January 2017 Employment Report

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According to the Bureau of Labor Statistics’ (BLS) establishment survey, non-farm payroll employment added 277,000 jobs in January -- considerably above expectations of +175,000. Combined November and December employment gains were revised down by 39,000 (November: -40,000; November: +1,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) edged up to 4.8%. 

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The BLS cautioned against making too many inferences from the January jobs report -- especially making MoM comparisons. The establishment survey data was revised as a result of the annual benchmarking process and the updating of seasonal adjustment factors. Also, the household survey data for January 2017 reflect updated population estimates.

Despite its own warning, the BLS provided the following MoM comparisons: 

* Manufacturing added 5,000 jobs in January. That result is consistent with the Institute for Supply Management’s manufacturing employment sub-index, which expanded at a faster pace in January. Wood Products employment was unchanged, while Paper and Paper Products added 500 jobs. Construction employment jumped by 36,000 -- which seems consistent with recent residential building activity; interestingly, however, ISM’s services report indicated no rise in construction employment. 

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* The number of employment-age persons not in the labor force (NILF) dropped by 736,000 -- to 94.3 million -- although much of that change resulted from the updated population estimates mentioned above. Nonetheless, January’s NILF estimate is within 0.8% of December’s record high. Meanwhile, the employment-population ratio (EPR) was increased to 59.9 %; roughly speaking, for every five people being added to the population, only three are employed. 

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* Like the EPR, the labor force participation rate (LFPR) also rose fractionally to 62.9%, still comparable to levels seen in the late-1970s. Average hourly earnings of all private employees inched higher ($0.03), to $26.00, resulting in a 2.5% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages rose by $0.04, to $21.84 (+2.4% YoY). Since the average workweek for all employees on private nonfarm payrolls was unchanged at 34.3 hours, average weekly earnings increased by $1.03, to $894.40 (+1.9% YoY). 

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* Full-time jobs jumped by 457,000. That good news was partially offset by the observation that those employed part time for economic reasons (PTER) -- e.g., slack work or business conditions, or could find only part-time work -- rose by 242,000; so-called “voluntary” part-time employment, by contrast, tumbled by 764,000. There are now over 2.8 million more full-time jobs than the pre-recession high; for perspective, however, the non-institutional, working-age civilian population has risen by 20.9 million). Those holding multiple jobs edged up to 7.6 million (+8,000), below September’s post-recession peak of 7.9 million. 

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For a “sanity check” of the employment numbers, we consult employment withholding taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in January rose by $1.9 billion, to $217.9 billion (+0.9% MoM and +14.0% YoY). 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 January was 5.0% 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.