Monday, September 9, 2013

Earned Income Proxy at New High (excerpt)

Every month, The Employment Situation report compiled by the Bureau of Labor Statistics (BLS) provides an overwhelming amount of data about the labor market. When it is first released, I immediately focus on one key series that I derive by multiplying total hours worked in private industries by the comparable series for average hourly earnings. The first variable reflects the number of people working and their average hourly workweek. The second variable is a measure of their average hourly pay.

The result is our YRI Earned Income Proxy, which rose 0.6% in August to a new record high. That’s very good news since it tends to be highly correlated with wages and salaries in the private sector, which are included in personal income. Indeed, I’ve learned from the BLS that the preliminary estimate for the latter is based on an earned income proxy similar to the one we devised.

The YRI Earned Income Proxy is also highly correlated with retail sales. In other words, notwithstanding the widespread disappointment with August’s payroll gain of 169,000 and the downward revision of 74,000 in payrolls during June and July, the underlying trend in the labor market remains positive.

By the way, in his Barron’s column this week, Randy Forsyth reports that JPMorgan economist Michael Feroli “turned up a factoid in the establishment data that might account for some of the shortfall in payrolls--a record 22,000 plunge in motion-picture jobs last month.” A health scare in the adult segment of the industry last month caused a temporary work stoppage, which should be reversed next month.

Today's Morning Briefing: G-Rated Employment. (1) An employment report for the general public. (2) No graphic content produced last month. (3) Tiny tapering likely after all the taper talk. (4) Proxy for wages and salaries up at record high. (5) Full-timers working longer hours. (6) Full-time workers' wages rising faster too. (7) Jobless rate only 0.3 ppt from 7% threshold for QE to disappear. (8) Labor force dropouts reduce unemployment rate. (9) Who is dropping out and why? (More for subscribers.)

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