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Employment situation

Both  the payroll and the household. survey showed continued weak employment gains as payroll employment only added some 80,000 jobs and the household survey showed a 128,000 gain.

Private payrolls expanded some 84,000 as government jobs only contracted by 4,000.

But the workweek did expand from 34.4 to 35.5 hours for all employees and from 33.7 to 33.8 for nonsupervisory employees.

The index of hours worked for all employees is now back to the trend for this recovery.

But the index of hours worked for nonsupervisory workers fell below trend.


 Average hourly earnings for nonsupervisory employees rose from $19.69 to $19.74,  a 0.25% increase.
So wage gains continue at or near record lows.

Small  changes in wages and hours worked mean that weekly wages only grew  modestly and is still only some 2.6% above its year ago level.


I watch the wage and earnings data because of what it tells about economic prospects.  It dominates income gains that in turn is the single most important factor driving consumer spending, especially later in the cycle. The US is clearly in a spiral of weak wage gains leading to weak spending that in turns leads to further weak wage gains.  It is hard to see what will cause the economy to break out of this spiral.

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Employment Situation….Spencer England

This was another disappointing  employment report  It is looking more and more like the stronger numbers last winter stemmed more from the mild weather rather than a strengthening of underlying trends.

The headline or payroll report showed a gain of 115,000 jobs– 130,000 in private jobs and a 15,000 drop in government employment.

 The work week was unchanged so the index of aggregate hours worked only rose 0.1%. The previous  report was revised higher so that hours worked versus trend looks a little better than it did last month.

Even though the gains in hours worked is weak, compared to the other two jobless recoveries in the1990s and 2000s it looks fairly strong. 

My thesis from last month that the slowing of employment growth was partially a product of firms trying to rebuild productivity growth still looks valid.  In the productivity report, the growth in unit labor costs  slowed from 3.1% to 2.1% while the increase in the nonfarm business deflator slowed from 2.1%

 to 1.8%  So the spread between unit labor cost is now only 0.3 percentage points versus 1.1 percentage points a quarter ago.  Given that labor compensation is  58.7% of costs this should be consistent with single digit profits growth.

But average hourly earnings and weekly earnings growth continue to show very modest gains. As long as wage and earnings growth remain this weak a significant acceleration of either inflation or aggregate demand remains unlikely. 

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Employment Situation

This report is now adjusted to show the impact of the population control adjustment.

The employment report was the strongest this cycle with payroll employment rising 243,000.
The household survey shows a gain of 843,000 but almost 250,000 of that is due to the new population adjustments so the net result is an increase of 631,000. This is what is in the chart, but
the January observation is not comparable to the 2011 observations.
Moreover, hours worked rose 0.6% as compared to the 0.2% norm over most of this cycle.In January government employment was little changed as compared to the 276,000 drop in government employment last year.

Despite all the talk about uncertainty employment gains this cycle continue to be better than last cycle.
The civilian employment/population ratio was little changed last month as it has been for months so the drop in the unemployment rate continued to stem more from the labor force falling rather than employment rising.

But hours worked for nonsupervisory workers rose 0.6% in January, the strongest gain this cycle.

Average hourly earnings only rose 0.2% and the year over year change in average hourly earnings is now 1.9%, the smallest increase on record.

The combination of very strong gains in hours worked and very weak average hourly earnings average weekly earnings appear to be bottoming.

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