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.

The Labor Market Remains Robust

By Thomas Cooley and Peter Rupert

The BLS announced a 33,000 decline in in payroll employment. Employment in the food services and drinking places sector fell by 104,000. Several disruptions occurred during the past month, including hurricane Irma that occurred at the beginning of the BLS survey week. This is the first decline in employment since September, 2010 as the economy was recovering from the Great Recession. The drop in employment in food services and drinking places was the largest since the series started. This decline was largely responsible for the overall decline in payroll employment. 



Average hours worked remained at 34.4 for the third straight month. Average hourly earnings rose 0.5% over the month and are up 2.9% year over year. Given the changes in the CPI and PCE, real earnings have grown between .5% and 1%, respectively.




The decline in payroll employment seems to be a little misleading due to the disruptions from the hurricanes. The household survey looks much more positive. The labor force participation rate was up from 62.9 to 63.1. The employment to population ratio was also up, from 60.1 to 60.4. The number of unemployed fell by 331,000 and the unemployment rate fell from 4.44% to 4.22%.





While the “headline” employment decline shows up first in most reports, a deeper look shows continued strength in the labor market. The coming months are likely to show a bounce back from the hurricane’s effects and a stimulus as rebuilding gets underway.



Q2 GDP: 3.1% in 3rd estimate

By Thomas Cooley and Peter Rupert

The BEA released the 3rd estimate for Q2 real GDP and hiked it from 3% in the 2nd estimate to 3.1% in the third. Real GDP increased 1.2% in Q1, unchanged from the previous estimate. The 3.1% increase is the largest since Q1 of 2015.



Non-residential fixed investment remained strong for the second quarter in a row, 7.2% in Q1 and 6.7% Q2. These back-to-back increases were the largest over the past three years. Residential investment, on the other hand, dropped 7.3%, the largest decline since 2011.



Hurricane Harvey created a lot of uncertainty for the future. On the one hand it foretells a big short term hit to local GDP from lost economic activity and the hit to the oil and gas sector. Hurricanes Irma and Maria will not show up strongly in GDP except insofar as they affected Florida and the U.S. mainland. This is because the GDP from Puerto Rico and the U.S. Virgin Islands does not enter into calculations of U.S. Domestic GDP. Government expenditures on relief will show up.


August employment stalls

By Thomas Cooley and Peter Rupert

The Bureau of Labor Statistics reports employment increased 156,000 in August along with 41,000 in downward revisions over the past two months. The overall picture, highlighted by the continued use of “little changed” by the BLS:

“and the unemployment rate was little changed at 4.4 percent”,

“Among the major worker groups, the unemployment rates for adult men (4.1 percent), adult women (4.0 percent), teenagers (13.6 percent), Whites (3.9 percent), Blacks (7.7 percent), Asians (4.0 percent), and Hispanics (5.2 percent) showed little or no change in August. (See tables A-1, A-2, and A-3.)”

“The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged in August at 1.7 million and accounted for 24.7 percent of the unemployed. (See table A-12.)”

“The labor force participation rate, at 62.9 percent, was unchanged in August and has shown little movement on net over the past year. The employment-population ratio, at 60.1 percent, was little changed over the month and thus far this year. (See
table A-1.)”

Declines in employment were seen in information services and government. Average hours of work fell slightly from 35.4 to 34.4.



The employment to population ratio has been inching up since 2014 while he labor force participation rate has hovered around 62.9.







The matching of workers to vacancies, as indicated by the Beveridge Curve, after moving counter-clockwise over the cycle shows a slightly elevated vacancy rate as compared to unemployment.


The weakness from this August report likely gives some pause for the policy moving forward. Nevertheless, it is still a strong labor market with low unemployment rates and  healthy vacancies. The same puzzles that presented themselves in prior months persist – low participation rates and low wage growth. Healthy GDP growth has not translated into gains for most workers.