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Economy in Brief

U.S. Payroll Increase Is Moderate While Wage Growth Accelerates Y/Y
by Tom Moeller  February 2, 2018

The labor market remains firm. Nonfarm payrolls increased 200,000 (1.5% y/y) during January following a 160,000 December gain and a 216,000 November rise. Together these two figures were revised down by 24,000. A 184,000 increase in payrolls had been expected in the Action Economics Forecast Survey. Average hourly earnings rose an expected 0.3% following upwardly revised increases of 0.4% and 0.3% in the prior two months. The 2.9% y/y increase in earnings was the strongest since June 2009. The unemployment rate held steady at an expected 4.1% for a fourth straight month. The overall unemployment rate, including the marginally-attached and those working part-time for economic reasons, ticked higher to 8.2% from 8.1%, down from 9.4% one year earlier.

From the payroll employment survey, the report of a 200,000 increase in jobs last month accompanied five years of minor revision. Factory sector employment in January rose 15,000 (1.5% y/y), the weakest increase in four months. Construction sector payrolls improved 36,000 (3.6% y/y). Increases during the last three months represent significant improvement versus most of 2017. Mining sector employment increased 4,000 (9.3% y/y), the strongest gain since August.

In the private service-producing sector, the 139,000 jobs increase (1.6% y/y) was fueled by a 38,000 rise (2.0% y/y) in education & health services employment, which approximated the prior two monthly increases. The number of leisure & hospitality workers rose a moderate 35,000 (2.2% y/y) following a 37,000 gain. Employment in the trade, transportation & utility sector improved 34,000 (0.7% y/y), recovering after December's 3,000 decline. Education & health services jobs increased 38,000 (2.0% y/y), down from the gains logged early last year. Professional & business service employment increased 23,000 (2.2% y/y) after a 25,000 rise. Growth during the last three months, however, is roughly one-third what it was six months earlier. The number of temporary help jobs gained 1,800 (3.4% y/y), down sharply from the increases earlier in the year. Employment in the financial sector rose 9,000 (1.4% y/y), on a par with the modest gains since February of last year. Information sector employment declined 6,000 (-1.4% y/y) and has been falling since the end of 2016.

Government sector payrolls improved 4,000 and were roughly unchanged y/y. Federal government hiring rose 5,000 (-0.3% y/y) following four consecutive months of decline. Local government employment strengthened 10,000 (0.4% y/y), the strongest rise since August. The number of state government jobs fell, however, by 11,000 (-0.9% y/y) and have been falling since early last year.

The 0.3% increase in average hourly earnings owed its strength to a 0.4% increase (3.0% y/y) in private service sector earnings. It followed a 0.5% December increase. Professional & business services pay gained 0.6% (3.0% y/y) after a 0.4% rise. Earnings in the information sector increased 0.5% (3.7% y/y) for the second time in three months. Education & health services earning rose 0.4% (3.0% y/y), also for the second time in three months, while leisure & hospitality earnings improved 0.2% (3.3% y/y) after a 0.4% gain. Financial activities earnings ticked 0.1% higher (4.2% y/y) after a 0.7% jump.

The length of the average workweek declined to 34.3 hours, the shortest workweek since September and down from 34.6 hours early in 2016. Mining sector hours fell to 45.2 from December's high of 45.7. Factory sector hours shortened to 40.6 from 41.0 just six months earlier. Construction sector hours fell to 39.0, about where they've been for two years. Private service sector hours fell to 33.2 where they've been for a year.

From the household employment survey, stability in the unemployment rate at 4.1% reflected a 91,000 (population adjusted) increase in employment and a 185,000 (population adjusted) gain in the labor force. The number of individuals unemployed rose 93,000 (population adjusted). The labor force participation rate held steady at 62.7% for the fourth straight month and has been moving sideways since early 2016. It's fallen from the 67.1% rate logged from 1997 to 2000. The average duration of unemployment of 24.1 weeks was below the 25.3 weeks twelve months earlier.

By educational attainment, the unemployment rate for those with less than a high school diploma of 5.4% accompanied by a y/y decline in employment of 0.4%. High school graduates but no college were 4.5% unemployed while employment rose 1.6% y/y. Individuals with less than a bachelors degree were 3.4% unemployed and employment eased 0.2% y/y. College graduates were 2.1% without work and employment rose 3.2% y/y.

The teenage unemployment rate of 13.9% compared to 7.4% for individuals aged 20-24 years old. Individuals aged 25-54 were 3.5% jobless and those over age 55 were 3.0% without work.

The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.

Employment: (SA, M/M Change, 000s) Jan Dec Nov Jan Y/Y 2017 2016 2015
Payroll Employment 200 160 216 1.5% 1.6% 1.8% 2.1%
 Previous Estimate -- 148 252 -- -- -- --
  Manufacturing 15 21 30 1.5 0.7 0.1 1.2
  Construction 36 33 42 3.6 2.4 4.1 5.0
  Private Service-Producing 139 111 139 1.6 1.8 2.2 2.4
  Government 4 -6 -1 0.0 0.4 0.9 0.7
Average Weekly Hours - Private Sector 34.3 34.5 34.5 34.4 34.4 34.4 34.5
Private Sector Average Hourly Earnings (%) 0.3 0.4 0.3 2.9 2.5 2.6 2.3
Unemployment Rate (%) 4.1 4.1 4.1 4.7 4.4 4.9 5.3
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