Wednesday, 22 of May of 2019

Economics. Explained.  

Payroll Employment

May 3, 2019

Payroll employment for April rose 263 thousand after having risen 189 thousand in March.   A better reading of what is truly going on is typically represented by the  3-month moving average of private employment which is now 169 thousand, but that includes the minuscule 56 thousand increase in February.  Thus, it too is a bit misleading.  To us, employment continues to rise almost 200 thousand per month.  That compares to an average increase of 179 thousand in 2017 and 223 thousand last year.  Thus, employment continues to chug along despite the monthly wiggles.  Labor force growth rose 100 thousand in the past year.  With employment gains continuing to exceed growth in the labor force, the unemployment rate should continue to decline slowly.

Amongst the various employment categories construction employment rose 33 thousand in April after having risen 20 thousand in March.  The trend increase in construction employment appears to be about 20 thousand per month.

Manufacturing employment rose 4 thousand in April after having been unchanged in March.    Factory employment is now rising by about 17 thousand per month.  It is struggling as the recently imposed tariffs take a toll on growth in the goods sector.

Elsewhere, health care  climbed by 27 thousand.  Social assistance jobs gained 26 thousand.  Professional and business services increased 76 thousand in April.   Transportation and warehousing rose 11 thousand.  Employment in leisure and hospitality establishments climbed 34 thousand.  Financial services gained 12 thousand workers.  Retail jobs declined 12 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 April to 34.4 hours after having risen 0.1 hour in March .  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 0.1% in April after having risen 0.5% in March.  This index climbed by 1.8% in the first quarter.  We expect a gain of similar magnitude 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 has completely recovered.  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.  That is climbing but very slowly.  As noted earlier, factory employment is barely increasing.  Construction employment has been rising steadily.  And mining employment has been rising by about 5 thousand per month.  The service sector, however, is booming.

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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