October Employment…Strong Enough?

By Thomas Cooley, Ben Griffy and Peter Rupert

Today’s release of the employment situation by the BLS shows employment increasing by 161,000, as measured from the estalishment survey. Moreover, both August and September were revised up. For August, the third (and final) estimate has employment 9,000 higher than the second estimate. For September, the second estimate is 35,000 higher than the first. Here you can find revisions going back to 1979.

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Private sector employment increased 142,000 and all of that came from the service producing sectors as the net for the goods producing sectors was zero. Construction jobs increased 11,000, manufactuing fell by 9,000 and mining and logging (oil, mainly) continued to contract, down another 2,000 jobs.

Since the trough of the great recession, dated June of 2009 by the NBER, employment growth has been steady…yet below all other expansions except for the 2001 cycle. emp-rec-rec-trough2016-11-04

Average weekly hours were flat at 34.4 and average hourly earnings ticked up from $25.82 to $25.92.

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Data from the household survey showed a different picture, however. While the unemployment rate moved only slightly down, 4.96% to 4.87%, the number of those employed fell by 43,000 and the civilian labor force dropped by 195,000. The labor force participation rate dropped from 62.9% to 62.8% and the employment to population ratio fell from 59.8% to 59.7%.

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The productivity and costs report came out yesterday and revealed a 3.1% climb in productivity, with output increasing 3.4% and hours increasing 0.3%. In addition, second quarter productivity was revised up from -0.6% to -0.2%. Unit labor costs increased 0.3%, with a 3.4% rise in hourly compensation and a 3.1% rise in productivity.

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While the labor market continues to expand it does seem that it has cooled off in some respects. Unemployment rates have stopped declining, labor force participation is down, hours of work are flat and productivity has only recently increased after three quarters of decline. Evidently the FOMC thought so as they announced at their latest meeting earlier this week that they were maintaining their current stance of policy, with two members dissenting…both wanted an increase in the target rate to 0.5-0.75%. With one more employment report before the next FOMC meeting it remains to be seen whether they feel there is enough strength in the underlying economy to present us with another December increase.

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