U.S. Employment and Earnings Gains Weaken Unexpectedly

Labor market strength eased during November. Nonfarm payrolls increased 155,000 (1.7% y/y) after a 237,000 rise during October, revised from 250,000. September's gain was raised to 119,000 from 118,000. The November increase fell short of expectations for a 200,000 rise in the Action Economics Forecast Survey. Average hourly earnings increased 0.2% (3.1% y/y) during November after a 0.1% rise, revised from 0.2%. It left the y/y gain at 3.1% which remained the strongest since April 2009. A 0.3% rise had been expected. The unemployment rate held steady at an expected 3.7%. It remains the lowest rate since December 1969.

From the payroll survey, the 155,000 increase in jobs was held back by a 5,000 increase (4.0% y/y) in construction which followed seven months of much stronger gain. Mining & logging jobs fell 3,000 (7.6% y/y), the first decline in two years. Holding steady was factory sector employment, which increased by 27,000 (2.3% y/y). Strength has been notable in several durable goods industries.

The 132,000 increase (1.7% y/y) in private services jobs followed a 198,000 gain. It reflected an improved 53,000 increase (1.1% y/y) in trade, transportation & utilities. Elsewhere, job growth softened. Professional & business service sector hiring increased 32,000 (2.7% y/y). It was the smallest gain since December 2017. Temporary help employment rose a diminished 8,300 (2.8% y/y). Health care & social assistance employment improved 40,100 (2.2% y/y), but the rise was held back by a 6,400 decline (+0.9% y/y) in education jobs. Employment in the leisure & hospitality sector also moderated to 15,000 (1.7% y/y). The gain in financial activities employment halved to 6,000 (1.4% y/y) and information services employment fell 8,000 (-0.8% y/y).

The number of jobs in the public sector declined 6,000 (+0.2% y/y) following a 14,000 fall. State government jobs eased 13,000 (-0.3% y/y). Hiring increased at the local level by 4,000 (0.4% y/y) and at the federal level by 3,000, but it was unchanged y/y.

The length of the average workweek eased to 34.4 hours. The peak for the current expansion occurred in June at 34.6 hours. The mining logging workweek held steady at 45.8 hours and the factory sector workweek also was stable at 40.8 hours. The private service-producing workweek held steady at 33.3 hours. It reflected stability in financial activities hours at 37.8 and stability in professional & business services at 36.1 hours. The length of the construction sector workweek eased to 38.8 hours.   

The 0.2% gain (3.1% y/y) in average hourly earnings reflected an improved 0.3% rise (2.3% y/y) in the mining & logging sector. It followed a 0.5% decline. The rise in factory sector earnings improved to 0.3% (1.8% y/y). The gain in private service sector earnings was steady at 0.2% (3.2% y/y) while construction sector pay rose an improved 0.2% (3.7% y/y).

From the household employment survey, the unchanged 3.7% unemployment rate reflected a 233,000 increase in employment and a 133,000 rise in the labor force. The total unemployment rate, including the marginally attached and those working part-time for economic reasons, increased to 7.6%, its highest level since June. The labor force participation rate held steady at 62.9%, about where it's been since early 2016. The labor force participation rate for men aged 25-54 years it held at 89.0% and for women of that age, it eased to 75.6%. The average duration of unemployment fell to 21.7 weeks and nearly equaled the low for the economic expansion. 

The unemployment rate for individuals with less than a high school diploma fell to 5.6% and for high school graduates but no college, it declined to 3.5%. For those with some college but no degree, it rose to 3.1%. For college graduates, the jobless rate increased to 2.2%.

By age group, individuals aged 16-19 were 12.0% unemployed. The jobless rate for those 20-24 was 6.5%, and those aged 25-54 were 3.1% unemployed. Persons over age 55 were 2.9sssssssssssssssssssss% unemployed.   

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.

The Fed's latest Beige Book covering regional economic conditions is available here https://www.federalreserve.gov/monetarypolicy/beigebook201812.htm

Consumer credit outstanding increased $25.38 billion during October following an $11.57 billion September rise, revised from $10.93 billion. A $17.00 billion gain had been expected in the Action Economics Forecast Survey. During the past ten years, there has been a 52% correlation between the y/y gain in consumer credit and y/y growth in personal consumption expenditures.

Nonrevolving credit usage increased $16.18 billion (5.4% y/y) during October. Gains here have been trending upward this year. Federal government borrowing (42% of the total) rose a weaker 8.1% y/y. Borrowing from depository institutions (25% of the total) rose a slightly improved 4.0% y/y but finance company balances (18% of the total) eased 0.7% y/y. Credit union loans (13% of the total) rose a greatly strengthened 11.8% y/y.

Revolving consumer credit balances jumped $9.21 billion in October (2.8% y/y). Balances at depository institutions (88% of the total) rose a lessened 4.7% y/y. Borrowing from credit unions (6% of the total) rose 8.3% y/y. Finance company balances (2% of the total) fell 10.4% y/y, while nonfinancial business borrowing (2% of the total) weakened 4.0% y/y.

These Federal Reserve Board figures are break-adjusted and calculated by Haver Analytics. There is a break in the credit outstanding data from November 2010 to December 2010 due to the Fed's benchmarking process. Benchmark estimates are based on the Census of Finance Companies (CFC) and the Survey of Finance Companies (SFC) conducted in 2010 and 2011, respectively.

The consumer credit data are available in Haver's USECON database. The Action Economics figures are contained in the AS1REPNA database.

Assessing Financial Stability over the Cycle from Fed Governor Lael Brainard can be found here https://www.federalreserve.gov/newsevents/speech/brainard20181207a.htm