocrats once thought were its limits: Specifically, the jobless rate can fall lower and government budget deficits can run higher than was once widely believed without setting off an inflationary spiral.
Some leading liberal economists warned that Mr. Trump’s deficit-financed tax cuts would create a mere “sugar high” of a short-lived boost to growth. The Congressional Budget Office forecast that economic benefits of the president’s signature tax law would be partly offset by higher interest rates that would discourage private investment.
And the Federal Reserve in 2017 and 2018 took action to prevent the economy from getting too hot — driven by models suggesting that an improving labor market would eventually cause excessive inflation.
These warnings did not come true.
Before the pandemic took hold, the jobless rate was below 4 percent, inflation was low, and wages were rising at a steady clip, especially for low and middle earners. The inflation-adjusted income of the median American household rose 9 percent from 2016 to 2019.
The higher interest rates from unfunded tax cuts that had been forecast did not materialize; the C.B.O. in spring 2018 had expected the 10-year Treasury bond yield to average 3.5 percent in 2019. In fact, it averaged a mere 2.1 percent, making federal borrowing more manageable.
And the Fed cut interest rates starting in 2019 despite a very low jobless rate, implicitly accepting the premise that it had moved too aggressively with rate increases to prevent inflation that never arrived.
Mr. Trump has sent plenty of mixed signals on both deficits and interest rate policies over the years. He has intermittently promised to eliminate the national debt, even as his policies expanded it; he supported rate increases in 2015, accusing the Fed of keeping them low to help President Obama; and some of his Federal Reserve appointees were monetary hawks (though not those who managed to win Senate confirmation).
But the experience of his presidency — particularly the buoyant economy before the pandemic began — shows what is possible. It may not have been the best economy ever, as he has repeatedly claimed, but it was easily the strongest since the late 1990s, and before that you have to go back to the late 1960s to find similar conditions.
If Mr. Trump was able to ignore economic orthodoxy and achieve the best economic outcomes in years, it’s worth asking how much value that orthodoxy held to begin with.
Just maybe, does the success of Trumponomics tell us that we’ve been doing something wrong for decades?
The not-so-great moderation
To understand how deeply entrenched the centrist conventional wisdom around economic policy has been over the last generation, consider a curious incident from August 1994. Alan Blinder, the newly named vice chairman of the Federal Reserve, gave a speech at an annual symposium of central bankers in Jackson Hole, Wyo., in which he described trying to reduce unemployment as an important role for the Fed.
Some huffing and puffing ensued. There was talk in the hallways about Mr. Blinder’s focus on unemployment rather than on inflation prevention, which central bankers viewed as their main goal. It made its way into the news media, including some scathing attacks.
“Put simply, Blinder is ‘soft’ on inflation,” wrote the Newsweek columnist Robert J. Samuelson. Without adequate anti-inflation conviction, “Blinder lacks the moral or intellectual qualities needed to lead the Fed.”
“I was pilloried for suggesting that we might get below 6 percent on the unemployment rate,” Mr. Blinder, a Princeton economist, said recently.
A widespread view among economic policy elites, after the runaway inflation in the 1970s and early 1980s, was that elevated unemployment was a necessary cost of keeping prices stable. Also, that the government can’t spend much more money than it takes in without crowding out private investment — leaving the economy weaker over time — and that policymakers should act pre-emptively to ward off these risks. …