COMMENTS ON JULY EMPLOYMENT
Philippa Dunne & Doug Henwood
The Liscio Report, August 7, 2015
This is a report custom-designed for the dog days: little of interest to distract one from the important business of R&R, including, if you’re lucky, fishing. A bit on the weak side, perhaps – especially the household survey – but not dramatically so. Status quo is a description that quickly comes to mind.
* Employers added 215,000 jobs in July, 210,000 of them in the private sector. This is midway between the first-quarter headline average of 195,000 and the second quarter’s 226,000. Construction added 6,000 (a third its average over the last year); manufacturing, 15,000 (slightly above average, though durables were off); wholesale trade, 6,000 (about average); retail, 36,000 (firmly above average); transportation, 14,000 (about average); information, 2,000 (half average); finance, 17,000 (a third above average); professional and business services, 40,000 (about three-quarters its average, with
temps in the red, unusually); education and health, 37,000 (about a quarter below average, all because health was a third below average); leisure and hospitality, 30,000 (slightly below average); “other
services,” 7,000 (exactly average); and government, 5,000 (all because of an 8,000 gain in local). Mining and logging, off an exactly average 4,000, was the only sector in the minus column.
* The back months were revised up by 14,000, about equally divided between May and June. No sector stood out as a major contributor. It is good to see positive revisions again after a string of negatives.
* Diffusion indexes were mixed, with the one- and three-month up and the six- and twelve-month down. All but the twelve-month are below where they were a year ago, which is typical later-cycle behavior –
though their levels are still well above where they were on the cusps of the most recent recessions.
* After four months of flatness, the average workweek rose 0.1 hour to 34.6, taking it back to February’s level. Manufacturing was up 0.1, but services were unchanged.
* Average hourly earnings were up 0.2% for the month (leaving the three-month average at 0.1%), and 2.1% for the year. The annual gain has bobbed about between 2.0% and 2.2% for most of the last two years
and are showing no signs of acceleration at all. May’s hourly earnings change was unrevised at 0.0%.
* The household survey was mostly weaker. Total employment was up 101,000 – or 265,000 when adjusted to match the payroll concept. The adjusted household measure is very volatile – for example, the previous four readings were -502, +211, +2, + 519 – so it’s best to look at the yearly change. That was 1.4% for the year ending in July, compared with 2.1% for the payroll survey. That reduces the adjusted household’s recent relative underperformance, but it remains significant, which often happens as a cycle matures.
* The labor force grew by just 69,000, a third as much as the population. Both the participation rate and the employment/population (EPOP) ratio were unchanged; EPOP is exactly where it was in January (and April 1984, for that matter). Part-time employment was down and full-time was up, both by numbers too ridiculously large to quote (household survey volatility again). But over the past year, part-time employment is down 3.3%, and full-time up 2.7% -encouraging news for those worried about job quality.
* The unemployment rate was unchanged at 5.3%, with no rounding funniness. The number of unemployed fell by 33,000, with the number of job losers, new entrants, and re-entrants all down and job leavers up. (That’s a rare interesting detail in this report, assuming it’s not statistical noise; we’ll be looking at the quit rate when JOLTS comes out next Wednesday.) The average duration of unemployment rose 0.2 to 28.3 weeks – twice its long-term average, but still well down from the 40-ish neighborhood of 2011 and 2012. The median was unchanged. Numerically, the middle durations fell while the less than five weeks and 27 weeks or more rose; the rise in short-term unemployment combined with the decline in job losses suggests modestly rising confidence.
* Job flows were, as they’ve typically been lately, mixed. The share of the June employed who became unemployed in July fell 0.1 from the previous month-pair to 1.1%, one of the lowest readings of the expansion; the share of the employed who left the labor force was also down. But the share of the June unemployed who found work in July also fell, and pretty hard: from 24.1% to 22.3%. And the share of the June unemployed who left the labor force also rose, from 24.8% to 25.7%. So, less job loss, but also less job finding.
So the job market continues to perform well, though not spectacularly, with absolutely no sign of wage pressures. There’s nothing in this report that is likely to change any minds on the FOMC, so a September move looks highly likely. But all moves are almost certain to be cautious – an edging back to the old “normal,” and, like today’s employment report, nothing dramatic.
– Philippa Dunne & Doug Henwood, The Liscio Report
Philippa -at- Panix.com
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Managed by Philippa Dunne and Doug Henwood, The Liscio Report is an independent research outfit located in New York City. They manage two proprietary surveys of state withholding and sales tax receipts. The Liscio Report began covering economic data in 1992.
Known for their meticulous dissection of federal data, pointing out technical anomalies glossed over in the mainstream press, and related debunking of market rumors, and for ferreting out market-moving shifts in the economic landscape as they develop, the Liscio Report survey highly informed senior tax officials who are watching the cash flow into the state coffers.
