March 2019 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm payroll employment rising by 196,000 jobs in March (+168,000 expected). Also, combined January and February employment gains were revised up by 14,000 (January: +1,000; February: +13,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) was unchanged at 3.8% as the labor force and number of employed both shrank by roughly the same magnitude (respectively, -224,000 and -201,000). 

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Observations from the employment reports include:

* The disparity between the establishment (+196,000 jobs) and household survey results (-201,000 employed) makes us somewhat skeptical of the headline number. Also, had average (since 2009) March CES (business birth/death model) and seasonal adjustments been used, job gains might have amounted to +111,000.

* With those caveats in mind, Manufacturing lost 6,000 jobs in March. That result is counter to the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which expanded at a faster pace in March. Wood Products employment shrank by 2,200 jobs (ISM increased); Paper and Paper Products: +600 (ISM increased); Construction: +16,000 (ISM increased). 

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* The number of employment-age persons not in the labor force (NILF) expanded by 369,000 -- to 95.6 million. This metric has been trending lower since August as more potential workers conclude their prospects are improving and (re)enter the workforce. Meanwhile, the employment-population ratio (EPR) ticked down to 60.6%; roughly, then, for every five people being added to the population, three are employed. 

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* Similarly, the labor force participation rate dropped to 63.0% -- comparable to levels seen in the late-1970s. Average hourly earnings of all private employees increased by $0.04, to $27.70, resulting in a 3.2% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages rose by $0.06, to $23.24 (+3.3% YoY). The average workweek for all employees on private nonfarm payrolls expanded by 0.1 hour (to 34.5 hours), average weekly earnings increased by $4.15, to $955.65 (+3.2% YoY). With the consumer price index running at an annual rate of 1.5% in February, workers are -- by official metrics, at least -- gaining purchasing power. 

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* Full-time jobs retreated by 190,000. Those employed part time for economic reasons (PTER) -- e.g., slack work or business conditions, or could find only part-time work -- jumped by 189,000. Those working part time for non-economic reasons rose by 144,000 while multiple-job holders advanced by 212,000. 

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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 March soared by $27.9 billion, to an all-time high $237.7 billion (+13.3% MoM and +3.6% 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 March was 0.9% below the year-earlier average -- well off the peak of +13.8% set back in September 2013. More than a full year has now passed with the lower withholding rates from the Tax Cuts and Jobs Act of 2017, and the lagged effects of the partial federal government shutdown should have been minimal.

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.