Monday, 22 of April of 2019

Economics. Explained.  

Nonfarm Workweek

April 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 March rose 196 thousand after having risen just 33 thousand in February and having surged by 312 thousand in January.  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 180 thousand is probably more representative of the average growth rate for jobs.

The nonfarm workweek rose 0.1 hour in March to 34.5 hours after having declined 0.1 hour in February .  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 0.5 point in March to 111.1 after having fallen 0.3 point in February.  This means that this index rose 1.8% in the first quarter.  Even with no increase in productivity we should end up with GDP growth of 1.8% or so in the first quarter.  With the stock market selloff late last year and the protracted government shutdown slower growth in Q1 should be expected.  GDP growth is bound to rebound in Q2.

The factory workweek was unchanged in March at 40.7 hours after having fallen 0.1 hour in February.  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.

Overtime hours were fell 0.1 h our in March to 3.4 hours after having been unchanged in February 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.  There is no sign of slower growth in any of these data.

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.

Stephen Slifer

NumberNomics

Charleston, SC


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