Tuesday, 16 of July of 2019

Economics. Explained.  

Nonfarm Workweek

July 5, 2019

In any given month employers can boost output by either additional hiring or by lengthening the number of  hours that their employees work.  Payroll employment for June rose 224 thousand after having climbed by 72 thousand in May.  These numbers tend to bounce around on a month-to-month basis, especially at this time of the year, as the seasonal workers are hired and then let go.  The 3-month average increase in employment of 171 thousand is probably more representative of the average growth rate for jobs.  That is slower than the 200+ thousand workers hired monthly last year.  But that is also what one would expect when the economy is at full employment.   Qualified workers become very difficult to find.

The nonfarm workweek was unchanged in both May and June at 34.4 hours.  This series 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 rose 0.2% in June.  This index rose 1.8% in the first quarter and has now climbed 0.6% in the second quarter which, when combined with a projected 0.9% increase in productivity, should produce a GDP growth rate of 1.5% in the second quarter after having risen 3.1% in the first quarter.  That means that the economy grew at roughly a 2.3% pace in the first half of the year.

The factory workweek rose 0.1 hour in June to 40.7 hours after having been unchanged in May.  This series is a bit lower than it has been, but it remains at a relatively elevated level and will lead to additional factory hiring in the months ahead.  With individual and corporate tax cuts continuing to impact growth this year and U.S. firms able to repatriate overseas earnings to the U.S. at a favorable tax rate, the factory sector should continue to climb at a moderate pace this year, but the recently imposed tariffs are taking a toll on growth in this sector.

Overtime hours were unchanged in June  at 3.4 hours.  Like the factory workweek this series, too, is relatively long but has slowed somewhat.  The manufacturing sector is still expanding, but at a slower pace than last year because of the impact from tariffs.

The economy continues to expand at a respectable pace.  We currently expect GDP to increase 2.6% this year after having risen 3.0% in 2018 given the continuing impact of 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 continuing rapid growth in investment, but losing momentum in the manufacturing sector.

Stephen Slifer


Charleston, SC

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