US Employment

The Employment Situation report from the Bureau of Labor Statistics provides lots of data on the labor market every month. There tends to be lots of noise in the data and lots of noise about the data. Debbie and I prefer to cut to the chase by computing just one number based on the report, i.e., our Earned Income Proxy (YRI-EIP).

It is simply aggregate hours worked by all payroll employees times their average hourly earnings during the month. So it reflects the number of people working, the hours in their workweek, and their wage rate. It is highly correlated with aggregate wages and salaries in the private sector and jumped 0.7% for the second straight month during December to a new record high. Aggregate hours rose 0.4% and wages increased 0.3% last month. This measure is also highly correlated with retail sales, suggesting that a strong sales number will be reported on January 15 for the final month of last year.

Once again there was plenty of noise in the rest of the latest jobs report. Payroll employment rose 155,000 during December, following gains of 161,000 and 137,000 during November and October, which together were revised up by a net 14,000. Private payrolls rose 168,000 last month. On the other hand, the household measure of employment edged up by only 28,000 during December. However, when it is adjusted to be comparable to the payroll measure, the increase was 270,000, more in line with the ADP private payrolls gain of 215,000.

Contributing to the rise in payrolls during December was a 30,000 jump in construction employment. The gain was 18,100 among workers in the residential construction industry. Some of that might have been attributable to rebuilding following the devastation left by Hurricane Sandy. However, such employment is highly correlated with housing starts, which has been rebounding strongly in recent months. The partial resolution of the fiscal cliff issue at the start of the year also should boost employment as employers who held back on hiring move forward on doing so.

Today's Morning Briefing: One Singular Sensation. (1) From Booming Babies to Soaring Singles. (2) Demography is Washington’s destiny. (3) Singles account for half of working-age population! (4) Singles grew at four times the rate of married persons over past 10 years. (5) A self-absorbed generation leaving lots of debt. (6) Living longer, saving less, and spending more. (7) Fertility rate lowest on record. (8) Consumer Discretionary stocks should continue to outperform. (9) Our Earned Income Proxy soared to new high in December. (10) Bullish sensation. (11) “Django Unchained” (+). (More for subscribers.)