Sunday, 18 of February of 2018

Economics. Explained.  

Nonfarm Workweek

February 2, 2018

Payroll employment for January rose 200 thousand after having climbed by 160 thousand in December.

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 workweek declined 0.2 hour to 34.3 hours.  That is a big decline.  However, it is likely that the extremely cold winter weather and the ice storms throughout much of the country contributed to the drop.  If so, this series should rebound in February.  It is clear that over the longer term employers are having a hard time finding an adequate number of workers, so they are choosing to work their existing employees longer hours to boost production enough to satisfy demand.

The increase in employment combined with the workweek produces the aggregate  hours index which is a proxy for how many goods and services were produced in that month.  It declined 0.5% in January after having risen 0.2% in December.  However, it is likely that the weather played a role in the January drop and we should expect it to rebound in February.

The factory workweek fell 0.2 hour in January to 40.6 hours after having declined 0.1 hour in December.  As described above, the unusually severe winter weather probably caused the drop.  Apart from the January drop, this series is 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 perhaps being allowed to repatriate overseas earnings to the U.S. at a favorable tax rate, the factory sector is gathering  momentum.

Overtime hours were unchanged in January at 3.5 hours which is where they have been since October.  This series, too, is about as long as it gets.

The economy continues to expand at a respectable pace.  We currently expect GDP to quicken from a 2.5% pace in 2017 to 3.0% 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 has begun to show signs of life.

Stephen Slifer


Charleston, SC

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