Wednesday, 20 of June of 2018

Economics. Explained.  

Nonfarm Workweek

June 10, 2018

Payroll employment for May rose 223 thousand after having risen 159 thousand in April.  Thus, 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 for February, March, April and May came in at 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 0.2% in May after having climbed 0.1% in April.  Thus, this series continues to chug along which suggests that the economy is expanding at a steady pace.

The factory workweek fell 0.2 hour in May from 41.0 to 40.8 hours.  This series is still 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 declined 0.,2 hour to 3.5 hours in May .  This series, too, is about as long as it gets.  The manufacturing sector is trying hard to find the workers its need — 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 2.8% 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

NumberNomics

Charleston, SC


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