Monday, December 8, 2014

US Employment: Old Normal (excerpt)

As I do every month, I cut to the chase when analyzing the employment report by calculating our Earned Income Proxy, which is highly correlated with both private-sector wages and salaries as well as retail sales. Our proxy is simply the average workweek times payrolls times average hourly earnings in the private sector. It jumped 1.0% m/m during November as the workweek rose 0.1 hours, payrolls jumped 314,000, and wages rose 0.4%.

Revisions have added 44,000 jobs to the preliminary estimates for September and October, now showing gains of 271,000 and 243,000, respectively. During the first 10 months of this year, nine of the months were revised higher.

Some cranky observers question November’s strength, noting that it might have been boosted more than usual by seasonal workers in retailing, transportation, and warehousing. Others question the seasonal adjustment factor. Then again, odds are that November’s number will be revised higher anyway.

What about wages? November’s 0.4% m/m increase was the best monthly gain since June 2013. However, it remained stuck around 2% on a y/y basis. So far, upward pressures seem to be building up only in construction (2.5%) and leisure & hospitality (3.6). Manufacturing (1.1) remains remarkably moderate. Retail trade (2.3) and wholesale trade (2.5) are in line with the average trend. Financial services (3.8) and transportation and warehousing (2.9) are relatively high, while natural resources (1.4) and educational & health services (1.6) are relatively low.

Today's Morning Briefing: Sheik Out. (1) Sheiks vs shale. (2) The world’s lowest-cost producer. (3) Offshore drillers tend to have highest costs. (4) Shale drillers are more nimble and tech savvy. (5) No bust for frackers. (6) Saudis facing Iranian surrogates in Yemen. (7) Saudis draw $60 line in the sand. (8) Frackers still pumping. (9) Weak oil price boosting dollar. (10) EM oil consumers are winners. (11) Back to the old normal in the labor market? (12) “The Theory of Everything” (+ +). (More for subscribers.)

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