Monday, 25 of March of 2019

Economics. Explained.  

Payroll Employment

March 8, 2019

Payroll  employment for February rose a meager 20 thousand after having jumped 311 thousand in January and  227 thousand in December.   These numbers tend to jump around, especially at this time of the year, because of the hiring and subsequent layoff of seasonal temporary workers.

A better reading of what is truly going on is represented by the  3-month moving average of private employment which is now 186 thousand.  That compares to an average increase of 182 thousand in 2017 and 221 thousand last year.  Thus, employment continues to chug along despite the monthly wiggles.  Labor force growth has picked up to 217 thousand last year.  Thus, it appears that the relatively rapid GDP growth in 2018 has lured some workers back into the labor force.  That makes it easier for employers to sustain monthly increases in employment of about 180 thousand.

Amongst the various employment categories construction employment fell 31 thousand in February after having jumped 53 thousand in January.  The trend increase in construction employment appears to be about 20 thousand per month.

Manufacturing employment climbed by 4 thousand in February after having risen 21 thousand in January.    Factory employment is now rising by about 20 thousand per month.

Mining fell 3 thousand in February after having risen 6 thousand in January.  Mining employment is now rising about 5 thousand per month.

Elsewhere, health care  climbed by 21 thousand.  Professional and business services increased 42 thousand in February.  Wholesale trade jobs increased 11 thousand.  Employment in leisure and hospitality establishments was unchanged.  Retail jobs declined 6 thousand.

In any given month employers can boost output by either additional hiring or by lengthening the number of  hours that their employees work.  The nonfarm workweek fell 0.1 hour in February to 34.4 hours in February.  It has been bouncing around between 34.4 and 34.5 hours for the past year.  The  elevated level of the workweek  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 fell 0.3% in February after having risen 0.2% in January.  This index rose 2.1% in the fourth quarter.   Assuming a moderate increase in March, we expect this index to rise 1.4% in the first quarter.  Even with no increase in  productivity that quarter we should end up with a GDP growth rate of 1.5% or so in the first quarter.  Given the stock market selloff late last year and the lengthy government shutdown, growth of that magnitude is not indicative of a problem in the economy.  Growth should rebound in Q2.

There is no doubt that the consumer sector of the economy is expanding at roughly a 2.5% pace.   The stock market had a tough couple of months late last year but is rebounding nicely.  Consumer confidence fell somewhat given the government shutdown but it, too, has recovered.

The sector of the economy that had previously been weak was the various production industries.  But that has now turned upwards.  As noted earlier, factory employment is climbing at a moderate pace.  Construction employment has been rising steadily.  And even mining has been rising slowly.

Looking ahead, steady consumer spending and continued rapid growth rate in investment should cause  GDP to grow 2.7% this year.

Stephen Slifer


Charleston, SC

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