April 2016 Employment Report

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According to the Bureau of Labor Statistics’ (BLS) establishment survey, non-farm payroll employment rose by 160,000 jobs in April -- well below expectations of +200,000. Among revisions stretching back beyond 2000, combined February and March employment gains were trimmed by 19,000 (February: -12,000; March: -7,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) remained stable at 5.0% as the drop in the number of employed persons (-316,000) was only slightly exceeded by the contraction in the civilian labor force (-362,000). 

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Observations from the employment reports include:

* After tumbling by nearly 30,000 in March, Manufacturing gained 4,000 jobs. Those results are generally consistent with the behavior of the Institute for Supply Management’s manufacturing employment sub-index, which -- despite remaining in contraction -- rose slightly in April. Wood Products employment was unchanged; Paper and Paper Products: -600.

* Mining and logging shed 8,000 jobs, with 5,200 coming from support activities for mining and another 1,600 from oil and gas extraction. Construction added 1,000 jobs.

* Over 82% (141,000) of April’s private-sector job growth occurred in the sectors typically associated with the lowest-paid jobs -- Retail Trade: -3,100; Professional & Business Services: +65,000; Education & Health Services: +54,000; and Leisure & Hospitality: +22,000. This is a persistent issue, as we have repeatedly highlighted: There are 1.449 million fewer manufacturing jobs today than at the start of the Great Recession in December 2007, but 1.635 million more Food Services & Drinking Places (i.e., wait staff and bartender) jobs. In fact, Manufacturing has added essentially no jobs since 2014 while FS&D jobs have expanded by nearly 450,000. 

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* The employment-population ratio edged down to 59.7%; roughly speaking, for every five people added to the population, three are employed. Meanwhile, the number of employment-age persons not in the labor force jumped by 562,000 to 94.0 million. 

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* The labor force participation rate (LFPR) also retreated to 62.8%, comparable to levels seen in 1978. Average hourly earnings of all private employees increased by $0.08 (to $25.53), resulting in a 2.5% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages were rose by $0.05, to $21.47 (also +2.5% YoY). With the CPI running at an official rate of +0.9% YoY, in theory wages are rising in real (inflation-adjusted) terms. The average workweek for all employees on private nonfarm payrolls lengthened by 0.1 hour, to 34.5 hours. 

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* Full-time jobs dropped by 253,000 while those employed part time for economic reasons (PTER) -- e.g., slack work or business conditions, or could find only part-time work -- fell by 161,000. There are now 1.319 million more full-time jobs than the pre-recession high; for perspective, however, the non-institutional, working-age civilian population has risen by 19.8 million). PTER employment, by contrast, stopped declining in October 2015 and has been hovering around 6 million since. 

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For a “sanity check” of the employment numbers, we consult employment withholding taxes published by the U.S. Treasury. Although highly seasonal, the data show the amount withheld in April decreased (as usual) by $34.3 billion, to $182.4 billion -- the highest amount on record for that calendar month. To reduce some of the volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year. The average of the three months ending April were 4.3% above the year-earlier average, well off the peak of +13.8% set back in September 2013.

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.