With the update on inflation earlier this week, let’s take a look a real average wages and real aggregate payrolls. Plus there is a significant update to my yellow flag caution on the employment situation.

First, nominally nonsupervisory wages rose slightly under 0.3% in November, while consumer prices rose slightly more than 0.3%. Thus real average hourly wages declined slightly, but rounded to unchanged:

Real hourly wages remain at their all-time record high excluding the two months of pandemic lockdowns, where the result was heavily skewed by the layoffs of low income workers.

Aggregate nonsupervisory payrolls rose slightly under 0.4%, so after inflation real aggregate payrolls rounded to up 0.1%:

This is yet another all time record high. I pay a lot of attention to this metric, because it has almost always turned down at least several months in advance of any recession. 

That’s the good news. Now the bad news.

On Monday I wrote that the Establishment jobs Survey started flashing some yellow caution signals, partly in the downturn in manufacturing jobs, and its spread to a slight downturn in goods producing jobs sector. Beyond that, the YoY% gain for jobs as a whole was a little under 1.5%. I pointed out that in the past a gain that low has typically presaged a recession. I further wrote that the latest preliminary release for Q2 of this year of the comprehensive QCEW, a nearly full census of all employment, showed a gain of only 0.8% for the entire 12 month period, vs. a gain of 1.6% for the official nonfarm payrolls report.

One drawback of the QCEW is that it is not seasonally adjusted. But the Philadelphia Fed has a series called the Early Benchmark, which does undertake a seasonal adjustment based on some 75% of the entire employment universe.

This was released yesterday, and the news was not good. According to the Phildelphia Fed, there was an actual decline of -0.1% in Q2 of this year, vs. a gain of 0.3% in the official monthly reports, mainly due to a downturn in the month of June:

An important word of caution: a similar episode happened in 2022, which gave rise to a number of recession forecasts. And then when the preliminary QCEW was finalized, the decline was completely revised away. We won’t get that for 2024 for several more months, so as usual take this with a grain of salt. But it does add to the yellow flags.

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