Friday, September 4, 2015

August jobs report: Meh headliine, great internals except wage growth still stinks


- by New Deal democrat

HEADLINES:

  • 173,000 jobs added to the economy
  • U3 unemployment rate fell -0.2% to 5.1% 
With the expansion firmly established, the focus has shifted to wages and the chronic heightened unemployment.  Here's the headlines on those:

Wages and participation rates
  • Not in Labor Force, but Want a Job Now: down -203,000 from 6.135 million to 5.932 million
  • Part time for economic reasons: up  158,000 from 6.325 million to 6.483 million
  • Employment/population ratio ages 25-54: up 0.1 from 77.1% to 77.2% 
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up +0.2% from $21.02 to $21.07,  up +1.9%YoY. (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)
June was revised upward by +14,000.  July was also revised upward by +30,000, for a net change of +44,000.

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were very positive.

  • the average manufacturing workweek rose 0.1 hours from 41.7 hours to 41.8 hours.  This is one of the 10 components of the LEI and so will affect it positively.
  •  
  • construction jobs increased.by 3,000.  YoY construction jobs are up 217,000.  

  • manufacturing jobs decreased by -17,000, and are up 128,000 YoY.
  • Professional and business employment (generally higher-paying jobs) increased by 33,000 and are up  643,000 YoY.

  • temporary jobs - a leading indicator for jobs overall - rose by 10,700.

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - fell by -393,000 from 2,488,000 to 2,095,000, making a new low for this expansion.

Other important coincident indicators help us paint a more complete picture of the present:

  • Overtime fell -0.1 hour from 3.4 hours to 3.3 hours.

  • the index of aggregate hours worked in the economy rose by 0.4 from a downwardly revised 103.6 to 104.0. 
  •  
  • The broad U-6 unemployment rate, that includes discouraged workers declined  -0.1% from 10.4% to 10.3%. 
  •  the index of aggregate payrolls rose by 0.9% from a downwardly revised 123.7 to 124.6.
Other news included:    
  • the alternate jobs number contained in the more volatile household survey increased by  196,000 jobs.  This represents an increase of 2,585,000  million increase in jobs YoY vs. 2,919,000 in the establishment survey.  

  • Government jobs rose by +33,000. 
  • the overall employment to population ratio for all ages 16 and above rose +0.1%  from 59.3% to 59.4%,  and has risen by +0.1% YoY. The labor force participation rate was unchanged at  62.6% and is down -0.3% YoY (remember, this incl udes droves of retiring Boomers). 

SUMMARY:


Only two things held this report back from being Totally Awesome! The first is the headline 140,000 private jobs created, but as most readers probably already know, August numbers have had a history of major upward revisions.  The second - sigh - once again is wage growth, which despite a 5.1% U3 unemployment rate is unable to crack 2%.  This is terrible and continues to bode ill for the next recession whenver it may come.  I still expect this situation to improve once the broader U6 unemployment rate, which fell again this month, finally falls below 10%.

Everything else was damn near, well, awesome. Not only did both unemployment rates fall to new lows, so did short term unemployment (a leading indicator), and those not in the labor force but want a job now fell to a new post-recession low save for one month.  Involuntary part time workers did go up, but still are at the second-lowest number since the recession. The manufacturing workweek improved Manufacturing and mining employment did fall, but were more than offset by gains elsewhere. Both aggregate hours and payrools also made a new post-recession high.

All in all, a good report.

Thursday, September 3, 2015

US consumers power past poor manufacturing


 - by New Deal democrat

I have a new post up at XE.com, contrasting the slowdown in US manufacturing vs. the strength of the US consumer economy.

A real puzzle about real wages


 - by New Deal democrat

This morning the National Employment Law Project (NELP) released its annual update on real wages during the recovery.  Their findings are a puzzle to say the least. 
Virtually every other measure of real wages shows a bottom in late 2012. (Real wages declined from 2009-12 as the price of gas went from $14.0 to $3.90, hence inflation outstripped miserly nominal wage growth):

In contrast, here is the NELP graph of real occupation wage changes from 2009-2014:

Note that the OES is calculated through May of each year, so the latest report misses the effect of the big decline in gas prices in the last 12 months. 
It is virtually gospel that as the labor market improves, so should wage growth. In other words, wages could be down from 2009, but up from 2012 or 2013. So I went back and compare the NELP's latest report with earlier reports.  Here is what I found:
From 2009 through 2013:

and from 2009 through 2012:

In case it isn't obvious from the graphs, according to the NELP, wage declines have increased across every single wage quintile from 2012 to 2013, and even more in from 2013 to 2014! Even with the NELP saying that hiring in high wage jobs took off in 2013 into 2014.
To double-check the NELP data, I went to the OES database, which can be found here: (http://www.bls.gov/oes/tables.htm) and obtained the median hourly pay for all occupations for each year 2009-14, and then divided by the change in prices as calculated by the CPI from May 2009 (the OES is calculated as of May of each year), and here is what I got (pay in column 1, CPI change from 5/09 in column 2, "real" pay in column 3, and the YoY change in "real" pay column 4):
2009 $15.95
2010 $16.27 2.1 $15.94 -0.1
2011 $16.57 5.2 $15.75 -1.3 -1.2
2012 $16.71 7.6 $15.53 -2.6 -1.3
2013 $16.87 8.8 $15.51 -2.8 -0.2
2014 $17.09 10.9 $15.41 -3.6 -0.8
The NELP shows real median wages down -4.0%, not -.3.6%, since 2009, so they appear to be using a different inflation adjustment.
But more importantly, the OES data shows not just a continuous decline from 2009, but the decline in real wages actually *accelerating* from 2013 to 2014 -- much moreso than during the much weaker labor market of 2009-10!
I'm at a loss for an explanation.  This data cannot be dismissed as at outlier because it is very thorough.  But still it is not at all in accord with what other data on real wages have been showing. 
Is it possible that there has been a dynamic process where ever more employers are learning that they can freeze employee wages and get away with it?  This is a real puzzle.