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Economy in Brief

U.S. Payroll Increase Accelerates; Wage Gains Slow
by Tom Moeller  February 3, 2017

The job market started the new year on a firm footing. Nonfarm payroll employment increased 227,000 (1.5% y/y) following increases of 157,000 and 164,000, previously reported as 156,000 and 204,000. The latest gain was the strongest since September. Expectations had been for a 175,000 rise in the Action Economics Forecast Survey. Data back to 2012 were revised and added slightly to growth in 2016. Average hourly earnings nudged 0.1% higher (2.5% y/y). The December gain was revised down to 0.2% from 0.4%, but the November figure was revised up. A 0.3% increase had been expected. The unemployment rate increased to 4.8% versus an expected 4.7%. It was the highest rate in three months, up from the November low of 4.6%. The total unemployment rate including marginally attached workers and those working part-time for economic reasons rose to 9.4% from 9.2%.

The 227,000 increase in payroll employment reflected a 5,000 increase (-0.4% y/y) in factory sector employment, as it followed an 11,000 rise. Jobs increased in both the durable & nondurable goods sectors. Construction sector employment strengthened 36,000 (2.6% y/y), the strongest increase since March. Jobs in the mining sector improved 4,900 (-8.1% y/y), but they remained 27.7% below the September 2014 peak.

Private service sector employment increased 192,000 (2.1% y/y), improved from the 139,000 rise averaged during Q4. Retail trade employment strengthened 45,900 (1.5% y/y) after a 33,500 December rise, following declines in the prior two months. Transportation & warehousing employment eased 4,000 (+2.2% y/y). Employment in the professional & business sector increased 39,000 (2.9% y/y), though that remained down from the 84,000 increase during July. Temporary help jobs rose 14,000 (3.3% y/y) following a 12,800 decline. Leisure & hospitality employment increased 34,000 (2.2% y/y), though it rose 79,000 in May of 2015. Health care & social assistance jobs increased 32,000 (2.5% y/y), though again it fell short of the 79,500 rise in April 2015. Financial activity employment jumped 32,000 (2.3% y/y), the strongest increase since October 2005. Information sector employment gained 3,000 (0.1% y/y) after declines in the 7prior three months.

Government sector payrolls fell 10,000 (+0.7% y/y), the fourth straight month of decline. State government jobs were off 9,000 (-0.3% y/y), also the fourth straight monthly shortfall. Local government jobs fell 5,000 (+0.9% y/y), and continued the declines of recent months. Federal government jobs increased 4,000 (1.8% y/y) after a 5,000 rise.

Average hourly earnings in the private sector edged 0.1% higher. Recent weakness in the monthly figures lowered the y/y gain to 2.5% y/y. That reversed the recent acceleration to a December high of 2.8% y/y from 2.1% growth during all of 2014. The shortfall was most notable in the financial services sector where y/y growth slowed to 0.7% from 2.6% during all of last year. In most other sectors, earnings growth was fairly stable and firm, notably in leisure & hospitality where earnings grew 4.2% y/y.

The length of the average workweek held steady m/m at 34.4 hours, lower than the expansion high of 34.6 hours. Aggregate hours worked (employment times hours) increased 0.2% (1.1% y/y), and began the first quarter at the highest level of the economic expansion.

From the household sector employment survey, the higher 4.8% unemployment rate reflected a 458,000 rise (1.3% y/y) in population-adjusted employment and a 586,000 increase (1.1% y/y) in the population-adjusted labor force. The labor force participation rate rose to 62.9%, up from the 62.4% low in September 2015.

By educational attainment, the 7.7% unemployment rate for those without a high school diploma remained up from the expansion low of 6.3%. High school graduates with no college saw the jobless rate tick up m/m to 5.3%, but that was down from 10.3% during all of 2010. Persons with less than a bachelors degree realized a recently steady 3.8% rate of joblessness. Individuals' with a bachelor's degree or higher saw a 2.5% rate of unemployment, stable but below its 2010 high.

The teenage unemployment rose m/m to 15.0%, but was down from 25.9% in 2010. Unemployment amongst 20-24 year olds of 8.3% was below the 15.5% 2010 high. For those over 25 years old, the unemployment rate of 3.9% was down from 8.2% in 2010.

The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figure is in the AS1REPNA database.

Employment: (SA, M/M Change, 000s) Jan Dec Nov Jan Y/Y 2016 2015 2014
Payroll Employment 227 157 164 1.5% 1.7% 2.1% 1.9%
 Previous -- 156 204 -- -- -- --
 Manufacturing 5 11 0 -0.4 -0.2 1.1 1.4
 Construction 36 2 28 2.6 3.9 5.0 5.0
 Private Service-Producing 192 150 143 2.1 2.2 2.4 2.1s
 Government -10 -8 6 0.7 0.6 0.6 0.1
Average Weekly Hours - Private Sector 34.4 34.4 34.3 34.6 34.4 34.5 34.5
Private Sector Average Hourly Earnings (%) 0.1 0.2 0.0 2.5 2.6 2.3 2.1
Unemployment Rate (%) 4.8 4.7 4.6 4.9 4.8 5.3 6.2
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