Net Job Creation Through March 2019

We prefer to use three-month moving averages in our analyses to reduce short-term variability, but in averaging employment statistics in this way we obscure what we think is inferior data.

Figure 1a shows the raw monthly data since January last year and the extreme variability that has been reported. The average monthly job creation in the last 15 months has been 214,666.

The employment data has been seasonally adjusted. We have developed Figure 2 to examine if any seasonality is left in the data after adjustment. In the nine years since and including 2011, the average month-on-month change from February to March has been negative 31 percent. This year the change was positive 494 percent. We think it’s significant to look at the results this way because there is so much variability in the numbers that a long-term context is necessary.

In order to get another look at the degree of change, we have developed Figure 3. This shows the same total employment line as Figure 1, but includes the year-over-year growth on a percentage basis and shows more clearly the steady improvement that occurred during 2018. The year-over-year growth of the total number employed has been in the 1.6 to 1.9 percent range every month since January 2018. Considering the variability of the raw monthly data, we think the year-over-year view is the best way to evaluate what’s really going on.  

November 2018 was the first month ever for total nonfarm payrolls to exceed 150 million and in March 2019 was 12.451 million more than the pre-recession high of January 2008.

According to the latest BLS data, the average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.5 hours in March, offsetting a decline of 0.1 hour in February. In manufacturing, the average workweek was unchanged in March at 40.7 hours, while overtime decreased by 0.1 hour to 3.4 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls rose by 0.1 hour to 33.7 hours. In March, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $27.70, following a 10-cent gain in February. Over the past 12 months, average hourly earnings have increased by 3.2 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 6 cents to $23.24 in March.

The official unemployment rate, U3, reported in the BLS Household survey (see explanation below) was unchanged in March at 3.8 percent. U3 has ranged from 3.7 to 4.0 percent in each of the last 12 months. This is not a very representative number. The more comprehensive U6 unemployment rate is currently lower than at any time since December 2000 (Figure 4). The difference between these two measures in March was 3.5 percent. This was the lowest since April 2006. This is an encouraging result because U6 includes individuals working part time who desire full-time work and those who want to work but are so discouraged they have stopped looking.

The labor force participation rate is calculated by dividing the number of people actively participating in the labor force by the total number of people eligible to participate. This measure was 63.0 percent in March and hasn’t changed much in three years. Another gauge is the number employed as a percentage of the population, which we think is more definitive. In March, the employment-to-population ratio was 60.7 percent, the highest number since December 2008. The employment-to-population ratio has made progress for the last five years, but the labor force participation rate has been stalled for three years. Figure 5 shows both measures on one graph.

In the 39 months since and including January 2016, there has been an increase of 7,229,000 full-time and a decrease of 440,000 part-time jobs. Figure 6 shows the rolling 12-month change in both part-time and full-time employment. This data comes from the Household survey and part-time is defined as less than 35 hours per week. Because the full-time/part-time data comes from the Household survey and the headline job creation number comes from the Establishment survey, the two cannot be compared in any given month. To overcome the volatility in the part-time numbers, we look at a rolling 12 months for the full-time and part-time employment picture shown in Figure 6.

The job openings report known as JOLTS is reported on or about the 10th of the month by the Federal Reserve and is over a month in arrears. In the March employment report, JOLTS data was revised back to its inception in January 2001 and the recent numbers were increased significantly. For example, job openings in November were revised up from 6,888,000 to 7,626,000. Figure 7 shows the revised history of unfilled jobs through January when openings stood at 7,581,000. The all-time high was 7,626,000 in November 2018. There are now more job openings than there are people counted as unemployed.

Initial claims for unemployment insurance, reported weekly by the Department of Labor, have decreased in five of the six weeks prior to March 30 on a four-week moving average. New claims in September were at the lowest level since 1969. The U.S. is enjoying the longest streak since 1973 of initial claims below 300,000 (Figure 8).

SMU Comment: Another excellent employment report showing the dismal February result to be a statistical blip. Job openings continue to be very high, new unemployment claims are very low and there are less discouraged people who can’t find a job. Rising employment is a factor in total consumer spending, which is a driver of both GDP and steel consumption.

Explanation: On the first Friday of each month, the Bureau of Labor Statistics releases the employment data for the previous month. Data is available at www.bls.gov. The BLS reports on the results of two surveys. The Establishment survey reports the actual number employed by industry. The Household survey reports on the unemployment rate, participation rate, earnings, average workweek, the breakout into full-time and part-time workers and lots more details describing the age breakdown of the unemployed, reasons for and duration of unemployment. At Steel Market Update, we track the job creation numbers by many different categories. The BLS database is a reality check for other economic data streams such as manufacturing and construction. We include the net job creation figures for those two sectors in our “Key Indicators” report. It is easy to drill down into the BLS database to obtain employment data for many subsectors of the economy. For example, among hundreds of sub-indexes are truck transportation, auto production and primary metals production. The important point about all these data streams is the direction in which they are headed. Whenever possible, we try to track three separate data sources for a given steel-related sector of the economy. We believe this gives a reasonable picture of market direction. The BLS data is one of the most important sources of fine-grained economic data that we use in our analyses. The states also collect their own employment numbers independently of the BLS. The compiled state data compares well with the federal data. Every three months, SMU examines the state data and provides a regional report, which indicates strength or weakness on a geographic basis. Reports by individual state can be produced on request.