November 2022 Employment Report

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The Bureau of Labor Statistics‘ (BLS) establishment survey showed nonfarm employers added 263,000 jobs in November, better than the 200,000 expected. However, September and October employment changes were revised down by a combined 23,000 (September: -46,000; October: +23,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) was unchanged at 3.7%, as the number of employed fell (-138,000) while the labor force shrank (-186,000).

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Observations from the employment reports include:

* The disagreement between the establishment (+263,000 jobs) and household surveys (-138,000 employed) was quite noticeable. The validity of the surveys is questionable when they are misaligned to this degree.

* Goods-producing industries added 37,000 jobs; service providers: +226,000. Notable job gains occurred in leisure and hospitality (+88,000), health care (+44,700), and government (+42,000). Employment declined in retail trade (-29,000) and in transportation and warehousing (-15,100). Total nonfarm employment (153.5 million) is now 1.0 million jobs above its pre-pandemic level in February 2020. Private-sector employment is 1.5 million higher than in February 2020, while government employment is 461,000 lower. Employment is also perhaps nearly 7.1 million below its potential if accounting for growth in the working-age population since January 2006.

As mentioned above, manufacturing added 37,000 jobs. That result inconsistent with the change in the Institute for Supply Management’s (ISM) manufacturing employment subindex, which moved from breakeven to contraction in November. Wood products employment expanded by 1,600 (ISM was unchanged); paper and paper products: -2,000 (ISM fell); construction: +20,000 (ISM not reported at time of blog posting).

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* The number of employment-age persons not in the labor force rose (+359,000) to 100.2 million; that level is 5.2 million higher than in February 2020. Despite the above-mentioned job gains, the employment-population ratio (EPR) ticked down marginally to 59.9%; the EPR is 1.3PP below the February 2020 level. 

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* Because the civilian labor force shrank by 186,0000 in November, the labor force participation rate also edged down fractionally to 62.1%. Average hourly earnings of all private employees increased by $0.18 (to $32.82), and the year-over-year increase rose to +5.1%. Although the average workweek for all employees on private nonfarm payrolls shrank to 34.4 hours, average weekly earnings rose (+$2.93) to $1,129.01 (+4.1% YoY). With the consumer price index running at an annual rate of +7.7% in October, the average worker keeps losing purchasing power. In fact, average hourly wages have lagged CPI since April 2021; average weekly wages since June 2021.

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* Full-time jobs rose (+92,000) to 132.3 million. Workers 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 -- inched up by 25,000, while those working part time for non-economic reasons fell (-77,000); multiple-job holders: +165,000. 

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For a “sanity test” of the job numbers, we consult employment withholding taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in November decreased by $9.7 billion, to $237.5 billion (-3.9% MoM; -2.6% YoY). 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 November was 3.5% above the year-earlier average.

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.