Pundit's Perspectives – Fri 2 Sep, 2016

A closer look at the jobs number

The post below comes from the Calculated Risk blog. The author, Bill McBride is very good at looking at the numbers and breaking down what is reported.

Click here to visit his site for more macro economic commentary.

Employment Comments: A Decent Report

The headline jobs number was decent.  Job growth averaged 232,000 over the last three months, and both the participation rate and employment-population ratio were unchanged.  Wages increased slightly.

In August, the year-over-year change was 2.45 million jobs – a solid gain.

Average Hourly Earnings
Wages CES, Nominal and RealThis graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka “Establishment”) monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in “Average Hourly Earnings” for all private employees.  Nominal wage growth was at 2.4% YoY in August.  This series is noisy, however overall wage growth is trending up.

Note: CPI has been running around 2%, so there has been real wage growth.

Employment-Population Ratio, 25 to 54 years old

Employment Population Ratio, 25 to 54Since the overall participation rate has declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early ’90s, the participation rate moved more sideways, with a downward drift starting around ’00 – and with ups and downs related to the business cycle.

The 25 to 54 participation rate increased in August to 81.3%, and the 25 to 54 employment population ratio decreased to 77.7%.

The participation rate for this group might increase a little more (or at least stabilize for a couple of years) – although the participation rate has been trending down for this group since the late ’90s.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed at 6.1 million in August. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.

The number of persons working part time for economic reasons increased slightly in August. This level suggests slack still in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged at 9.7% in August.

Unemployed over 26 Weeks

Unemployed Over 26 WeeksThis graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 2.006 million workers who have been unemployed for more than 26 weeks and still want a job. This was down slightly from 2.020 million in July.

This is generally trending down, but is still high.

There are still signs of slack (as example, elevated level of part time workers for economic reasons and U-6), but there also signs the labor market is tightening.

Overall this was a decent report.  Job growth averaged 232,000 over the last three months, and 182,000 per month this year.

  1. On September 2, 2016 at 12:19 pm,
    CFS says:

    Off Topic……

    So far, guess how many Hillarious emails contained classified information.

    2,101. . All information now in Russian hands, one has to assume.

  2. On September 2, 2016 at 12:25 pm,
    James the lesser says:

    Time for an education…

    A few weeks ago gold was ready to break out and take out $1400.

    It was up intraday $13 and ready to go and they (the BIS, COMEX paper attack…) knocked it down.

    After that the usual FED propaganda began (FED heads giving speeches all over the place either to a) spin the phony narrative that the economy is growing and/or b) give the impression that the FED is still in control.

    Then came the Jackson Hole symposium, and this was the icing on the cake.

    They continued to spread the lies pounding gold all the way back down to $1308.

    All based on lies, spin, propaganda and few well timed paper attacks.

    Now for the cherry on the top…

    Yellen’s job was to give confidence to the stock market and at the same time give confidence that the economy was on solid footing.

    Then Fisher comes out right after and seemingly contradicts what his boss just said.

    He stressed the fact that two rates hikes we’re not only appropriate but coming.
    The only qualification being the August NFP number.

    Fisher played the bad cop to Yellens good cop.

    All of this of course is executed well in advance.

    So gold sinks, miners get crushed, all on the supposedly rate hikes that are coming.

    Same old playbook, same results.

    The markets now hang baited breath waiting for the August NFP.

    Of course it came in weak. What did you expect?

    Fisher made the NFP print a big deal. This was his trump card.

    Of course Fisher knew what the report was going to say.
    Of course he knew it would be weak.
    Of course he knew it would not allow the FED to pause.

    And there you have it.

    Yellen spins the economy is improving.
    Fisher and his comrades push the interest rate hike narrative once again.
    The NFP report gives them the out they needed to be sure and back off
    Meanwhile gold gives back all its gains and needs to start all over again.

    Mission accomplished.

    Everything is the same except you are there.

  3. On September 2, 2016 at 12:27 pm,
    CFS says:
  4. On September 2, 2016 at 2:11 pm,
    GH says:

    What do others think, is this analysis by McBride credible?

    Personally, I don’t trust his wage conclusion. We know CPI is jiggered. I don’t know if the wage statistic is. But given that he just takes the #s at face value, I’m dubious.

    Likewise, the figure on unemployed more than 26 weeks seems likely to me to be just discouraged people dropping out of the job search and joining welfare roles.

  5. On September 3, 2016 at 8:20 am,
    Hal says:

    I have stopped reviewing the data. It is worthless. Shadowstats has said so for a long tome. There are birth death adjustments and then in Jan and July major adjustments with no support. The report is based on surveys and guesses and then supervisors make changes as they see fit. I am not sure of those adjustments are made before or after the seasonally adjusted numbers which are like Cokes or Kentucky Fried Chicken secret magic formula.

    I am old enough to remember how we here in the US used to joke about the Soviet Union and its propaganda, and of Course China. Few are alive now who would recall the minister of Propaganda in Germany.

    We probably recall enron and how execs said to employees to buy stock just before the stock crashed.

    I suppose we can draw parallels to the US data.

    I give them some break as the GAO has reported significant internal control problems in the US accounting systems and reporting systems. Essentially the books of the US are not auditable. GAP said money is just pouring out of the system as there is no accountability or review AND the structure is so poor that there is no easy way to use the system to identify the spending problems.

    GAO sends an audit letter to the President and Congress each year on this. NOTHING GETS DONE!!! NO ACCOUNTABILITY!!

    Thats been known for some time. Thats Congresses responsibility and the CEO if we had one.

    In corporate terms we need a turn around artist. Someone to bring the organization back up to the structure standards that were set long ago.

    Problem is its TBTF- too big to fix, where does one start.

    Probably need an obnoxious CEO who will piss everybody off till things get done.