BLS Jobs Numbers Analysis, January 2018

At first glance this would appear to be a “ho-hum” jobs report that is not very exciting, but this is in large part because employment has been growing for the past 88 months! Despite the lack of excitement, we should be pleased with general state of the economy, especially some of the deeper good news, like the fact that long-term unemployment is declining and the number of discouraged workers continue to fall.

Link: https://www.bls.gov/news.release/empsit.htm

Employment

Monthly Changes (December 2017 to January 2018)

1. Total nonfarm payroll employment rose by 200,000
   1. This is the 88^th consecutive month of job increases
   2. A Wall Street Journal survey of economists anticipated an increase of about 180,000 jobs, so this is slightly above the expected increase
   3. The industries with the biggest jobs gains were construction (36,000), leisure and hospitality (35,000), healthcare and social assistance (25,800), and professional services (23,000)
2. The Labor Force Participation Rate stayed level at 62.7%
3. Unemployment (U-3) remained level at 4.1%
   1. Unemployment for African Americans rose from 6.8% to 7.7%, but this might reflect the noisiness of statistical measurements. There’s more variability in such measurements when the sample is smaller.

Yearly Changes (January 2017 - January 2018)

1. Total nonfarm payroll employment rose by 2.1 million
2. The Labor Force Participation Rate fell slightly from 62.9% to 62.7%
   1. This might reflect the Baby Boomer generation moving into retirement
3. Unemployment (U-3) fell from 4.8% to 4.1%
   1. The more interesting story in regard to the unemployment rate among African Americans is that they are the only demographic group whose unemployment rate did not decrease over the year. (7.8% in Jan 2017 and 7.7% in Jan 2018. Every other demographic group saw unemployment fall by at least half a percentage point.

The Bigger Picture

1. Long-Term Unemployment: The number of people who were long-term unemployed (more than 26 weeks unemployed) continued to fall, dropping by 94,000 from December 2017 to January 2018. Long-term unemployed people now only make up 21.5% of the U-3 unemployment rate (compared to 22.8% in December 2017 and 24.1% in January 2017)
2. Part-Time Work: The number of people who worked part-time for economic reasons (because of business conditions or because they could only find part time work) rose from December 2017 to January 2018 (increasing by 74,000), but fell over the year from January 2017 to January 2018 by 787,000. Of the 25.9 million people who work part-time, only 19.3% did so for economic reasons in January 2018, as compared to 22.0% in January 2017.
3. Discouraged Workers and the Marginally Attached to the Labor Force: The number of people ‘marginally attached’ to the labor force (who wanted a job and were available for work, had looked for work or been employed at some point in the previous 12 months, but hadn’t actively looked for a job in the last 4 weeks) fell by 99,000 from January 2017 to January 2018. The number of ‘discouraged workers’—the subset of marginally attached workers who have stopped looking because they don’t believe a job is available for them—fell by 81,000, meaning that they accounted for most of the decline. This is a particularly encouraging development as it relates to people’s confidence in the economy.

Wages

1. The average hourly earnings rose by $0.09 per hour between December 2017 and January 2018.
2. Between January 2017 and January 2018 average hourly earnings rose by $0.75 per hour, or a 2.9% increase. This is 50% higher than some reports anticipated, but is equivalent with the wage growth in 2016.
3. Many economists are surprised by the relatively slow wage growth in what appears to be a tight labor market with low unemployment, but there are a few factors that could explain this:
   1. It’s possible that enough workers are coming off the sidelines to reduce upward pressures on wages. The reductions in the long-term unemployment rate and the number of marginally attached workers would seem to support this hypothesis
   2. It’s also possible that employers are increasing compensation or benefits in other ways, such as allowing more flexible work or work from home, which employees might accept in lieu of higher wages.
   3. It’s also important to realize that the wage growth number is a national average, which would make it harder to see faster wage growth in specific regions or industries—previous research finds that there are substantial differences in wage growth between states and within states across urban and rural labor markets.

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