December jobs report: good headlines, but deceleration continues
– by New Deal democrat
If the long leading indicators all last year, and the majority of the short leading indicators from the past few months are to be believed, a recession is near. And if that is the case, we ought to see the leading elements of the jobs report begin to roll over. One of them, the average manufacturing workweek, clearly has. Arguably so has temporary employment. Residential construction employment may have peaked. But total construction and manufacturing employment continued to increase through November’s report.
So my focus as of this report is on those remaining leading components, as well as whether the deceleration in the 3-month moving average of jobs growth is continuing.
As described below, the deceleration continues, also including wages, but the leading sectors have not materially deteriorated from the past few months.
Here’s my in depth synopsis.
- 223,000 jobs added. Private sector jobs increased 220,000. Government jobs increased by 3,000. The three month moving average of growth declined further to 247,000.
- The alternate, and more volatile measure in the household report had its best month in quite awhile, increasing by 717,000 jobs. The above household number factors into the unemployment and underemployment rates below.
- U3 unemployment rate declined -0.2% to 3.5%.
- U6 underemployment rate also fell -0.2% to 6.5%.
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 tilted to the negative:
- the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declined -0.3 hours to 40.6, and is down -1.0 hours from its February peak last year of 41.6 hours. This is recessionary.
- Manufacturing jobs increased 8,000, and are at a level higher than before the pandemic.
- Construction jobs increased 28,000, also at a level higher than before the pandemic.
- Residential construction jobs, which are even more leading, increased by 3,100.
- Temporary jobs, which until several months ago had been rising sharply, declined again, by 35,000.
- the number of people unemployed for 5 weeks or less declined by 11,000 to 2,233,000, about 100,000 above its pre-pandemic level.
Wages of non-managerial workers
- Average Hourly Earnings for Production and Nonsupervisory Personnel, which was recorded at $28.10 in November, was revised downward by $-.09, and increased $.06 from that to $28.07, a 0.2% gain m/m, and up 5.0% YoY, vs. its 6.7% peak at the beginning of 2022.
Aggregate hours and wages:
- the index of aggregate hours worked for non-managerial workers declined for the second month in a row, by -0.2% which is still above its level just before the pandemic.
- the index of aggregate payrolls for non-managerial workers was unchanged, and is up 7.4% YoY. This metric has been decelerating nominally almost consistently for the past 16 months. Compared with inflation through November, it is up only 0.2% YoY (recessions typically start when it crosses zero).
Other significant data:
- Leisure and hospitality jobs, which were the most hard-hit during the pandemic, rose 67,000, but are still about -6% below their pre-pandemic peak.
- Within the leisure and hospitality sector, food and drink establishments added 26,300 jobs, but are still about -4% below their pre-pandemic peak.
- Professional and business employment declined -6,000, the second poor reading in a row after last month’s measly increased of 1,000.
- Full time jobs decreased -1,000 in the household report.
- Part time jobs increased 689,,000 in the household report.
- The number of job holders who were part time for economic reasons rose 190,000.
- The Labor Force Participation Rate increased 0.2% to 62.3%, vs. 63.4% in February 2020.
- Those not in the labor force at all, but who want a job now, declined -352,000 to 5.176 million, compared with 4.996 million in February 2020.
- October was revised downward by -21,000, and November was also revised downward by -7,000, for a net decrease of -28,000 jobs compared with previous reports. This is at least the second such downward revisions in a row.
This report was mixed. There were many positive elements, including the unemployment and underemployment rates, labor force participation rate, and the absolute number of gains in jobs. The gains in the household report were the best in months. The leading sectors of manufacturing and construction employment continued to gain. It is nearly impossible to envision a recession beginning while that is still happening.
On the other hand, the manufacturing workweek declined to recessionary levels (suggesting job cuts will be close behind), and temporary employment continued to decline. Aggregate hours worked declined for the second month in a row, and aggregate payrolls were stagnant. There were again downward revisions to previous months’ data. Wages increased at the lowest pace in nearly two years.
This does not suggest to me that a recession is imminent, but it does suggest that deceleration in that direction has continued.