Highlights of the jobs report, the good news & the bad.

Summary:  Yesterday we looked at leading indicators for the US economy. Today we look at one of the best coincident indicators: jobs. Today we’ll do it differently, seeking answers to the hot questions in the blizzard of numbers provided by the BLS. We’ll examine the good news, and the bad.  Also see the additional info in the comments. {1st of 2 posts today.}

Contents

1. About the collapse of the oil industry.
2. Has Obama’s recovery helped the middle class?
3. The bottom line.
4. Bad news about wage growth.
5. Making sense of this numbers blizzard.
6. About ZH’s accusations of fraud.
7. For More Information.

(1) About the collapse of the oil industry.

The resource sector lost 9,000 jobs, a dot among America’s 148 million workers (one thousand of those were in oil & gas extraction; 7 thousand were in “support activities”). Weekly wages of their non-supervisory workers continue to slowly drop, down 3% to $1,230.

YoY the number of unemployed in the sector dropped 1.4 million, taking the sector’s unemployment rate from 7.0 to 5.7.  The oil bust is too small to have more than a regional impact.  See the BLS Highlights for more info about the growth in jobs by sector.

(2) Has Obama’s recovery helped the middle class?

 

The confident “no” you hear on Fox has no basis in reality. Wages, hours, part vs full-time employment — they’ve all improved, albeit only slowly (and less than the bounty enjoyed by the 1%).

The number of long-term unemployed continues to drop, down almost 30% YoY to 2.7 million. Job growth continues at a moderately strong rate — and has accelerated during the past year from +1.6% YoY to +2.4% YoY. Part-time for economic reasons continues to fall, down 8% NSA over the past year. The broadest measure of unemployment (U-6) has fallen from 13.1% to 11.4% during the past year (NSA). The number of full-time workers has risen 2.6% YoY NSA; the number of part-time is almost unchanged.

The weakest progress is in hours and wages. Hours remain stalled for the 5th month at 34.6/week, as employers keep people at less-than full time and avoid overtime (both showing the surplus of workers over demand). Average hourly earning is up only 2% YoY, slightly ahead of inflation but less than we should get in a recovery — and far less than the fantastic boom in profits. Look further down to see more about this bad news.

(3) The bottom line.

Here’s one version of the bottom line (at the end is a more accurate version) of the numbers in the Febuary employment report: job growth continues at roughly the same rate as during the past ten months. Not slowing, as some feared. It might even be breaking out, as some hoped. Employment is a coincident indicator, unlike the leading indicators examined yesterday.

The following graphs show the numbers on on a Year-over-Year NSA basis, smoothing the lines but losing resolution on recent change. The numbers are too noisy and too revised to see the pattern otherwise.

Is this rate fast or slow? The monthly numbers don’t say, especially since population growth means that the same number of new jobs represents slower growth over time. Let’s look at job growth as a percent change. We see a slow — very slow — acceleration, perhaps even the start of a break-out: 2.4% YoY  NSA (2.1% YoY using the Household survey data, a second survey confirming the results). That’s the fastest since May 2000 — at the peak of the tech bubble.

Here’s good news: the number of jobs is growing faster than the working age population!

(4) Bad news about wage growth.

Wage growth is slowing. High profits plus a tightening labor market should produce rising wages for the average worker.  It’s not happening — although for several years we’ve been told that it’s going to happen real soon. Wage growth peaked in August 2014, and has rolled over.

This is an important change, perhaps one of the most important structural changes of the past few decades. A strong recovery should bring strong wage growth. Corporations have learned how to break this relationship, what economists thought was a “law”. They’ve broken the unions, developed tacit (or even explicit) agreements to suppress wages, and many other means to shift money from wages to profits. See this example of these methods: firing your American workers, replacing them with cheap young foreign workers imported under H1-B visas. They’ve grown so powerful they no longer need to disguise these illegal actions.

Update: for a brief but powerful analysis showing why wage growth should be higher at this point in the cycle see Benn Zipperer at Equitable Growth: “U.S. wage growth remains sluggish despite employment gains.” Especially note the graph.

(5) How do we make sense of this numbers blizzard?

To help us the Fed produces a Labor Market Conditions Index, using a model fed by 19 indicators. It paints a picture of job conditions consistent with the slow growth of most economic indicators since Summer 2012. Like most indicators it shows no acceleration. No signs of the coming boom predicted by so many during the past 3 years. It’s growth even slower than during the previous cycle.

(6)  Update: About ZH’s accusations of fraud.

Today from that popular engine of misinformation, Zero Hedge (bold in original):

Today we ask again: did the BLS once more forget to add the now tens of thousands of jobs lost in the US energy sector? We ask because the divergence is getting, frankly, ridiculous. In the February NFP report, the establishment survey reported that just 1.1K jobs were lost in the “Oil and Gas Extraction” industry: this is lower than the downward revised number of 1.8K in January, and adds up to only 2900 jobs lost in 2015. As a reminder, this is what Challenger said just yesterday:  “Once again, the energy sector saw the heaviest job cutting in February, with these firms announcing 16,339 job cuts, due primarily to oil prices.” … As a result, this is what the job losses in the energy sector look like based on the calculation of the BLS and of Challenger, which actively counts the layoffs, and has no White House-driven agenda to paint a rosier than reality picture.

Back on Earth, the BLS explains the process: “For both surveys, the data for a given month relate to a particular week or pay period. … In the establishment survey, the reference period is the pay period including the 12th…”.

Challenger reports announcements in the month of February. BLS tracks employment as of the 12th of February. Announcements precede firings by weeks or even months. Also, Zero Hedge just makes up these accusations of White House interference with the government statistics. Perhaps they get them from Fox.

(7)  For More Information.

(a)  See all posts about economics. Especially see this: Dreams of a boom fade & attention turns to secular stagnation. Also see these posts about “stall speed”: The dilemma of the US economy: can’t take off & too close to the brink and Has America’s economy entered the “coffin corner”?

(b)  Recent posts about this cycle:

1. Dreams of a boom fade & attention turns to secular stagnation., 4 February 2015.
2. Listen to the slowing US economy, hear echoes of Japan, 6 February
3. How close are we to the next recession? — More indicators.