December 2019 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm payroll employment rising by 145,000 jobs in December (+160,000 expected). Also, combined October and November employment gains were revised down by 14,000 (October: -4,000; and November: -10,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) was unchanged at 3.5% as expansion of the labor force (+209,000) was more than matched by growth in the number of employed persons (+267,000). 

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Observations from the employment reports include:

* The establishment (+145,000 jobs) and household survey results (+267,000 employed), although at least directionally consistent, were otherwise poorly correlated. Had average (since 2009) December CES (business birth/death model) and seasonal adjustments been used, job gains might have been an even more sedate +120,000.

* Manufacturing shrank by 12,000 jobs. That result aligns with the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which contracted at a faster pace in December. Wood Products employment added 1,200 jobs (ISM decreased); Paper and Paper Products: +200 (ISM unchanged); Construction: +20,000 (ISM decreased).

* As a related point, there are 891,000 fewer manufacturing jobs today than at the start of the Great Recession in December 2007, but 2.67 million more Food Services & Drinking Places (i.e., wait staff and bartender) jobs. In 2019, manufacturing added 46,000 jobs while FS&D jobs expanded by 271,300. 

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* The number of employment-age persons not in the labor force (NILF) was little changed (-48,000) at 95.6 million. This metric has leveled off since the latter half of 2018. Meanwhile, the employment-population ratio (EPR) was stable at 61.0% -- its highest level since December 2008; roughly, then, for every five people being added to the working-age population, three are employed. 

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* Despite growth in the labor force of nearly 1.3 times that of the working-age civilian population, the labor force participation rate was unchanged at 63.2%. Average hourly earnings of all private employees inched up by $.0.03, to $28.32, resulting in a 2.9% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages rose by $0.02, to $23.79 (+3.0% YoY). Although the average workweek for all employees on private nonfarm payrolls shrank by 0.1 hour (to 34.3 hours), average weekly earnings increased by $1.03, to $971.38 (+2.6% YoY). With the consumer price index running at an annual rate of 2.1% in November, workers are maintaining purchasing power according to official metrics. 

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* Full-time jobs jumped up by 194,000, to a new record of 131.8 million; there are now nearly 9.9 million more full-time jobs than the pre-recession high; for perspective, however, the non-institutional, working-age civilian population has risen by over 27.2 million. Those employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work -- fell by 140,000. Those working part time for non-economic reasons rose by 54,000 while multiple-job holders dropped by 161,000. 

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For a “sanity test” 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 December jumped by $43.1 billion, to a record $243.6 billion (+21.5% MoM; +4.1% YoY and +4.3% YTD). To reduce some of the monthly 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 December was 4.0% 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.