Tag: employment

Labor market stuff

Posted on by peter.c.rupert

by paul gomme and peter rupert

Employment

The BLS announced that December employment increased by 50,000, following November’s 56,000 (revised down from 64,000). October employment fell 173,000 after a 68,000 downward revision.

Despite the weak employment gains from the Establishment Survey, the unemployment rate ticked down from 4.54% in November to 4.38% in December. This fall in the unemployment rate is chiefly due to the number of unemployed persons falling from 7.8 million (November) to 7.5 million (December). This decline was large enough that the labor force fell (by 46 thousand). On its own, a drop in the labor force tends to push up the unemployment rate.

job openings and labor turnover survey (JOLTS)

According to the JOLTS data, there was very little movement in vacancies, hires or layoffs. The rates shown below are calculated by the variable in question divided by total employment or total employment plus openings. For example, if employment is 9.5 million and there are 0.5 million openings then the openings rate is 0.5/(9.5+0.5) = .05 = 5%. It is also useful to see the relationship between the level of unemployment and the level of openings. The number of unemployed persons fell by 278,000 in December, leaving 7.5 million unemployed persons, close to the number of job openings, 7.1 million.

Productivity and costs

Nonfarm business sector labor productivity increased 4.9% in the third quarter of 2025. Output increased 5.4% while hours worked increased only slightly, 0.5%. This led to a decline in unit labor costs of 1.9% as hourly compensation increased by 2.9% while productivity increased 4.9%.

Discussion

Despite the somewhat anemic employment numbers, other aspects of the labor market are doing well. Unemployment has fallen a bit, productivity is the highest we have seen in a couple of years. Firms continue to have vacant slots and, as can be seen in the JOLTS graphs above, tend to fall quite quickly at the onset of a recession. No sign of that yet. So, if you are searching for a reason to lower rates, this probably isn’t the best place to look.

Inflation and jobs

Posted on by Paul Gomme

We are finally seeing jobs numbers for October and November. The Bureau of Labor Statistics press release studiously failed to mention the loss of 105 thousand jobs in October — except to mention the 162 thousand fall in federal government employment. Perhaps this omission is a leftover from Trump having fired the previous head of the BLS after the BLS revised the May and June employment numbers down. With September employment revised down to 108 thousand (from 119 thousand), there was a scant 3,000 increase in employment over September and October. November delivered an anemic 64 thousand job gain.

As noted in the BLS press release, due to the Federal government shut down, the household survey for October was not collected. In the figures using household survey data, we have allocated half of the change from September to November to each of October and November (and omit the October figure to emphasize that this data is unavailable).

The unemployment rate is similarly missing for October 2025. The November unemployment rate rose to 4.56%, up from 4.44% in September. This is the highest unemployment rate in four years.

Overall, the employment numbers are fairly weak. Although average weekly hours rose from 34.2 to 34.3, so that total hours of work in the US rose. Moreover, firms continue to be opening jobs at a relatively high rate even though the hiring rate has been falling.

Inflation

There were two price index reports released, the September PCE and the November CPI. The September monthly (annualized) PCE rose slightly, from 3.14% to 3.27%. Our preferred trend measure rose from 2.70% to 2.89%. The Fed’s inflation measure of choice, the core PCE (PCEX) fell from 2.68% to 2.40% and our trend measure also fell, from 2.82% to 2.68%. While core PCE inflation is moving in the right direction, it is still above the FOMC’s 2% target.

Due to the federal government shutdown, October data for the Consumer Price Index was not collected. Below, the November CPI inflation rate is the average for the two months from September to November. The monthly annualized CPI rate for October November averaged 1.23%, down from 3.79% in September and our trend measure fell to 2.19% (October-November) from 3.38% in September. In the graphs below we have included the November number with dots. Annualized core CPI inflation was 0.92% in October-November while the trend measure was 1.94%.

Certainly good news on the inflation front: the last reading on the Fed’s preferred core PCE inflation measure moved down (albeit still above target) and the more timely CPI measures have continued downward, a trend that hopefully will soon be reflected in the PCE inflation measures. As inflation approaches target, the inflation hawks on the FOMC will have less reason to insist on keeping interest rates high. At the same time, the slow hiring in the labor market should allow some to argue more strongly for more rate cuts.

August employment not very August

Posted on by peter.c.rupert

by paul gomme and peter rupert

The Bureau of Labor Statistics (BLS) announced that the establishment survey showed that payroll employment was little changed, rising 22,000. In addition, June was revised down 27,000 and July up slightly, 6,000, for a net decline over the previous two months of 21,000. The government sector declined by 16,000.

The goods producing sector shed 25,000 and has declined in each of the last four months. Since July of 2000 employment in that sector has declined by about 3 million jobs. There has been a lot of research on what is known as the “China shock” that occurred when China entered the World Trade Organization (WTO) in 2001. Here is an article discussing some of the findings of the research.

Policy Outlook

At this stage, there is little doubt that the FOMC will cut the Fed funds rate at its upcoming September meeting. The big question is: How will markets respond? If the Fed is seen as capitulating to the White House, inflation expectations will rise, and so will market interest rates. However, those on the FOMC who are calling for a rate cut can make plausible arguments unrelated to any pressure from the White House. Our view is that inflation is still not under control and has been increasing of late and so cuts to the fed funds rate is premature.

June Employment Report

Posted on by Paul Gomme

According to the BLS Employment Survey, the U.S. economy added another 147 thousand jobs in June — a very respectable number. Although the private sector saw a weak employment increase of 74 thousand.

The BLS noted gains in the government sector (gaining 73 thousand jobs, despite a reduction of 7 thousand at the Federal level) and health care (up 39 thousand jobs).

Average hours of work fell to 34.2 from 34.3 and has been oscillating between the two for several months.

From the Household Survey in the same BLS release, the unemployment rate dipped from 4.24% in May to 4.12% in June.

One dark spot in the employment outlook is that continuing unemployment insurance claims have risen in June. This increase may reflect increased difficulty of the unemployed to find suitable jobs.

JOLTS (Job Openings and Labor Turnover Survey) allows for a deeper dive into the data; this data was released on July 1 and includes data for May but not June. It continues to be the case that there are more available jobs than folks classified as “unemployed” (actively seeking a job). Of course, aggregate measures like these say nothing about the match between skills needed for open jobs, and the skills of the unemployed.

As the job openings rate has fallen since 2022, so has the hiring rate and the quit rate. Since JOLTS is a relatively new survey, it covers a span of time with very few complete business cycles. Consequently, it’s difficult to say what typcally happends to the JOLTS rates at the oneset of a recession. That said, around a recession as the labor market tightens we would expect to see a fall in the quit, openings and hiring rates, and a rise in the layoff rate. Thus far in 2025, it is hard to see any such changes.

While there were some spots of concern, the labor market shows little signs of weakening. Indeed the strength of the June report gives amunition to those on the FOMC advocating for no action at its July meeting.

May Jobs Report

Posted on by Paul Gomme

The Bureau of Labor Statistics (BLS) reported another month of solid job gains for the U.S. economy. According to the Establishment Survey, the U.S. added 139 thousand new jobs. Oddly, the Household Survey recorded a loss of 696 thousand jobs. Historically, it’s not unusual for these two surveys to give much different readings on the job situation.

The government sector lost around a thousand jobs owing to 22 thousand fewer jobs at the federal level.

The goods sector dropped 5 thousand jobs with the manufacturing component falling 8 thousand. The service sector added 145 thousand.

While the BLS report stated that the unemployment rate was unchanged at 4.2%, the unemployment rate actually ticked up slightly, from 4.19% in April to 4.24% in May. Moreover, it continues to trend up from the extremely low rates in 2022-2023. Note that the unemployment rate is still quite low compared to its long term average.

The Job Openings and Labor Turnover Summary was released on June 3 and showed that the number of job openings was little changed at 7.4 million. There are roughly the same number of job openings as unemployed person.

Solid February Employment Report

Posted on by Paul Gomme

The Bureau of Labor Statistics Establishment Survey recorded an increase in employment of 151 thousand for February. This increase is only slightly below the average for the previous 12 months. Another way to think about the February number: it exceeds 6 of the previous 12 month employment gains.

While government employment rose by 11 thousand jobs in February, federal government employment dropped by 10 thousand.

The household survey from the BLS press release indicated a decline in the labor force participation rate (62.6% to 62.4%) and an employment-to-population ratio decline (60.1% to 59.9%). The report showed a slight increase in the unemployment rate, from 4.01% in January to 4.14% in February. For the most part, the unemployment rate has hovered around 4.1% for the last 8 months.

Although the unemployment rate has been trending up over the past year or so, keep in mind that it is, historically, quite low.

Job Market Remains Strong

Posted on by Paul Gomme

As reported by the Bureau of Labor Statistics (BLS), according to the Establishment Survey, nonfarm payroll employment rose by 256 thousand jobs in December — well in excess of expectations of 165 thousand new jobs reported by Bloomberg. The BLS noted that December’s job gains exceeded the average monthly gain for 2024 of 186 thousand.

Sectors receiving particular attention by the BLS were: health care added 46 thousand jobs in December (lower than the average of 57 thousand jobs per month in 2024), government gained 33 thousand jobs (down from the 2024 average of 37 thousand), social assistance was up 23 thousand (compared to an average of18 thousand per month in 2024), and retail trade accrued 43 thousand additional jobs in December after losing 29 thousand jobs in November (for the year, retail trade was essentially unchanged).

The household survey showed an increase in employment of 478,000 and a decrease in unemployed persons of 235,000. The employment to population ratio increased to 60% and the participation remained at 62.5%. The unemployment rate fell from 4.23% to 4.09%.

Although the overall labor force participation rate is still much lower than its peak in the late 1990’s, the rate for prime-age workers is close to it’s all-time high.

With a decline in the number of unemployed persons and a recent increase in job openings, we continue to see more openings than persons searching for jobs, meaning jobs are, in some sense, plentiful.

These stronger than expected labor market gains cast more doubt on the potential for future declines in the Fed Funds rate, as indicated in their December 18 announcement:

In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.

Indeed, if the next inflation report shows no real progress in moving toward the 2% target, it is quite likely, in our view, that the Fed should take a pause while they wait for more incoming signals.

Hot September Employment

Posted on by peter.c.rupert

By Paul gomme and Peter Rupert

The BLS announced that payroll employment increased 254,000 in September (plus 72,000 in upward revisions over the previous two months), solidly beating the “forecasts” that hovered around 150,000. Before the report many had talked about the slowing of the labor market, such as this from CNBC:

September’s jobs picture is expected to look a lot like August’s — a gradual slowdown in hiring from earlier this year, a modest increase in wages and a labor market that is looking a lot like many policymakers had hoped it would.

Well, looks like policy makers didn’t get what they hoped for! In fact it looks more like a gradual increase in hiring over the past four months. The private sector led the charge, increasing 223,000, the second highest reading since May of 2023.

Private sector service jobs increased 202,000 with health services and social assistance rising 71,700 and leisure and hospitality jumping up 78,000, the highest since January, 2023. Declines were seen in manufacturing of both durable goods, down 3,000 and non-durable goods down 4,000.

Average hours of work fell from 34.3 to 34.2, so that total hours of work fell 1.5%. Average hourly earnings climbed to $35.36 from $35.23. The growth in hourly earnings continues to outpace CPI inflation, meaning real wages are rising.

The household survey shows an employment increase of 430,000 and the number of unemployed persons fell 281,000. The labor force increased 150,000. The unemployment rate declined from 4.22% to 4.05%. Curiously, in its press release, the Bureau of Labor Statistics said that the unemployment rate was little changed between August and September.

Earlier this week, the Job Openings and Labor Turnover Survey (JOLTS) was released and showed little change in job openings, hires and separations. There are still more job openings than the number of unemployed persons.

Overall, the labor market continues to defy the press who seem to be constantly trying to show the economy is softening. No signs here. What will this do to the outlook for the Fed’s next steps? The labor market is also at odds with the Fed, at least in terms of their last statement,

Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee’s 2 percent objective but remains somewhat elevated.

Looking at the very first graph on this post, one can see that job gains have been increasing over the past several months and the unemployment rate actually fell this month. With the strong GDP numbers and this strong labor market outcome it may shift the thinking that inflation pressures could/might/will be increasing. Was the recent 50bp cut too much too soon?

August Employment Report

Posted on by Paul Gomme

On September 6, the Bureau of Labor Statistics released its employment report for August. According to the Establishment Survey, the US economy added 142 thousand jobs in August. In addition, the previous two months were revised down, -61 in June and -25 in July. The Household Survey put the gain at 168 thousand jobs.

From the Establishment Survey, the leisure and hospitality sector added 46 thousand jobs; construction 34 thousand jobs; and health care 30 thousand jobs. Sectors losing jobs were led by manufacturing (24 thousand) and retail trade (11 thousand).

Average weekly hours rose from 34.2 to 34.3 so that total hours of work increased by 4.7%. Average hourly earnings increased 0.4%, from $35.07 to $35.21.

The unemployment rate, derived from the Household Survey, fell marginally, from 4.25% to 4.22%. (The headline numbers are touting a decline from 4.3% to 4.2%.) However, a broader measure of the unemployment rate which includes marginally attached individuals rose between July and August, from 7.8% to 7.9%.

Policy Implications

Is strength or weakness in the eye of the beholder? Or rather, in the data of the beholder?

Given the signaling from members of the FOMC, it’s pretty clear that the committee will lower the Federal funds rate at its next meeting later in September. Speculation is growing that the committee may deliver a 50 basis point reduction rather that `just’ a 25 point reduction. The case for a more aggressive loosening of monetary policy lies on the real side of the economy. Where does this weak real side show up? Maybe in the employment numbers reported above. Yet, the same report shows a slight decline in the unemployment rate and a 48 thousand decline in the number unemployed. The labor force increased by 120 thousand. As mentioned above, wage growth was fairly strong and total hours increased substantially. Second quarter real GDP growth was revised up from 2.8% to 3.0%. Considering that US population growth is running around 0.5% per year, real per capita output growth for the second quarter is around 2.5% which is well above its long run average. Meanwhile, while PCE inflation has fallen, it is still a bit above the FOMC’s 2% target.

July Employment Report

Posted on by peter.c.rupert

By Paul Gomme and Peter Rupert

The BLS announced that employment rose by a very subdued 114,000 according to the establishment survey, 97,000 of which came from the private sector. The bulk of the increase came from Health Care and Social Assistance sector, increasing 64,000. Moreover, there were 29,000 fewer employees over the past two months than reported earlier, as May was revised down 2,000 and June revised down 27,000.

Average hours of work fell from 34.3 to 34.2. Given the weak increase in private sector employment and the decline in average hours meant that total hours of work fell about 2.6%.

To be sure, the July employment report is disappointing. The figure below plots the change in nonfarm payroll employment since 1947. To this figure, we’ve added a red dot when the change in employment was at most 114,000 (as in the most recent jobs report), and the economy was in an expansion. (We’ve excluded a few months around the start of the pandemic because these employment changes were so extreme.) The bottom line is that the US has often had weak job reports in the midst of expansions. The point being that looking only at one monthly report may be very misleading. Indeed the Fed has mentioned this in other contexts:

The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.

July 31 FOMC Statement

The unemployment rate, based on the household survey, rose to 4.25% from 4.05% in the previous month. Digging deeper into the unemployment data reveals that much of the increase in the unemployment rate in 2024 has been due to a combination of workers losing jobs, and workers reentering the labor market, the labor force grew by 420,000. Keep in mind that reentry may be an artifact of the rules for counting an individual as unemployed which includes a notion of active job search. According to the jobs report, in July there were 4.6 million individuals who were not in the labor force but who want a job, an increase of 346,000. When these marginally attached individuals are included in the ranks of the unemployed, the unemployment rate is nearly 8%, not the official 4.3%.

Once again there are many in the media showing the possibility that the economy is heading toward a recession. Note: definitionally, it has to be true that if we are currently not in a recession we are heading toward one since recessions do frequently occur (but have become much less frequent, see the recessions graph below. At any one time there are usually both positive and negative signs. For example, how much weight should one put on a one month decline? Or a one day decline in the stock market? Jeremy Piger uses data to infer the probability the economy is in a recession, as of July 26, the probability that we were in a recession in June was 0.26%. That said, there will be inflation reports before the next FOMC meeting, but at this point it looks more likely there will be a rate cut in September, barring any large increases in inflation.