December 2015 Employment Report

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According to the Bureau of Labor Statistics’ (BLS) establishment survey, non-farm payroll employment rose by 292,000 jobs in December -- “crushing” even the upper end of the range of expectations of 230,000 (consensus average: 200,000). In addition, combined October and November employment gains were revised up by 50,000 (October: +9,000; November: +41,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) remained unchanged at 5.0% as the increase in the civilian labor force (+466,000) essentially offset the change in the number of people employed (+485,000). 

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Observations from the employment reports include:

* The disparity in job gains between the establishment (+292,000) and household (+485,000) surveys was quite noticeable. However, the outsized increase in the household survey lends some support for the gain observed in the establishment survey.

* Employment gains were widespread across age cohorts, with only the 45- to 54-year-old cohort exhibiting a decline.

* Manufacturing added 8,000 jobs in December, and 30,000 during all of 2015. We find those results somewhat at odds with the behavior of the Institute for Supply Management’s manufacturing employment sub-index, which declined in nine of the past 12 months and has been either at the breakeven level or in outright contraction (including December) during four of those months. Wood Products added 1,500 jobs in December; Paper and Paper Products gained 500.

* Mining and logging shed 8,000 jobs, with 5,500 coming from support activities for mining and another 900 from oil and gas extraction. Construction added 45,000 jobs.

* Over 60% (165,300 jobs) of December’s private-sector job growth occurred in the sectors typically associated with the lowest-paid jobs -- Retail Trade: +4,300; Professional & Business Services: +73,000 (nearly half of which were temp-help positions); Education & Health Services: +59,000; and Leisure & Hospitality: +29,000. This is a persistent issue, as we have repeatedly highlighted: There are 1.415 million fewer manufacturing jobs today than at the start of the Great Recession in December 2007, but 1.602 million more Food Services & Drinking Places (i.e., wait staff and bartender) jobs. If 2015 trends continue, in three years there will be as many wait staff and bartender jobs as manufacturing jobs in the United States. 

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* The employment-population ratio remained at 59.5%; roughly speaking, for every five people added to the population, fewer than three are employed. Meanwhile, the number of employment-age persons not in the labor force retreated by 277,000 to just over 94.1 million. 

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* The labor force participation rate (LFPR) inched up to 62.6%, comparable to October 1977. Average hourly earnings of all private employees dipped by $0.01 (to $25.24), resulting in a 2.5% year-over-year increase. For all production and nonsupervisory employees (pictured above), however, hourly wages rose by $0.02, to $21.22 (+2.4% YoY). With the CPI running at an official rate of +0.5% 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 504,000 while part-time jobs rose by 27,000. Full-time jobs have been trending higher since December 2009, and are now 728,000 above the pre-recession high (although, for perspective, the non-institutional, working-age civilian population has risen by an estimated 18.8 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.