I got a late start on this report today (May 6). I’ll add much more detail shortly, but for now, be advised in summary that while the establishment report was strong, with mainly positive internals, the household report was very weak, with some very weak, albeit mainly still positive, internals.
To be continued . . .
Just as one month ago, I was most interested in three main issues:
1. Is the pace of job growth beginning to decelerate? (Not in the establishment survey, *definitely* in the household survey)
2. Is wage growth holding up? Is it accelerating? (It is still strong, but decelerated slightly)
3. Are the leading indicators in the report beginning to flag? (Not yet, at least not significantly)
We still have 1.2 million jobs, or 0.8% of the total to go to equal the number of employees in February 2020 just before the pandemic hit. At the current average rate for the past 6 months of 552,000 jobs added per month, that’s 2 months from now.
Here’s my in depth synopsis of the report:
- 428,000 jobs added. Private sector jobs increased 406,000. Government jobs increased by 22,000 jobs.
- The alternate and more volatile measure in the household report indicated a gain of only 115,000 jobs, after a February gain of 122,000 and a March gain of 120,000 – or an average gain of only 119,000 jobs per month for the last 3 months. The above household number factors into the unemployment and underemployment rates below.
- U3 unemployment rate was unchanged 3.6%, 0.1% above the January 2020 low of 3.5%.
- U6 underemployment rate *rose* 0.1% to 6.0%, 0.1% above the January 2020 low of 6.9%.
- Those not in the labor force at all, but who want a job now, rose 122,000 to 5.859 million, compared with 4.996 million in February 2020.
- Those on temporary layoff rose 66,000 to 853,000.
- Permanent job losers declined -13,000 to 1,386,000.
- February was revised downward by -36,000. March was also revised downward by -3,000, for a net decline of -39,000 jobs compared with previous reports.
Leading employment indicators of a slowdown or recession
These are leading sectors for the economy overall and will help us gauge whether the strong rebound from the pandemic will continue. These were positive:
- the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declined -0.1 hour to 41.4 hours.
- Manufacturing jobs increased 55,000. Since the beginning of the pandemic, manufacturing has still lost -56,000 jobs, or -0.4% of the total.
- Construction jobs increased 2,000. All of the jobs lost during the pandemic, plus another 738,000, have been made up.
- Residential construction jobs, which are even more leading, increased 3,500. Since the beginning of the pandemic over 50,000 jobs have been gained in this sector.
- Temporary jobs rose by 2400. Since the beginning of the pandemic, almost 250,000 jobs have been gained.
- the number of people unemployed for 5 weeks or less declined by -67,000 to 2,227,000, which is 97,000 higher than just before the pandemic hit.
- Professional and business employment increased by 41,000, which is about 750,000 above its pre-pandemic peak.
Wages of non-managerial workers
- Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $0.10 to $27.12, which is a 6.4% YoY gain, down from 6.7% in the past two months.
Aggregate hours and wages:
- the index of aggregate hours worked for non-managerial workers rose by 0.3%, which is a loss of -0.4% since just before the pandemic.
- the index of aggregate payrolls for non-managerial workers rose by 0.7%, which is a gain of 12.4% (before inflation) since just before the pandemic.
Other significant data:
- Leisure and hospitality jobs, which were the most hard-hit during the pandemic, rose 78,000, but are still -1,438,000, or -8.5% below their pre-pandemic peak.
- Within the leisure and hospitality sector, food and drink establishments added 43,800 jobs, and is still -793,800, or -6.4% below their pre-pandemic peak.
- Full time jobs *declined* -651,000 in the household report.
- Part time jobs increased 189,000 in the household report.
- The number of job holders who were part time for economic reasons declined by -137,000 to 4,033,000, which is still below their level before the pandemic began.
- The Labor Force Participation Rate declined -0.2% to 62.2%.
This report had a decidedly split personality. The Establishment report, which asks employers about their hiring, continued to hit on almost all cylinders, with both the total number of new jobs and the growth of jobs in the leading sectors, continuing to increase at a solid clip. Although the YoY pace of wage gains decelerated a little, it still increased solidly as well. The only downsides were the decline in the manufacturing workweek, and more importantly, the slight downward revisions of the past two months.
The situation was completely different in the Household report, which asks individuals what their employment situation is. This month – and the previous two months as well – increased at a rate that didn’t even keep pace with the growth in the adult population. The unemployment rate held steady, but the underemployment rate rose, and the labor force participation rate declined. The number of persons working full time also declined significantly.’
At turning points, the household report generally leads the establishment report. So the softness in the household report raises a caution flag. I have been expecting the sharp deceleration in consumer spending to show up in hiring, and this month’s household report may be the first sign of that happening.