December 2023 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed nonfarm employers adding 216,000 jobs in December (+164,000 expected). Also, October and November 2023 employment changes were revised down by a combined 71,000 (October: -45,000; November: -26,000). Except for July, job gains of all months in 2023 have been revised lower.

Meanwhile, the unemployment rate (based upon the BLS’s household survey) was unchanged at 3.7%, as a drop in the number of employed (-683,000) was essentially matched by a contraction of the labor force (-676,000). 

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Observations from the employment reports include:

* Once again, the two surveys diverged, which erodes their credibility. While the employment report showed the addition of 216,000 jobs, the household report indicated the number of employed fell by 683,00.

* Goods-producing industries gained 22,000 jobs; service providers: +194,000. Employment continued to trend up in government (+52,000), health care (+38,000), social assistance (+21,000), and construction (+17,000), while transportation and warehousing lost jobs (-23,000). Total nonfarm employment (157.2 million) is now nearly 4.9 million jobs above its pre-pandemic level in February 2020 (private sector: +4.73 million; public sector: +132,000). Nonetheless, employment is perhaps 5.1 million below its potential if accounting for growth in the working-age population since January 2006.

Manufacturing added 6,000 jobs (led by durable goods: +8,000, of which miscellaneous manufacturing; 3,200). That result may agree with the change in the Institute for Supply Management (ISM) manufacturing employment subindex, which moved closer to breakeven (48.1) in December. Wood products manufacturing shed 2,100 jobs (ISM was unchanged); paper manufacturing: -100 (ISM decreased); construction: +17,000 (ISM increased).

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* The number of employment-age persons not in the labor force jumped (+845,000) to 100.5 million -- the highest since March 2021 and 5.3 million above February 2020. Because the working-age civilian population expanded (+169,000) while the number of employed fell (-683,000), the employment-population ratio (EPR) declined to 60.1%, which is 1.0PP below its February 2020 level. 

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* Also, because the working-age civilian population grew by 169,000 while the labor force shrank by 676,000, the labor force participation rate fell to 62.5%. Average hourly earnings of all private employees nudged up by $0.15 (to $34.27), and the year-over-year increase edged up fractionally to +4.1%. Because the average workweek for all employees on private nonfarm payrolls decreased to 34.3 hours, average weekly earnings rose (+$1.73) to $1,175.46 (+4.4% YoY). With the consumer price index running at an annual rate of +3.1% in November, the average worker appears likely to have gained a bit of purchasing power. 

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* Full-time workers slumped (-1.5 million) to 133.2 million; there are now nearly 2.4 million more full-time jobs than in February 2020. For perspective, however, the non-institutional working-age civilian population has risen by 8.4 million during that period. 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 -- rose by 217,000, while those working part time for non-economic reasons jumped (+579,000); total part-timers are at their highest since March 2018. Multiple-job holders: +222,000 -- to a record 8.6 million. 

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For a “sanity test” of the job numbers, we consult employment withholding/FICA taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in December spiked by $50.0 billion, to $290.6 billion (+20.8% MoM; but -14.5% 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 December was down 4.9% from 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.