Today's jobs data: what you need to know

Transcription

1 Trend Macrolytics, LLC Donald Luskin, Chief Investment Officer Thomas Demas, Managing Director Michael Warren, Energy Strategist Data Insights: Jobs Friday, September 7, 2018 Today's jobs data: what you need to know Non-farm payrolls Change Aug: +201 Revision Jul: -10 Revision Jun: -40 Private payrolls Change Aug: +204 Revision Jul: -17 Revision Jun: -42 Employment Change Aug: -423 Unemployment Change Aug: -46 Long -term unemployment Change Aug: -15 Civilian labor force Change Aug: million below trend 9.8% of leavers unemployed Unemployment rate Aug: 3.85% Change Aug: -0.02% Underemployment rate Aug: 7.4% Change Aug: -0.1% Participation rate Aug: 62.7% Change Aug: -0.2% UE adjusted for participation Aug: 8.7% Change Aug: +0.27% Average weeks unemployed Aug: 22.6 Change Aug: -0.6 % longterm unemployed Aug: 21.5% Change Aug: -1.2% Aggregate hours worked index Aug: Change Aug: +0.2% Revision Jul: unch Average hourly earnings Aug: 0.37% Change Aug: 0.11% Revision Jul: 0.00% Aggregate weekly earnings Aug: Change Aug: +0.5% Revision Jul: unch Monthly job-finding probability Aug: 35.9% Change Aug: -0.3% Monthly separation probability Aug: 1.7% Change Aug: +0.2% % involuntary part-time Aug: 2.8% Change Aug: -0.1% "Household" vs "Payroll" jobs Change Aug: -357 Source: Bureau of Labor Statistics, TrendMacro calculations For more information contact us: Donald Luskin: don@trendmacro.com Thomas Demas: tdemas@trendmacro.com Copyright 2018 Trend Macrolytics LLC. All rights reserved. This document is not to be forwarded to individuals or organizations not authorized by Trend Macrolytics LLC to receive it. For information purposes only; not to be deemed to be recommendations for buying or selling specific securities or to constitute personalized investment advice. Derived from sources deemed to be reliable, but no warranty is made as to accuracy.

2 Today's payroll data: what you need to know -- where did the jobs come from? Sequential month change, thousands SA ---- Net job losses Biggest change per detail module: best worst Non-farm +201 Mining/logging +6 Goods-producing +26 Construction +23 Manufacturing -3 Durable goods -4 Nondurable goods +1 Motor vehicles -5 Other +1 Private +204 Service-providing +178 Federal unch Wholesale +22 Retail -6 Transportation +20 Utilities +0 Government -3 State -1 Information -6 Local -2 Financial +11 Pro/Business +53 Edu/Health +53 Leisure/Hospitality +17 Other +13 Temp services +10 Other +43 Health care +41 Education +12 Where is the pay coming from? Vertical: Hourly wages vs average Horizontal: Payrolls change this month Circle size: Share of all employment +60% +40% Utilities Information Trend of job growth towards lower-wage sectors. +20% Energy/Mining Financial Wholesale Construction Pro Services Education/Health Manufacturing Transportation Other -20% Retail -40% Leisure -60% Source: BLS, TrendMacro calculations 2

3 Solving the wage-growth puzzle YOY average hourly earnings growth Atlanta Fed Wage Growth Index Recession 5% 4% Atlanta Fed Wage Growth Tracker 3% 2% Average hourly earnings 1% Mar 2007 Mar 2008 Mar 2009 Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016 Mar 2017 Mar 2018 Source: BLS Current Employment Statistics, Atlanta Federal Reserve Bank, TrendMacro calculations The rewards of dynamism YOY wage growth for steady employees, versus those who change jobs Recession 5% Job switchers 4% 3% 2% Atlanta Fed Wage Growth Tracker Job Stayers 1% Mar 2007 Mar 2008 Mar 2009 Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016 Mar 2017 Mar 2018 Source: Atlanta Federal Reserve Bank, TrendMacro calculations 3

4 The payroll cycle in the Not So Great Expansion following the Great Recession Growth MOM from July % +0.35% +0.25% +0.15% +0.05% -0.05% -0.15% -0.25% -0.35% Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun The ultimate jobless recovery is becoming jobful Unemployment: thousands Short-term = <27 weeks Long-term = >27 weeks Income inflation adjusted to today's USD 16,000 14,000 Total unemployed 12,000 Short-term unemployed 10,000 8,000 6,000 Long-term unemployed 4,000 2,

5 Unemployment rate normalized for participation rate December 2007 Participation rate Headline unemployment rate Recession 66.5% 66.0% 65.5% 65.0% 64.5% 64.0% 63.5% 63.0% 62.5% 62.0% Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% Winner and losers in the Not So Great Expansion following the Great Recession Change in total payrolls from prior business cycle peak, millions Services Sales and office Management, professional -5 Production, farming -7 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Source: BLS, NBER, TrendMacro calculations 5

6 US labor force demographics: fading baby boom and its well-educated echo By age and education bracket: Dec 2000, peak in the labor force participation rate Latest Prime age 7.4% 6.5% 8.7% 8.7% 8.2% 8.9% 10.3% 10.5% 9.4% 8.4% 8.2% 7.5% 9.5% 8.5% 7.9% 8.0% 8.4% 6.4% 8.0% 5.1% US population, millions 8.1% 6.6% 7.2% 5.2% 4.4% 4.1% over 77.2% 71.1% 84.6% 84.6% 84.4% 85.2% 84.6% 81.6% 83.2% 82.5% 82.6% 81.7% 80.2% 79.0% 72.6% 50.1% Labor force participation rate 69.3% 56.9% 47.5% 35.7% Based on demographics of aging since December million persons could join the labor force. 33.0% 24.5% 19.2% 14.1% 8.8% 5.4% over US population millions 32.9% 35.4% 25.2% 26.0% Labor force participation rate 74.1% 79.4% 15.9% 28.6% 25.9% 64.4% 57.6% 64.9% 73.5% 10.1% 46.3% 43.0% Based on the demographics of education since December million persons could join the labor force. No high school diploma High school, no college Some college, assoc. degree Bachelors or higher No high school diploma High school, no college Some college, assoc. degree Bachelors or higher 6

7 Monthly job-finding probability (the outflow rate from unemployment) Chance of an unemployed person becoming employed in one month (per Shimer 2005) Recession 65% 55% 45% 40% 35% 30% 25% 20% 15% % 35% 25% 15% Monthly job-separation probability (the inflow rate to unemployment) Chance of an employed person becoming unemployed in one month (per Shimer 2005) Recession 5.5% 5.0% 4.5% 4.0% 2.9% 2.7% 2.5% 2.3% 2.1% 1.9% 1.7% 1.5% % 3.0% 2.5% 2.0% 1.5%

8 Involuntary part-time workers as percentage of the employed labor force Persons available for full-time work Recession 7% 6% 5% 4% 3% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 2% Aggregate weekly private hours-worked index Recession Source: BLS Productivity and Costs (quarterly) and Current Employment Stats (recent monthly), TrendMacro calcs 8

9 Difference in employment change: "household" minus "payroll" surveys Recession Small company bias Big company bias Source: BLS Current Population Survey and Current Employment Statistics, TrendMacro calculations Civilian labor force versus 20-year trend, millions Recession

10 Unemployment rate Can the disabled come back to the labor force? Social Security disability recipients, millions Running out of workers? The Beveridge Curve Cycle relationship between unemployment and job openings Expansion Recession Expansion extreme, from 1954 to present +10% +9% +8% +7% Current expansion expansion +6% +5% +4% Great Recession expansion Average recession expansion expansion Average expansion expansion expansion expansion expansion Current expansion expansion +3% +1.5% +2.0% +2.5% +3.0% +3.5% +4.0% +4.5% +5.0% +5.5% Open rate Source: BLS Current Population Survey & JOLTS. Pre-2000:Conference Board normalized per Valletta (2005), TrendMacro calculations 10