Wednesday, 17 of October of 2018

Economics. Explained.  

Nonfarm Workweek

October 5, 2018

Payroll employment for September rose 134 thousand after having climbed by 270 thousand in August.  The September increase was somewhat smaller than anticipated, but it follows a huge increase in September.  At the same time Hurricane Florence hit the North and South Carolina coasts during the survey week and could have contributed to the smaller-than-expected increase.  Almost certainly we will see a much stronger employment increase in October.  Thus, in our opinion, the outlook for employment has not changed much in the wake of this report.

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 was unchanged in September 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 0.1% in September after having risen 0.3% in August. For the second quarter as a whole this index rose 2.8%.  It climbed 1.6% in Q3.

The factory workweek declined 0.1 hour in September to 40.8 hours after having slipped 0.1 hour in August.  It is quite possible that Hurricane Florence caused the additional drop in September.  If so, it should rebound in October.  This series is also about as high as it gets and will lead to additional factory hiring in the months ahead.  With individual and corporate tax cuts taking effect this year and U.S. firms able to repatriate overseas earnings to the U.S. at a favorable tax rate, the factory sector is gathering  momentum.

Overtime hours declined 0.1 hour in September to 3.4 hours after having been unchanged in August.  Like the factory workweek this series could have been negatively impacted by Hurricane Florence and should rebound in October.  If so, this series, too, is quite long.  The manufacturing sector is trying hard to find the workers it needs — hiring as best it can given the shortage of qualified workers, working existing employees longer hours, and asking people on the line to work more overtime hours.

The economy continues to expand at a respectable pace.  We currently expect GDP to quicken from a 2.5% pace in 2017 to 3.1% in 2018 given the prospect of both individual and corporate income tax cuts and repatriation of corporate earnings currently locked overseas.  The economy is currently being supported by robust growth in consumer spending and housing and now manufacturing is coming on strong.

Stephen Slifer


Charleston, SC

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