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Economy in Brief

U.S. Payroll Increase Disappoints; Earnings Gain Picks Up & Jobless Rate Holds Steady
by Tom Moeller  January 5, 2018

The labor market exhibited tepid growth last month. Nonfarm payrolls increased 148,000 (1.5% y/y) during December following a 252,000 November rise and a 211,000 October gain. Together these two figures were revised down by 9,000. A 190,000 increase in payrolls had been expected in the Action Economics Forecast Survey. The unemployment rate held steady at an expected 4.1%. The overall unemployment rate, including the marginally-attached and those working part-time for economic reasons, ticked higher to 8.1% from 8.0%, down from 9.1% one year earlier. Average hourly earnings increased an expected 0.3% (2.5% y/y) after rising an unrevised 0.1% in November.

From the payroll employment survey, The disappointing 148,000 increase in jobs was the weakest since the hurricane-depressed 38,000 September gain. Weakness centered in the private service sector where employment in retail trade declined 20,300 (-0.2% y/y), pulled down by a 27,000 drop (-2.2% y/y) in general merchandise store jobs. In addition, the 19,000 rise (2.5% y/y) in professional & business services employment was less than half the gain in the prior two months. Professional & tech services jobs declined 4,700 (+2.3% y/y) reflecting fewer jobs in accounting and bookkeeping. Temporary help jobs rose 7,000, the weakest increase since April. Employment in education rose 28,000 (+2.0% y/y) after a 50,000 increase, but leisure & hospitality employment rose a modestly improved 29,000 (2.0% y/y). Information sector employment gained 7,000 (-1.6% y/y), the first meaningful increase since September of 2016, and financial services jobs rose a weakened 6,000 (1.6% y/y). Government sector employment edged just 2,000 higher (0.2% y/y). The number of federal government jobs rose 1,000 (-0.6% y/y). State government employment declined 4,000 (-0.3% y/y) local area employment rose 5,000 (0.6% y/y).

The length of the average workweek held m/m at 34.5 hours, but that was up from 34.3 hours early this year. Factory sector hours of 40.8 has been fairly steady since 2015. Construction sector hours jumped to 39.3, the longest workweek since April. Professional & business services hours held m/m at 36.0, but that was down from the 36.4 peak early in 2014. Financial activity hours were improved at 37.6, and in leisure & hospitality, 26.2 hours were up sharply from 26.0 twelve months ago. It was the longest workweek since early 2016. The workweek in mining & logging surged to a record 45.8 hours.

The 0.3% gain in average hourly earnings left the 2.5% y/y rise below its 2.9% y/y peak late in 2016. Factory sector earning growth decelerated to 1.6% y/y from 3.5% in June of 2016, while construction sector earnings growth has been steady at 3.0%. Financial sector earnings growth of 3.6% y/y was up from 1.7% early last year, but professional & business services earnings growth has been stable at 2.6% y/y. Leisure & hospitality earnings were up a lessened 3.6% y/y while education & health services earnings growth held fairly steady at 2.2% y/y.

From the household employment survey, the steady 4.1% unemployment rate reflected steady 1.2% y/y growth in employment and a lessened 0.5% y/y rise in the labor force. The average duration of unemployment declined to a recovery low of 23.6 weeks, down from a 2011 peak of 39.4 weeks.

The 62.7% labor force participation rate has been moving sideways since early 2016, but there is divergence in the detail. The participation rate for males aged 25-54 has inched up to 88.9% (NSA), but the participation rate of 75.1% for females aged 25-54 has jumped from a July 2015 low of 73.0%. Participation rates for younger men and women has been steady or declining.

By educational attainment, the unemployment rate for those with less than a high school diploma at 6.5% last year was below the 14.8% peak in 2010. For high school graduates but no college, last year's 4.6% rate compared to 10.3% in 2010. Individuals with less than a bachelors degree realized 3.7% joblessness last year compared to the 2010 high of 8.4%. Last year's 2.3% unemployment rate for those with a bachelors degree or higher was down from the 2010 high of 4.7%.

Last year's 14.1% teenage unemployment rate compared to the 25.9% peak during 2010. Individuals aged 20-24 years were 7.4% unemployed last year compared to 15.5% in 2010. Those aged 25-54 years old were 3.7% unemployed last year compared to a 2010 peak of 8.6%, and those aged 55 years or over were 3.2% jobless compared to 7.0% in 2010.

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

Employment: (SA, M/M Change, 000s) Dec Nov Oct Dec Y/Y 2017 2016 2015
Payroll Employment 148 252 211 1.5% 1.5% 1.7% 2.1%
 Previous Estimate -- 228 244 -- -- -- --
  Manufacturing 25 31 23 1.5 0.7 0.1 1.2
  Construction 30 27 15 2.8 2.8 3.9 5.0
  Private Service-Producing 91 176 184 1.6 1.7 2.1 2.4
  Government 2 13 -11 0.1 0.4 0.9 0.7
Average Weekly Hours - Private Sector 34.5 34.5 34.4 34.4 34.4 34.4 34.5
Private Sector Average Hourly Earnings (%) 0.3 0.1 -0.1 2.5 2.6 2.6 2.3
Unemployment Rate (%) 4.1 4.1 4.1 4.7 4.4 4.9 5.3
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