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My theme for the past several years as to employment has been “deceleration,” as in a gradual cooldown from white hot to red hot to hot to warm. But at some point past “warm,” we get to lukewarm, and then cool, and then chilly. In other words, if it continues at some point “deceleration” transitions into “deterioration.” A “soft landing” would require that the deceleration end, and the numbers stabilize. That’s what I was watching out for last year. So this month I have continued to be on the lookout for stabilization vs. deterioration.Additionally, we have to be particularly careful at this time of year to overweight any one month, due to seasonality. Yes, of course these numbers are seasonally adjusted, but the Holiday season is particularly hard to get right.Below is my in depth synopsis.
Headlines:
256,000 jobs added. Private sector jobs increased 223,000. Government jobs increased by 33,000. Even including October’s poor number, the three month average was an increase of +165,000.
The pattern of downward revisions to previous months continued in part this month.. October was revised upward by 7,000, while November was revised down by -15,000, for a net decline of -8,000.
The alternate, and more volatile measure in the household report, showed an increase of 478,000 jobs. On a YoY basis, this series increased 537,000 jobs. This is good news after two of the previous three months had shown a YoY decline.
The U3 unemployment rate fell -0.1% to 4.1%. Since the three month average is 4.133% vs. a low of 3.7% for the three month average in the past 12 months, or an increase of just over 0.4%, this means the “Sahm rule” is once again not triggered. The rate for native born workers declined -0.2% (NSA) to 3.7%, up 0.2% YoY and that for foreign born workers also declined -0.2% (NA) to 4.3%, but was higher by 0.5% YoY.
The U6 underemployment rate declined -0.2% to 7.5%, 1.1% above its low of December 2022.
Further out on the spectrum, those who are not in the labor force but want a job now increased 22,000 to 5.505 million, vs. its post-pandemic low of 4.925 million in early 2023.
Leading employment indicators of a slowdown or recessionThese are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn. This month they were mixed:
the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, rose 0.1 hour to 40.9 hours, and November was also revised higher by 0.1%. This remains down -0.6 hours from its February 2022 peak of 41.5 hours, but on the other hand is the highest since December two years ago.
Manufacturing jobs declined -13,000. This series is firmly in decline.
Within that sector, motor vehicle manufacturing jobs declined -4,100.
Truck driving declined -800.
Construction jobs increased another 8,000.
Residential construction jobs, which are even more leading, rose by 3,500 to another new post-pandemic high.
Goods producing jobs as a whole declined -8,000, and are now -27,000 below their September peak. This is especially important, because these typically decline before any recession occurs. As I wrote two months ago, “in the absence of special factors this would be a serious red flag for oncoming recession.”
Temporary jobs, which have generally been declining since late 2022, rose by 5,300, the second increase in a row. These had declined over -550,000 since their peak in March 2022, so this is good news which may signal that the bottom in this metric is in.
the number of people unemployed for 5 weeks or fewer fell -52,000 to 2,166,000. This is in line with its range for the past 12 months.
Wages of non-managerial workers
Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.06, or +0.2%, to $30.62, for a YoY gain of +3.8%, the lowest since their post pandemic peak of 7.0% in March 2022. Nevertheless, and importantly, this continues to be significantly higher than the 2.7% YoY inflation rate as of last month.
Aggregate hours and wages:
The index of aggregate hours worked for non-managerial workers rose 0.2%. This measure remains up 1.1% YoY, which is in line with its trend for the past 18 months.
The index of aggregate payrolls for non-managerial workers was rose 0.4%, and is up 4.9% YoY. This resumes the pattern of slow deceleration since the end of the pandemic lockdowns, and is the lowest since early 2021. Nevertheless in real inflation adjusted terms this remains powerful evidence that average working families have continued to see gains in “real” spending money.
Other significant data:
Professional and business employment rose 9,400 to the highest number since July. These tend to be well-paying jobs. Their YoY comparison, however, remained 0.4%, which in the past 80+ years has almost always happened immediately before, during, or after recessions.
The employment population ratio rose 0.2% to 60.0%, vs. 61.1% in February 2020.
The Labor Force Participation Rate remained steady at 62.5%, vs. 63.4% in February 2020. The prime 25-54 age participation rate declined -0.1% to 83.4%, vs. its all time peak of 83.9% in June and July.
SummaryNeedless to say, in the main this report was strongly positive, as all the headline numbers moved in the right direction. There was also good news in aggregate payrolls, in the construction sector, and in the previously suffering professional and business as well as temp jobs sectors. The native born unemployment rate continues to be consistent with the very low initial jobless claims numbers we’ve been seeing each week. As I noted above, the leading indicators in the survey were mixed, as construction continued to power forward, and short term unemployment declined; but on the other hand, manufacturing continues to suffer and the goods producing sector as a whole has failed to make a new high for the past 3 months. Although this is hardly dispositive, it is a red flag. Meanwhile real wages remained positive, but this too has continued to decelerate. Much depends on the immediate future course of inflation.But to return to my main theme, this month was consistent with the “soft landing” scenario, although the longer term trend of deceleration has not been broken. And because of Holiday seasonality, take it with an extra grain of salt.More By This Author:Jobless Claims Still Rocked By Seasonality; Native Born Unemployment Rate Of Under 4% Forecast Truck Sales Sound A Warning November JOLTS Report Adds To The Data Showing Continued Labor Market Deterioration
