Politics Of The Employment Report

Today’s non-farm payrolls miss, 134k total jobs created in September, sealed the deal on the job creation political debate before the November midterms.   That is all things being equal — during President Trump’s first 20 employment reports versus President Obama’s last 20 — the Trump economy created 347k fewer total non-farm payroll jobs, and 137k fewer private sector jobs, than President Obama’s economy.

The differential will move even more against President Trump when October non-farm payrolls are reported, the Friday before the election, as the May 2015 326k jobs comp will be a bar too high to conquer.

These are the facts, spin them as you wish.

On the eve of the midterm elections it is likely that the Democrats will be able to argue that President Obama’s economy created 500k more jobs than President Trump’s economy over a similar period.   Reality clashes with virtual reality and bombastic rhetoric.

Perspective

However,  all things are never equal.  The Trump economy is running up against labor constraints with shortages breaking out almost everywhere, which is reflected in today’s 3.7 percent unemployment rate print, a 49-year low. It’s difficult to create the marginal job on this side of the inelastic labor supply curve.

Data should always be placed in the proper context.  But, hey, we are talking politics here,  and, politics ain’t beanbag,” folks.

Other Notables 

  • The shrinking labor supply is illustrated in the inflation differentials during the two periods –  4.14 percent under Trump, and 2.12 percent during Obama’s last 20 months in office.
  • Trump’s nominal Average Hourly Earnings are running about 70 bps higher than Obama
  • Real Average Hourly Earnings under Trump is about 1.3 percent lower than during President Obama’s last 20 employment reports
  • Real GDP growth under Trump is almost double President Obama’s last six quarters in office, but not reflected in the overall labor market, which reflects the economy continues to reward capital disproportionate to labor
  • Manufacturing jobs have recovered smartly during President Trump first 20 months, much of it due to the increase in oil prices, especially in the mining sector
  • Job creation in the government sector, which, on average, generates higher income paying jobs than the private sector, is much lower under President Trump

https://macromon.files.wordpress.com/2018/10/employment_2.png?w=622&h=662

https://macromon.files.wordpress.com/2018/10/employment_1.png?w=624&h=441

Source: Global Macro Monitor


Where The Jobs Were In June: Who’s Hiring And Who Isn’t

As noted earlier, September was a hurricane-affected month for payrolls, resulting in lower than expected jobs across several categories, among which Leisure and Hospitality jobs were the hardest hit.

https://www.zerohedge.com/sites/default/files/inline-images/leisure%20and%20hosp%20spet%202018.jpg

However, a deeper dive reveals that other industries were also severely impacted, with the 2nd worst September in contraction in Retail (-20K), Telecom (-3K), Education (-12K), Child Care (-4K) and Food Services (-23K).

This, according to Southbay Research, was remarkable because while last year’s layoffs surged 100K above trend due to 2 major Hurricanes that displaced millions and destroyed 10s of thousands of homes, with jobless claims across Texas, Florida and Puerto Rico soaring by 100K+, this year, one hurricane came but was very mild and had minimal impact, with Initial Jobless Claims rose a combined 12K. Yet somehow, “the impact was the same.”

Here’s one example: Food Services. As Southbay notes, somehow a mild storm led to layoffs at a scale only seen last year when 2 major Hurricanes shut down Puerto Rico and Florida and pummeled Texas.

https://www.zerohedge.com/sites/default/files/inline-images/food%20services.png?itok=Xlo30Uai

One note here is that if one were to revise last month’s data to incorporate the “missing” jobs, the impact on hourly earnings would be adverse as these are mostly lower paying jobs, and while the result would have been higher jobs, it would have also pushed down on hourly earnings.

Odd BLS estimates of layoffs aside, we know the following:

  • Employment in professional and business services increased by 54,000.
  • Health care employment rose by 26,000 as hospitals added 12,000 jobs, and employment in ambulatory health care services continued to trend up (+10,000).
  • Employment in transportation and warehousing rose by 24,000. Job gains occurred in warehousing and storage (+8,000) and in couriers and messengers (+5,000).
  • Construction employment continued to trend up in September (+23,000).
  • Employment in manufacturing continued to trend up in September (+18,000)
  • Employment in mining, employment in support activities for mining rose by 6,000

And visually:

https://www.zerohedge.com/sites/default/files/inline-images/jobs%20sept%20breakdown.jpg?itok=3pYNtUkj

Looking over the past year, the following charts from Bloomberg show the industries with the highest and lowest rates of employment growth for the prior year. The latest month’s figures are highlighted.

https://www.zerohedge.com/sites/default/files/inline-images/jobs%20bbg%202018-10-05_10-08-41.jpg?itok=YKWJ8IjG

One final observation from Southbay Research, who notes that overtime pay dropped as staffing increases.

Overtime is a temporary solution to strong demand.  While a drop in overtime can signal a fall in demand, it can signal that employers no longer think the strong demand is temporary.

Whatever the reason, after 1+ years of above-trend overtime, employers have turned to hiring.  Because it’s also cheaper than paying double rates for overtime. This, to Soutbay, “is another metric supporting continued hiring growth.”

https://www.zerohedge.com/sites/default/files/inline-images/overtime_0.png?itok=2rWocdZO

Source: ZeroHedge

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