Monday, 24 of September of 2018

Economics. Explained.  

Payroll Employment

September 7, 2018

Private sector employment for August rose 201 thousand after having risen 147 thousand in July.   While the August increase of 201 thousand was slightly more than the 190 thousand jobs that had been expected, employment gains for June and July were revised downwards,  Thus, the outlook for employment has not changed much in the wake of this report.

A better reading of what is truly going on is represented by the  3-month moving average of private employment which is now 185 thousand.  That compares to an average increase of 180 thousand in 2017.  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 23 thousand in August after climbing 18 thousand in July.    The trend increase in construction employment appears to be about 25 thousand per month.

Manufacturing employment fell 3 thousand in August after having risen by 18 thousand in July.    Factory employment is now rising by about 20 thousand per month.

Mining rose 6 thousand in August after having fallen 1 thousand in July.  After a long period of steady declines mining employment is now rising about 5 thousand per month as rising oil prices are boosting hiring in that  sector.

Elsewhere, health care climbed by 33 thousand.  Professional and business services increased 53 thousand in August.  Wholesale trade jobs increased 22 thousand.  Transportation and warehousing climbed by 20 thousand.  Employment in leisure and hospitality establishments increased 17 thousand in August.  Retail jobs declined by 6 thousand in August.

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 for August was unchanged at 34.5 hours  That is  about as long as it gets.  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 rose 0.2% in August to 109.9 after having fallen 0.2% in July.  Thus, it rose 2.7% in for the second quarter as a whole and is on track to rise about 1.5% in Q3.

There is no doubt that the consumer sector of the economy is expanding at roughly a 2.5% pace.  Individual  income tax cuts should slightly boost spending 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 2.5% in 2017 to 3.1% in 2018.

Stephen Slifer


Charleston, SC

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