January 2016 Employment Report

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According to the Bureau of Labor Statistics’ (BLS) establishment survey, non-farm payroll employment rose by 151,000 jobs in January -- well below even the lower end of the range of expectations of +170,000 (consensus: +188,000). In addition, combined November and December employment gains were trimmed by 2,000 (November: +28,000; December: -30,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) ticked down to 4.9% as the change in the number of people employed (+615,000) more than matched the increase in the civilian labor force (+502,000).

As is customary when reporting on January employment numbers, we caution against taking December 2015 to January 2016 comparisons -- especially in the household survey -- too seriously. The numbers are in considerable flux as a result of seasonal (i.e., post-holiday) employment patterns and adjustments to underlying population estimates. 

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Observations from the employment reports include:

* Revisions to historical establishment data resulted in 105,000 fewer jobs having been created by the end of 2015 than previously estimated.

* Manufacturing added 29,000 jobs in January, and 45,000 during the 12 months ending in January. 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 those 12 months and has been either at the breakeven level or in outright contraction during three of the months since September 2015. Wood Products lost 1,500 jobs in December; Paper and Paper Products declined by 500.

* Mining and logging shed 7,000 jobs, with 5,500 coming from support activities for mining and another 800 from oil and gas extraction. Construction added 18,000 jobs.

* Nearly 74% (116,700) of January’s private-sector job growth occurred in the sectors typically associated with the lowest-paid jobs -- Retail Trade: +57,700; Professional & Business Services: +9,000 (although temp-help lost 25,200 jobs); Education & Health Services: +6,000; and Leisure & Hospitality: +44,000. This is a persistent issue, as we have repeatedly highlighted: There are 1.390 million fewer manufacturing jobs today than at the start of the Great Recession in December 2007, but 1.595 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 edged up to 59.6%; 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 41,000 to nearly 94.1 million. 

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* The labor force participation rate (LFPR) also inched up to 62.7%, comparable to October 1977. Average hourly earnings of all private employees jumped by $0.12 (to $25.39), resulting in a 2.5% year-over-year increase. For all production and nonsupervisory employees (pictured above), however, hourly wages rose by $0.06, to $21.33 (+2.5% YoY). With the CPI running at an official rate of +0.7% YoY, wages are technically rising in real (inflation-adjusted) terms. The average workweek for all employees on private nonfarm payrolls nudged up to 34.6 hours. 

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* Finally, full-time jobs increased by 538,000 while part-time jobs rose by 5,000. Full-time jobs have been trending higher since December 2009, and are now 1.266 million above the pre-recession high (although, for perspective, the non-institutional, working-age civilian population has risen by an estimated 19.2 million during that time period). 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.