Friday, 14 of December of 2018

Economics. Explained.  

Nonfarm Workweek

ecember 7, 2018

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 November rose 155 thousand after having climbed by 237 thousand in October.  The outlook for employment has not changed much in the wake of this report.

The nonfarm workweek fell 0.1 hour in November to 34.4 hours after a similar-sized increase in October.  The  still 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 0.2% in November after having risen  0.5% in October.  Assuming a moderate increase in December this index seems on track to rise 1.6% in the fourth quarter which, when coupled with a moderate increase in productivity seems consistent with our projected 2.6% GDP growth rate for that quarter.

The factory workweek was unchanged in November at 40.8 hours.  This series remains high 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 continues to climb at a moderate pace..

Overtime hours were unchanged in November at 3.5 hours .  Like the factory workweek 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 and 2.8% next year 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 expanding at a moderate pace.

Stephen Slifer

NumberNomics

Charleston, SC


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