Last Friday (May 5, 2023), the U.S. Bureau of Labor Statistics (BLS) released its latest labor market data—— Employment Situation Summary – April 2023 – This points to continued employment growth and a modest decline in the unemployment rate. Despite the Fed’s deliberate attempt to disrupt the labor market, data for April suggested that the rate hikes were falling short, even as inflation fell relatively quickly. This is not surprising. Monetary policy is a relatively ineffective tool for suppressing demand. Most aggregates remained stable, and net employment change in March remained relatively strong for the pre-pandemic period. Real wages are finally improving in the face of slowing inflation. Overall, the U.S. labor market is stable and does not appear to be contracting amid Fed rate hikes.
Overview April 2023 (seasonally adjusted):
- Employment rose by 253,000 – a slight increase over the past few months.
- The Labor Force Survey showed a net increase of 139,000 total employment (0.09%).
- The labor force recorded a net decrease of 43,000 (-0.03%).
- The participation rate rose 0.1 percentage point to 62.6%.
- The measure of total unemployed fell by 97,000 to 5.839 million.
- The official unemployment rate fell 0.1 percentage point to 3.4%.
- The broad measure of labor underutilization (U6) fell 0.1 point to 6.6%.
- The employment-population ratio was unchanged at 60.4% (still well below the May 2020 peak of 61.2).
For those confused about the difference between wage (institutional) data and household survey data, you should read this blog post – The U.S. labor market is in bad shape – I explain the differences in detail here.
Some months have very small differences, while others have large differences.
Salary Employment Trends
The U.S. Bureau of Labor Statistics states:
Total nonfarm payrolls rose by 253,000 in April, compared with the 290,000 monthly average for the prior six months…
Employment in professional and business services continued its upward trend in April (+43,000). Over the past 6 months, the industry has averaged 25,000 per month in…
Employment in the healthcare industry rose by 40,000 in April, compared with the 47,000 monthly average for the previous six months…
Employment in leisure and hospitality continued its upward trend in April (+31,000)…still 402,000, or 2.4%, below its pre-pandemic level in February 2020.
Social assistance added 25,000 jobs in April, in line with the 21,000 average monthly gain in the prior six months…
Financial activities employment increased by 23,000 in April…Financial activities employment was little changed in the first 3 months of the year
Year.Government sector employment continued its upward trend in April (+23,000)…and was 301,000, or 1.3%, below the February 2020 level.
Employment in mining, quarrying, and oil and gas extraction rose by 6,000 in April, up 102,000 since a recent low in February 2021…
Employment in other major industries was little changed in a month…
All in all, there are no signs of a looming recession, despite a sharp decline in average monthly net job creation in 2022.
The first graph shows the monthly change in employment (in thousands, expressed as a 3-month moving average to remove monthly noise). The red line is the annual average. Observations between January 2020 and January 2020 were excluded as outliers.
However, some industries have still not regained the jobs lost in 2020-21.
The graph below shows the same data in a different way – in this case, the graph shows the average monthly wage employment net change (real) for the calendar year 2005 through 2023.
The red marks on the columns are the results for the current month.
Average monthly change – 2019-2023 (000s)
| Year | Average Monthly Employment Change (000s) |
| 2019 | 163 |
| 2020 | -774 |
| 2021 | 606 |
| 2022 | 399 |
| 2023 (present) | 285 |
Labor Force Survey Data – Job Growth Slows
Seasonally adjusted data for April 2023 shows:
1. Labor Force Survey Total Employment Net Increase of 139K (0.09%) – Significantly weaker.
2. The net decrease in the labor force was 43,000 (-0.03%).
3. The participation rate remained unchanged at 62.6%.
4. As a result (in accounting terms), the total number of unemployed fell by 182,000 to 5.657 million, and the official unemployment rate fell by 0.1 percentage point to 3.4%.
While there have been no signs of a recession so far, conditions have softened this month.
The chart below shows monthly job growth since January 2008 and excludes extreme observations (outliers) between May and January 2020 that distort the current period relative to the pre-pandemic period.
The employment-to-population ratio is a good indicator of the strength of the labor market because the denominator, population, is not particularly sensitive to cycles (unlike the labor force), so movements are relatively clear.
The graph below shows the US employed population from January 1950 to April 2023.
In April 2023, the rate remains unchanged at 60.4%.
The pre-pandemic peak level was 61.1% in May 2020.
Unemployment and Underutilization Trends
The U.S. Bureau of Labor Statistics states:
The unemployment rate was 3.4% in April, with 5.7 million people unemployed, little changed. Since March 2022, the unemployment rate has been between 3.4% and 3.7%.…
The number of long-term unemployed (people unemployed for 27 weeks or more) was little changed on the month at 1.2 million, or 20.6% of the total…
The number of people working part-time for economic reasons was little changed at 3.9 million in April. These people who would have preferred to work full-time are working part-time because their hours have been reduced or they cannot find full-time employment. …
So the rather static picture continues.
The first graph shows the official unemployment rate since January 1994.
The official unemployment rate is narrow Measures of labor waste, which imply strict comparisons with the 1960s, for example, in terms of tightness in the labor market, must take into account broader measures of labor underutilization.
The figure below shows the BLS metric U6, which is defined as:
Total unemployed, plus all marginalized workers plus total number of people working part-time for economic reasons, as a percentage of all civilian labor force plus all marginalized workers.
As such, it is the broadest quantitative measure of labor underutilization published by the BLS.
Pre-COVID, U6 was 6.8% (January 2019).
In April 2023, the U6 indicator was 6.6%, down 0.1 percentage point due to a fall in the unemployment rate, while other determinants remained largely unchanged. It is still 0.1 percentage point above the December 2022 level.
How is wage growth in the US?
The U.S. Bureau of Labor Statistics reports:
Average hourly earnings for all private nonfarm employees rose 16 cents, or 0.5%, to $33.36 in April. Average hourly earnings have increased 4.4% over the past 12 months. Average hourly earnings for private-sector production and nonsupervisory employees rose 11 cents, or 0.4%, to $28.62 in April.
Newest – Summary of BLS Actual Benefits (posted April 12, 2023) – Tell us:
Real average hourly earnings for all employees rose 0.2% seasonally adjusted from February to March…the results were driven by a 0.3% increase in average hourly earnings and the Consumer Price Index (CPI-ü) for all urban consumers. …
Real average weekly earnings fell 0.1% over the month due to changes in real average hourly earnings and a 0.3% reduction in the average weekly hours worked.
From March 2022 to March 2023, real average hourly earnings fell 0.7% on a seasonally adjusted basis. The change in real average hourly earnings combined with the 0.9 percent decline in average weekly hours worked resulted in a 1.6 percent decline in real average weekly earnings. period.
Overall, inflationary pressures are easing rapidly, with nominal wage growth starting to lead to modest real wage growth.a good sign
The table below shows the change in nominal Average Hourly Earnings (AHE) by industry and inflation-adjusted AHE by industry in April 2023 (note that we are using the February CPI for the adjustment – this is the latest data).
There is considerable variation across industries, with most industries starting to see modest real wage growth in the last month.
The chart below shows the annual growth rate of real average hourly earnings from 2008 to April 2023.
Real wage cuts have slowed, and it is hoped that workers will start enjoying sustained real wage growth.
Another indicator that tells us whether the labor market is shifting in favor of workers is the turnover rate.
The latest BLS data — Job Openings and Labor Turnover Summary (Published April 4, 2023) – states:
The number of job vacancies fell to 9.6 million on the last working day of March…Over the month, hiring and total departures were little changed at 6.1 million and 5.9 million respectively. Among separations, layoffs (3.9 million) were little changed, while layoffs and layoffs (1.8 million) increased…
In March, the number of people who quit smoking and the rate of smoking cessation did not change much, being 3.9 million and 2.5% respectively. Fewer quitters in accommodation and food services (-178,000).
If there is a recession in the U.S. labor market, the resignation rate will fall.
in conclusion
In April 2023, the latest US labor market data showed no sign of a recession, although net job growth had slowed.
Net employment changes in March remained relatively strong compared with the pre-pandemic period.
Real wages are finally improving in the face of slowing inflation.
Overall, the U.S. labor market is stable and does not appear to be contracting amid Fed rate hikes.
Enough for today!
(c) Copyright 2023 William Mitchell. all rights reserved.
