Sunday, 18 of February of 2018

Economics. Explained.  

Private Employment

February 2, 2018

Private sector employment for January rose 196 thousand after having risen 166 thousand in December.

A better reading of what is truly going on is represented by the  3-month moving average of private employment which is now 193 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 36 thousand in January after having risen 33 thousand in December.   The trend increase in construction employment appears to be about 20 thousand per month.

Manufacturing employment rose 15 thousand in January after having climbed 21 thousand in December.    Factory employment is now rising steadily.  We think the trend increase is currently about 15 thousand per month.

Mining rose by 5 thousand in January after having risen by 1 thousand in December.  After a long period of steady declines mining employment is now rising about 5 thousand per month.

Elsewhere, health care climbed by 26 thousand.  Professional and business services increased 23 thousand in January.  Retail jobs rose 15 thousand.  Employment in leisure and hospitality establishments rose 35 thousand in January.  And jobs in the financial industry climbed 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 January the nonfarm workweek fell 0.2 hour to 34.3 hours.  That is a big drop.  The BLS does not think the government shutdown had any particular effect on that number.  However, it is likely that the extremely cold weather and ice storms throughout much of the country did shorten the workweek.  We will see when we get the February data.  That would be our bet.  The still relatively 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 0.5% in January after having risen 0.2% in December.  But, once again, the weather may have played a role in the January decline.

There is no doubt that the consumer sector of the economy is expanding at roughly a 2.8% pace.  Individual  income tax cuts are likely to 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 3.0% in 2018.

Stephen Slifer


Charleston, SC

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