Last Friday (November 4, 2022), the U.S. Bureau of Labor Statistics (BLS) released their latest labor market data – Employment Situation Summary – November 2022 – This suggests that the U.S. labor market is showing signs of further slowing, with payrolls adding just 261,000 net jobs. Labor force indicators show employment and labor force growth turning negative as participation declines. As a result, the official unemployment rate rose 0.1 percentage point to 3.7%. There is also no base-wage pressure to push inflation further up. Wage growth appears to be a response to inflation rather than driving it. Wage growth appears to be a response to inflation rather than driving it. Given the data, the claim that wage pressures are driving inflation is untenable.
October 2022 overview (seasonally adjusted):
- Employment rose by 261,000.
- Total employment in the Labour Force Survey decreased by a net 328 (-0.21%).
- The labor force decreased by a net 22,000 (-0.01%).
- The employment-to-population ratio fell 0.1 percentage points to 60% (still below the May 2020 peak of 61.2).
- The total measured unemployment increased by 306,000 to 6.059 million.
- The official unemployment rate rose 0.2 percentage points to 3.7%.
- Participation fell 1 percentage point to 62%.
- The broad labor underutilization indicator (U6) rose 0.1 percentage point to 6.8%.
For those confused about the difference between wage (institution) data and household survey data, you should read this blog post – The U.S. labor market is in a sad state – I explained the differences in detail.
Some months have small differences, while others have large differences.
This month makes a big difference.
Salary Employment Trends
BLS states:
Total nonfarm payrolls increased by 261,000 in October. Monthly employment growth has averaged 407,000 in 2022 so far, compared with 562,000 per month in 2021. October saw notable job gains in healthcare, professional and technical services, and manufacturing…
Health care employment increased by 53,000 in October… Health care employment has averaged 47,000 monthly gains through 2022, and 9,000 monthly gains in 2021…
Professional and technical services added 43,000 jobs in October…monthly employment growth…41,000 on average so far in 2022 compared to 53,000 per month in 2021.
Manufacturing added 32,000 jobs in October…an average of 37,000 per month so far this year compared to 30,000 per month in 2021.
Social assistance employment rose by 19,000 in October, slightly below the February 2020 pre-pandemic level (-9,000)…
Wholesale trade added 15,000 jobs in October…an average of 17,000 per month so far in 2022 and 13,000 per month in 2021.
Employment in the leisure and hospitality sector continued its upward trend in October (+35,000)…an average monthly gain of 78,000 jobs so far this year is less than half of the 196,000-month average increase in 2021.
Leisure and Hospitality decreased by 1.1 million, or 6.5%, from February 2020 levels.Employment in the transportation and warehousing industry was little changed in October (+8,000)…the year-to-date average is 25,000, compared to 36,000 per month in 2021.
Financial activity employment was little changed (+3,000) in October…little change over the past 6 months.
Employment in other major industries was little changed during the month, including mining, construction, retail trade, information, other services and government.
Significant revisions were also made in August (down 23,000) and September (up 52,000) due to “additional reports received from businesses and government agencies.”
The first graph shows the monthly change in wage employment (in thousands, expressed as a 3-month moving average to remove monthly noise). The red line is the annual average. I ignore observations between January 2020 and October 2020 that are so extreme that it is difficult to compare the current period with pre-pandemic history.
The U.S. labor market has now surpassed pre-pandemic levels 514 thousand Employment, although the gains don’t even cut across sectors as detailed above.
The graph below shows the same data in a different way – in this case, the graph shows the average monthly net change in wage employment (real) for the calendar years 2005 to 2021.
The red markers on the columns are the results for the current month.
The final average for 2019 was 164,000.
The final average for 2020 was -774,000.
The final average for 2021 is 562,000.
So far, the 2022 average is 407,000, and it’s falling fast.
Labour Force Survey Data – Job Growth Is Now Declining
Seasonally adjusted data for October 2022 shows:
1. The total employment in the labor force survey decreased by 328,000 (-0.21%).
2. The labor force decreased by 22,000 people (0.01%).
3. The participation rate fell by 0.1 percentage points to 62.2%.
4. As a result (in accounting terms), the total measured unemployment increased by 306,000 to 6,059,000, and the official unemployment rate increased by 0.2 percentage points to 3.7%.
Taken together, these results point to a faltering labor market.
The graph below shows monthly employment growth since January 2008 and excludes extreme observations (outliers) between May 2020 and October 2020 that distort current relative to the pre-pandemic period period.
The employment-to-population ratio is a good measure of labor market strength, as the denominator population is not particularly sensitive to cycles (unlike the labor force), so movements are relatively well-defined.
The graph below shows the U.S. employed population from January 1950 to October 2022.
In October 2022, the ratio fell by 0.1 percentage points, a 60% decline.
The pre-pandemic peak level in May 2020 was 61.1%.
Unemployment and underutilization trends
BLS states:
The unemployment rate rose 0.2 percentage points to 3.7% in October, and the number of unemployed rose by 306,000 to 6.1 million. The unemployment rate has been in a narrow range of 3.5% to 3.7% since March…
The number of long-term unemployed (unemployed for 27 weeks or more) barely changed
1.2 million in October. Long-term unemployed account for 19.5% of all unemployed
people……The number of people working part-time for economic reasons was little changed at 3.7 million in October. These people who would have liked to work full-time are working part-time because their hours are reduced or they cannot find full-time employment…
The reasons for the rise in unemployment in October were:
1. Employment growth is negative
2. The participation rate fell slightly and the labor force contracted slightly.
3. Employment shrinks more than labor shrinks.
The first graph shows the official unemployment rate since January 1994.
The official unemployment rate is narrow A measure of labor waste, which means that strict comparisons with the 1960s, for example, in terms of labor market tightness, must take into account broader measures of labor underutilization.
The figure below shows the BLS measurement U6, which is defined as:
Total unemployment, plus total employment of all marginalized workers plus part-time employment for economic reasons, as a percentage of all civilian labor force plus all marginalized workers.
As such, it is the broadest quantitative indicator of labor underutilization published by the Bureau of Labor Statistics.
Before COVID, U6 was 6.8% (Dec 2019).
In October 2022, the U6 indicator was 6.8%, down 0.1 percentage points.
The decline was due to rising unemployment and stabilization of workers forced to work part-time for economic reasons — an indicator of U.S. underemployment.
What is the salary in the US?
With inflation currently rising sharply and the Fed pretending to have a major wage problem that needs to be disciplined as massive unemployment rises, one would expect to see strong nominal wage growth pushing up the price level.
The BLS report said:
Average hourly earnings for all private nonfarm payrolls rose 12 cents, or 0.4%, to $32.58 in October. Average hourly earnings rose 4.7% over the past 12 months. Average hourly earnings for private-sector production and non-supervisory employees rose 9 cents, or 0.3%, to $27.86 an hour in October.
However, the latest – BLS Actual Earnings Summary (Published 13 October 2022) – Tell us:
On a seasonally adjusted basis, real average hourly earnings for all employees fell 0.1% from August to September… This result stems from a 0.3% increase in average hourly earnings and the Consumer Price Index (CPI-U) for all urban consumers …
From September 2021 to September 2022, real average hourly earnings decreased by 3.0% on a seasonally adjusted basis. The change in real average hourly earnings combined with a 0.9% drop in average weekly hours worked resulted in a 3.8% decline in real average weekly earnings over the period.
The graph below shows the annual growth rate of real average hourly earnings from 2008 to September 2022.
It’s hard to argue that the inflation event is a “wage story.”
Another indicator that tells us whether the labor market is favoring workers is the turnover rate.
The latest data from the BLS shows that between August 2021 and September 2022 last year, the turnover rate was relatively stable, falling slightly from 2.8% of total employment to 2.7%.
in conclusion
In October 2022, the U.S. labor market showed signs of further slowing, with net payrolls adding just 261,000 jobs.
Labor force indicators show employment and labor force growth turning negative as participation declines.
As a result, the official unemployment rate rose 0.1 percentage point to 3.7%.
There is also no base-wage pressure to push inflation further up. Wage growth appears to be a response to inflation rather than driving it.
Enough for today!
(c) Copyright 2022 William Mitchell. all rights reserved.
