November 2014 Employment Report

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According to the Bureau of Labor Statistics’ (BLS) establishment survey, non-farm payroll employment posted the biggest gain since January 2012 when increasing in November by 321,000 jobs -- smashing MarketWatch’s consensus expectations of 235,000. Data for the prior two months was also revised up by a combined 44,000 jobs. Meanwhile, the unemployment rate (based upon the BLS’s household survey) was unchanged at 5.8%. This month’s report internals (i.e., the comparison between household and establishment survey data) were extremely inconsistent, however: The household survey showed seasonally adjusted employment growth of only 4,000 versus the headline establishment number of 321,000. The glaring disparity prompted one analyst to beg, “Will the real job situation please stand up?”

Hiring last month was broad-based but the biggest beneficiaries were retail, temporary services and transportation and warehousing. Those increases likely reflect seasonal hiring for the holiday season. In addition, manufacturers added 28,000 jobs, the most in a year, and education and health services 38,000. Professional and business services, a category that includes temps but also higher-paying jobs in fields such as accounting and engineering, added the most jobs in four years. Construction added 20,000 jobs; construction employment is up 231,000 from a year earlier. 

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Other internals of the report were mixed. For example, the employment-population ratio remained stable at 0.592, just one percentage point above the post-recession low. At the same time, the number of employment-age persons not in the labor force edged up by 69,000 (to 92.4 million), just shy of its recent peak of 92.6 million. 

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The labor force participation rate was unchanged at 62.8, near its multi-decade low. Average hourly earnings of all private employees rose by $0.09, resulting in a 2.1% year-over-year increase. For all production and nonsupervisory employees (pictured above), wages rose by $0.04/hour (+2.1% YOY). With the CPI running at an official annual rate of 1.7%, wages are technically keeping up with price inflation. 

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Finally, full-time jobs decreased while part-time jobs increased. 

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The U.S. recovery still has far to go to fully rebound from the Great Recession, given that many people without jobs have stopped looking and thus are no longer counted as unemployed. "At this rate, we won't return to pre-recession labor market health until October 2016 -- nearly nine years since the recession began," said Elise Gould, a senior economist at the Economic Policy Institute. We think Gould's prediction is too optimistic. The figure above presents a variety of forecasts related to when employment might converge with the number of jobs that likely would exist had the recession not occurred (gray line).

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.