Relevant and even prescient commentary on news, politics and the economy.

Employment Situation

The headline numbers in the employment report were very weak as  payroll employment rose by only 88,000  and the household survey reported a -206,000 drop in employment while the labor force fell by -496,000.  The futures markets are reacting very badly.  But the workweek expanded and aggregrate hours worked increased 0.3% as compared to 0.5% last month.

Private payrolls grew  96,000  and government employment fell 7,000 implying that the sequester is not yet having a significant impact.

After falling to  below trend last year hours worked is now back on the 0.2% trend displayed earlier in the cycle.   So basically it looks like the headline numbers are overstating the weakness.


Interestingly, my bond valuation model still says that the 10 year T Bond yield should be about 1.5%.
 The model still has fed funds in it, but  nothing else to capture other measure of fed policy..

Average hourly earnings were essentially unchanged last month, but the smoothed data still implies that wage gains have bottomed.

Average weekly earnings also still looks like it has  bottomed.

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Employment Situation

This was one of the better employment reports of this cycle.  Private payroll employment grew 246,00
while  government employment fell about 10,000 for a net gian of of 236,000.  The household survey also showed a nice gain of 170,000.

 

On a year over year change basis both series are showing nice gains.




You would never know it to listen to the news, but employment in this cycle continues to better than in the previous   cycle.

The workweek also increased 0.1% and the index of aggregate hours worked grew 0.5% of all workers and 0.9% for production workers.  The index is now back to the trend established early in the cycle.

Average hourly earnings growth has bottomed and are starting to move up very nicely.


And this is leading to an improvement in weekly earnings.


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The employment situation

This was another tepid employment report not much different than the reports in 2012.

Payroll employment rose 168,000 and the household survey showed a gain of only 17,000

 

Private payrolls expanded 168,000 while government employment fell 9,000.

 Perhaps more importantly the year over year change in employment is showing significant signs of weakness,  Both the household survey and payroll data show that the year over year gain in employment has peaked.


 Moreover, this weakness is appearing despite the fact that the annual benchmark revisions showed stronger employment growth in 2012 than originally reported.

 The revisions also significantly changed the pattern of hours worked in 2012.  Originally, hours worked fell well below trend in mid-2012 and were strengthening back to trend at year-end.  Now
it appears that hours worked were not as weak as originally reported. But with the average workweek unchanged in January, the January hours worked fell 0.2%.

 

 On the other hand the apparent bottoming of average hourly earnings growth  is still intact and was actually strengthening in January. 

 
 The growth in average weekly earnings fell back to only 1.2%  versus 1.7% in December and the low of 1.0% in October.  It is going to be very hard for consumer to absorb the increase in payroll and income taxes in early 2013.  Prospects for consumer spending in early 2013 do not appear promising.

 

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THE EMPLOYMENT SITUATION

At first glance the December employment report shows that the trends throughout 2012 were unchanged in December.  But within the report there were some greater signs of strength.

Private payroll employment showed a gain of 155,000 and the household survey reported a much smaller gain of only 28,000.  These changes are about the same  as they have been all year.


Private payroll employment was up 166,000 as government employment fell again.

But on a year over year change the two reports are still showing very similar gains.

 The workweek increased from 33.7 to 33.8  the second consecutive month of  a 0.4% gain.

As a result, the index of aggregrate hours worked rose 0.5% after a 0.4% jump last month.

These are some of the largest gain this cycle and the chart shows how the rate of gain is moving back up to the trend experienced earlier in the cycle.

Moreover, average hourly earnings rose 0.3%.   The year over year increase and the smoothed three month growth rate strongly suggest that wage growth is bottoming.   This is good news.  But on the other hand it is exactly the type of change the inflation hawks are warning us about


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