The December Employment Numbers Look Softer

By Thomas Cooley and Peter Rupert

The BLS announced that December employment rose by 148,000. The gains were broad-based, the only declines were found in retail trade, -20.3, and utilities, -0.9. This is well off the trend rate of job growth of the last few months.  It is also significantly softer than the ADP estimate based on payroll data of 250,000 new private sector jobs. But employment growth has been volatile month-to-month and this softening is not statistically meaningful. The unemployment rate remained steady at 4.1% and other features of the labor market remained much the same.


Average hours of work remained at 34.5 and average hourly earnings ticked up 9 cents to $26.63.


Average hourly earnings increase was 0.3% which signals some upward pressure on wages but nothing like a the break through increases that observers have been looking for as evidence of a tight market.

The household survey shows that labor force participation and the employment population ratio remain largely unchanged at historically low levels. This represents a degree of slack in the labor market and it isn’t changing.



Weather and recurrent natural disasters have had a fairly steady damping effect on the aggregate labor market over the past 12 months.  Observers report emerging signs of tightness and rising wages in some regional markets that have not been so affected.  We should expect to see some significant strengthening of labor markets over the next 12 months that have nothing to do with changes to the tax law.  If that also turns out to have an impact on employment then we should begin to see that show up in wage growth and labor force participation.



November Employment Remains Strong

By Thomas Cooley and Peter Rupert

Payroll employment rose 228,000 for November as reported by the BLS, with the private sector gaining 221,000. The increases were widespread, with only Utilities down slightly and Information employment down 4,000. The Goods producing sector was up 62,000: Mining and Logging 7,000, Construction 24,000 and Manufacturing 31,000. Government employment was up 7,000 after declining for the past few months. Revisions nearly offset, with September up 20,000 and October down 17,000.


Average weekly hours rose to 34.5 and average hourly earnings up from $26.50 to $26.55.



From the household data there is little to report. basically no change in the unemployment rate, from 4.06 % to 4.12%, or the participation rate. However, long term unemployment remains remarkably elevated.




The overall strength of the labor market and the previous GDP report make a December rate hike pretty much a done deal.




Third Quarter GDP Gets a Boost

By Thomas Cooley and Peter Rupert

The BEA announced a small upward revision to Q3 GDP, from 3.0% in the preliminary estimate to 3.3% in the second estimate. Year-over-year growth continues its upward trajectory. Consumption growth was revised down slightly to 2.3%.

The upward revision to fixed investment was large, increasing almost a full percentage point, from 1.5% to 2.4%. The big gainers in the investment sector were equipment, from 8.6% to 10.4%, and intellectual property, from 4.3% to 5.8%. Non-residential structures were bumped down, from -5.2% to -6.8%. Residential investment, however, was revised up, from -6.0% to -5.1%, respectively.


Corporate profits increased 4.3% from Q2 to Q3 and are up 5.4% compared to Q3 2016.


This revision does little to change the overall outlook of the US economy…meaning that the Fed is likely still on for a December rate hike.


October Employment

By Thomas Cooley and Peter Rupert

The BLS announced an increase in payroll employment of 261,000 in October and revised September’s preliminary estimate of a decline of -33,000 to an increase of 18,000 and August revised up by 39,000. The increase was widespread across goods producing (33,000), service producing (219,000) and government (9,000).


Average hours remained at 34.4 and average hourly earnings were essentially flat. The labor market continues to plod along, not seeing particular strength or weakness.



The household survey revealed a sharp decline in the labor force, -765,000, and a decline in the number unemployed, -281,000, that lead to a decline in the unemployment rate from 4.220% to 4.065%. Employment declined, -484,000, as did the participation rate from 63.1 to 62.7. The employment to population ratio from 60.4 to 60.2. So while the establishment data looked strong, the household survey had little going for it except the drop in the unemployment rate.




Job openings from JOLTS reveals the number of openings remaining at or near the highest level ever. However, the number of hires per opening has fallen since the end of the Great Recession to its lowest number.



Although natural disasters have somewhat muddied the waters, there is little in this report that would change the likelihood of a December federal funds increase.

Q3 GDP: Solid Growth Continues

By Thomas Cooley and Peter Rupert

The BEA announced that GDP grew 3.0% the advance estimate for Q3 following a 3.1% rise in Q2. This was the strongest two-quarter increase since Q2-Q3 in 2014. The economy is rolling along despite the disruption from hurricanes and the uncertainty about future policies. Consumption expenditures remain strong, increasing 2.4% and durable goods increasing 8.3%. Investment in structures, both residential and non-residential, however, was quite weak, falling -6.0% and -5.2%, respectively. On the other hand equipment investment grew at 8.6% and intellectual property products at 4.3%.





As the affected areas rebuild from the hurricanes and wildfires the prospects are that economic activity will remain strong in the fourth quarter.  The only worries are longer term concerns about the impact of policies originating in the Whitehouse. Bu they remain very uncertain as of now.