Monday, January 12, 2015

Mixed Employment Report (excerpt)

December’s wage data were disappointing. Indeed, while private-sector payroll employment rose solidly by 240,000 and the average workweek for the sector was unchanged at 34.6 hours, the drop in private-sector wages by 0.2% m/m caused our Earned Income Proxy to flatten during December following November’s jump of 0.8% m/m. That doesn’t augur well for retail sales. However, the strong pace of employment and the boost to real incomes from lower energy costs should drive consumer spending higher in coming months. Let’s review the employment report:

(1) Payroll employment rose 2.95 million last year, the best calendar-year gain since 1999. Upward revisions totaling 50,000 during October and November boosted the former’s gain to 261,000 and the latter’s to 353,000.

(2) Full-time employment rose to a cyclical high of 119.9 million at the end of last year according to the household survey. That’s the most since July 2008. Part-time employment fluctuated around 27.5 million last year. In other words, there is no evidence in these data that Obamacare boosted part-time employment, as was widely feared. (That doesn’t mean I am endorsing the program. Rather, I continue to be impressed by the resilience of the economy despite Washington’s meddling!)

(3) The labor force fell 273,000 during December as the number of dropouts rose 456,000 to a record high of 92.9 million. Many economists have been expecting that this number would fall as the labor market tightened and encouraged more people to reenter the labor force because jobs are easier to get. That hasn’t happened so far. It is likely that many long-term unemployed workers are dropping out.

Today's Morning Briefing: Averting a “Catastrophe”. (1) Fairy Godmother and Godfather. (2) Charles Evans is an influential and patient member of the FOMC. (3) Is the Fed more or less patient than Evans? (4) Normalization looking less likely this year to us. (5) See you after April 28-29 FOMC meeting. (6) Stronger dollar could hurt. (7) Wage inflation heading in the wrong direction. (8) Wage weakness: Noise or signal? (9) Despite solid job gains, workers continue to drop out of labor force. (10) “Wild” (+ + +). (More for subscribers.)

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