Tuesday, 26 of September of 2017

Economics. Explained.  

Payroll Employment

September 1, 2017

Payroll employment for August rose 156 thousand.  July was revised downward from an increase of 209 thousand to a gain of 189 thousand.  June revised downwards from a previously reported increase of 231 thousand to an increase of 210.  The August increase in employment was somewhat smaller than the expected increase of 180 thousand.  The downward revisions to June and July were largely attributable to the government employment category.  Private employment in those two months was essentially unrevised.

The best reading of what is truly going on is represented by the  3-month moving average of payroll employment which is now 185 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 28 thousand in August after having declined 3 thousand in July.   The trend increase in construction employment appears to be about 18 thousand  per  month.

Manufacturing employment jumped by 36 thousand in August after having risen by 26 thousand in July and 21 thousand in June.   Factory employment is now rising and seems to be accelerating.  We think the trend increase is currently about 20 thousand per month.

Mining climbed by 7 thousand in August after having risen 2 thousand in July and 6 thousand in June .  After a long period of steady declines mining employment is now rising about 5 thousand per month.

Elsewhere, health care climbed by 20 thousand.  Professional and business services continued to trend upward and rose 22 thousand in July.  Leisure and hospitality jobs climbed by 4 thousand of which included an increase in food services and drinking places of 9 thousand.

In any given month employers can boost output by either additional hiring or by lengthening the number of  hours that their employees work.  In August the nonfarm workweek fell 0.1 hour to 34.4 hours.  Despite the August drop, 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.

This increases in  employment and hours worked are reflected in the aggregate hours index which declined 0.2% after having risen 0.2% in July.  Thus, the economy continues to expand at a moderate pace.

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.  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 2.4% in 2017 and 2.8% in 2017.

Stephen Slifer


Charleston, SC

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