October 2015 Employment Report

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According to the Bureau of Labor Statistics’ (BLS) establishment survey, non-farm payroll employment jumped by 271,000 jobs in October -- “blowing out” consensus expectations of 190,000 and even the upper end of the range of predictions (240,000). Moreover, combined August and September employment gains were nudged up by 12,000 (July: +17,000; August: -5,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) edged down to 5.0% (the lowest since April 2008) as the 320,000 people who found work more than offset the 97,000-person expansion of the labor force. 

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Observations from the employment report include:

* The disparity in job gains between the establishment (+271,000) and household (+320,000) surveys was less noticeable; the changes were at least directionally consistent.

* Workers aged 55 and over accounted for 84% of “gross” jobs gained. By contrast, workers aged 25 to 54 actually declined by 35,000, with males in this age group tumbling by 119,000; note that age-cohort-based estimates are not additive, as each cohort is assigned a different seasonal adjustment.

* Manufacturing employment was unchanged in October. Year-to-date, manufacturing has gained a net 16,000 jobs; during August and September, however, manufacturing surrendered 28,000 of the 44,000 jobs gained earlier in 2015. Wood Products added 1,100 jobs in October; Paper and Paper Products was unchanged.

* Construction added 31,000 jobs, bringing YTD gains to 118,000. Oil and gas extraction lost 2,700 jobs.

* Over 82% (219,800) of October’s private-sector job growth occurred in the sectors typically associated with the lowest-paid jobs -- Retail Trade: +43,800; Professional & Business Services: +78,000; Education & Health Services: +57,000; and Leisure & Hospitality: +41,000. This is a persistent issue, as we have repeatedly highlighted: There are 1.429 million fewer manufacturing jobs today than at the start of the Great Recession in December 2007, but 1.531 million more Food Services & Drinking Places (i.e., wait staff and bartender) jobs. 

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* The employment-population ratio inched up to 59.3%; roughly speaking, for every five people added to the population, fewer than three are employed. One oddity in the employment report that analyst Karl Denninger highlighted is that October’s population-adjusted employment gain appears to uncharacteristically large; if his observation is correct, future revisions likely will be negative. Meanwhile, the number of employment-age persons not in the labor force retreated by 97,000 to just over 94.5 million. 

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* The labor force participation rate (LFPR) was unchanged at 62.4%, comparable to October 1977. Average hourly earnings of all private employees jumped by $0.09 (to $25.20), resulting in a 2.5% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages also rose by $0.09, to $21.18 (+2.2% YoY). With the CPI running at an official rate of 0.0% YoY, wages are technically rising in real (inflation-adjusted) terms. The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours. 

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* Finally, full-time jobs increased by 185,000 while part-time jobs rose by 214,000. Full-time jobs have been trending higher since December 2009, and are now 149,000 above the pre-recession high (even while the non-institutional, working-age civilian population has risen by an estimated 18.4 million). Part-time jobs, by contrast, have been stuck in a channel between roughly 27 and 28 million.

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.