Wednesday, 22 of November of 2017

Economics. Explained.  

Payroll Employment

November 3, 2017

Payroll employment for October rose 261 thousand.  There were significant upward revisions to both August and September.  August previously had risen 169 thousand, it has now risen 208 thousand.  September had initially declined 33 thousand.  It now shows an increase of 18 thousand.   Both the August and September changes were impacted by the combination of Hurricanes Harvey and Irma.

A better reading of what is truly going on is represented by the  3-month moving average of private employment which is now 162 thousand.  That compares to an average increase of 187 thousand last year.  Thus, employment continues to chug along.  The labor force is growing by about 100 thousand per month.  For employment gains to be consistently larger than the increase in the labor force implies some people not previously in the labor force are choosing to return (like discouraged workers).

Amongst the various employment categories construction employment rose 11 thousand in both September and October.   The trend increase in construction employment appears to be about 15 thousand  per  month.

Manufacturing employment rose 24 thousand in October after having risen 6 thousand in September.   Factory employment is now rising and seems to be accelerating.  We think the trend increase is currently about 15 thousand per month.

Mining declined 2 thousand in October after having risen 1 thousand in September.  After a long period of steady declines mining employment is now rising about 5 thousand per month.

Elsewhere, health care climbed by 22 thousand.  Professional and business services continued to trend higher and increased 50 thousand in October.  Employment in leisure and hospitality establishments rose 106 thousand in October following a decrease of 102 thousand in September when many workers were off due to the hurricanes.

In any given month employers can boost output by either additional hiring or by lengthening the number of  hours that their employees work.  In October the nonfarm workweek was unchanged at 34.4 hours.  The workweek remains elevated and implies that employers are in need of workers and will continue to hire at a meaningful pace in the months ahead.

The increases in  employment and hours worked are reflected in the aggregate hours index which rose 0.2% in October after having been unchanged in the previous month.

There is no doubt that the consumer sector of the economy is expanding at roughly a 2.5% pace.  Individual  income tax cuts still seem possible later this year or in 2018.  The stock market is at a record high level.  Consumer confidence is holding up well.  Remember that consumer spending represents two-thirds of total GDP.

The sector of the economy that had previously been weak was the various production industries.  But that seems to be changing.  As noted earlier, factory employment is rising modestly.  Construction employment has been rising steadily.  And even mining has been rising somewhat after a steady series of declines associated with the drop in oil prices.

Looking ahead the prospect of both individual and corporate income cuts and the repatriation of some overseas earnings currently locked overseas should boost GDP growth from its 2016 2.0% pace to 2.3% in 2017 and 2.8% in 2017.

Stephen Slifer


Charleston, SC

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