November Jobs Report: Very Positive Headlines, But With Weak Hours And Aggregate Payrolls

In the earlier part of this year my Big Theme was that the AI Boom (or possibly bubble) had been counterbalancing a stagnant or even shallowly recessionary rest of the economy. In the last few months that has changed to the economy being in an inflationary expansion, including a slight pick-up in employment and downward drift in unemployment.

After a preliminarily weak report this month, this month came in at the stronger end of that range.

Below is my in depth synopsis.

HEADLINES:

• +165,000 jobs gained. Private sector jobs increased 159,000, while government jobs rose 6,000. The three month average increased to +137,000.

• The pattern of downward revisions to previous months reversed this month, as August was revised upward by +53,000, and September was also revised higher by +31,000 for a total increase of +84,000.

• The alternate, and more volatile measure in the household report, rose sharply for the third month in a row, by +463,000 jobs. Because of the lapse in reporting last October, there is no YoY comparison this month. 

• The U3 unemployment rate declined -0.1% back to 4.1%. 

• But the U6 underemployment rate rose +0.2% to 7.9%.

• Further out on the spectrum, those who are not in the labor force but want a job now rose +234,000 to 6.024 million, well within its recent range.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn vs. rebounding. These were decidedly mixed.

• The average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declilned -0.2% to 41.8 hours.

• Manufacturing jobs rose +19,000, the 7th increase in the last 12 months.

• Truck driving, which had reversed its recent decline for three month in a row, was unchanged this month.

• Construction jobs declined -3,000.

• Residential construction jobs, which are even more leading, declined again, by -1,200.

• Goods producing jobs as a whole rose +15,000. 

• Temporary jobs, which had declined by over -650,000 since late 2022, but has reversed higher most of this year, rose again, by 18,600.

• The number of people unemployed for 5 weeks or less rose +72,000 to 2170 million, well within its range over the last 3 years.

Wages of non-managerial workers 

• Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.12, or +0.4%, to $32.75, for a YoY gain of +3.3%. Except for July’s +3.2%, and several months affected by pandemic shutdowns, this equals the lowest since December 2019. This remains less than the 3.7% YoY inflation rate as of September, meaning that these workers are again earning less in real terms.

Aggregate hours and wages: 

• The index of aggregate hours worked for non-managerial workers declined -0.2%, and is up 1.2% YoY.

• The index of aggregate payrolls for non-managerial workers rose +0.2%, and is up 4.6% YoY, and up 0.9% above the YoY inflation rate through September.

Other significant data:

• Professional and business employment continued its recent increasing trend, up +70,000. These tend to be well-paying jobs. This remains above its low from last October, and remains higher YoY as well.

• The employment population ratio reversed its recent declines, rising another +0.1% to 59.3%, vs. 61.1% in February 2020.

• The Labor Force Participation Rate rose +0.1% to 61.9% , vs. 63.4% in February 2020. IMPORTANT: both the EPOP and LFPR are greatly affected by the retiring Boomer population. In the prime age 25-54 demographic, they are virtually unchanged.
  

SUMMARY

This was one of the most positive reports all year, still consistent with an inflationary expansion, and with mixed but reasonably good internals. The employment gain was weak, and so were the revisions. The unemployment rate declined, and hourly earnings increase well. Weaknesses included an increase in the underemployment rate, a negative number for aggregate hours, and a very weak increase in aggregate payrolls, almost certainly less than the likely increase in inflation this month. Perhaps most importantly, real aggregate nonsupervisory payrolls remain positive YoY, signaling that the expansion is continuing.