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According
to the Bureau of Labor
Statistics’s (BLS ) establishment survey, non-farm payroll employment rose
by 165,000 in April (exceeding the 135,000 forecast of economists polled by MarketWatch).
The unemployment rate (based upon the BLS ’s household survey) edged down by 0.1 percentage point to 7.5 percent.
Most private supersectors reported at least some job growth. Government
employment contracted at all levels. The change in total non-farm payroll
employment for February was revised from +268,000 to +332,000, and the change
for March was revised from +88,000 to +138,000.
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As
seems to have been the case for longer than we’d like to recall, the underlying
details in the report at least partially belied the relatively upbeat headline
number. For example:
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· The ratio of
employed persons to the entire population remained mired in the range seen
since late 2009.
· The number of
people not in the labor force retreated from March’s record high, but
the drop was a marginal 31,000 (to 89.9 million). I.e., 90 million people who
could otherwise make a positive contribution to the economy have given up
looking for employment.
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· The civilian labor force participation
rate (the share of the entire U.S.
· Although average hourly earnings
of production and non-supervisory employees rose by $0.04 relative to March, the
year-over-year percentage increase fell back to 1.7 percent. With the price
index for urban consumers rising at an annualized pace of 1.5 percent in March,
wage increases are just keeping up with current, official estimates of price
inflation. To put things into perspective, however, average wages would need to
be in the neighborhood of $130 per hour to have kept up with inflation since
1970.
· Another problem was
the drop in average weekly hours for all employees (not just those in
production and non-supervisory positions), which posted a surprising and
disappointing decline from 34.4 to 34.6 on expectations of an unchanged number.
This amounts to a 12 minute shorter workweek on average for the entire U.S.
It
is when one considers that there were 135,474,000 full time Establishment
Survey employees in April (rising by the much trumpeted 165,000), all of which
worked on average 34.4 hours (down from 34.6 in March) according to the BLS . Multiply these together and one gets 4,660,305,600 total hours worked
in April, a drop of 21,385,800 million hours from the 4,681,691,400 total
hours worked in March.
Then
apply the average hourly wages of $23.83 in March and $23.87 in April, and the
total wages paid out in March ($111.565 billion) compared to April ($111.231
billion) amounted to a drop of $323.2 million.
Had
the average weekly hours stayed flat as expected, this number should have been
an increase of $323.5 million or a $646.8 million swing!
In
other words, the US
What
does this mean for the bottom line?
Well,
had the BLS reported flat average weekly hours worked at 34.6 as
Wall Street had expected, while companies were paying out the same
amount of hourly wages in April, the result would have been that
instead of the BLS reporting a 165,000 increase in jobs, it would have
had to report a drop of, drumroll, 618 thousand workers, or total April
workers of 134,690,913: a 783 thousand negative worker swing, more
than wiping out not only all the gains of April, but all prior upward monthly
revisions as well.
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· One of our
criticisms of the headline jobs number (and the overall report in general) is its
failure to differentiate among job quality. A part-time position at a fast-food
restaurant is given the same “weight” as a brain surgeon. Hence, we are
disappointed to see that part-time employment rose by nearly twice the rate of
full-time employment (278,000 versus 150,000, respectively).
· Another issue is
composition of job growth by age. “[J]ust like in prior months,” ZeroHedge
observed, “a key part of the growth was attributable to those aged in the 55-and-over
group, which added 79K workers, although a surprising change was the massive
addition of some 187K workers in the lowest paid, 20-24 age group -- the
biggest monthly jump in this category since September. Was this due to students
entering the workforce early? The reason is unclear. What is clear is that the
prime working demographic, those aged 25-54 saw yet another decline, as 16K workers
exited the ranks of the employed.”
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Withholding
taxes fell dramatically in April, relative to March; this turn of events is unsurprising
in light of April not being the end of a quarter.
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Employment
is converging with the previous peak at a slower pace than all prior recessions
going back to 1973; circles in the chart above indicate when previous
recoveries reached their corresponding pre-recessionary employment highs. The
economy still has 2.58 million fewer jobs than at the January 2008 peak.
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The
figure above presents a variety of forecasts related to when employment might
return to the January 2008 peak (dashed line) or converge with the number of
jobs that likely would exist had the recession not occurred (gray line). At April’s
rate of job gains, it will take until August 2014 to recapture January 2008’s
employment level (i.e., without adjusting for population growth).
Bottom
line: This jobs report is positive on the surface, but underlying details are
less positive. Even Econintersect’s Steven Hansen -- who diligently
attempts to present a balanced view in all of his posts -- ultimately was
forced to appeal to a statement by Bill Dunkelberg, chief economist at the
National Federation of Independent Business, to eke out a reasonably positive
conclusion about the employment situation.
The foregoing comments represent the
general economic views and analysis of Delphi Advisors,
and are provided solely for the purpose of information, instruction and
discourse. They do not constitute a solicitation or recommendation regarding
any investment.
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