February 7, 2025
In any given month employers can boost output by either additional hiring workers or by lengthening the number of hours that their employees work. Payroll employment climbed by 143 thousand in January. The December gain was revised upwards by 51 thousand while November was revised upwards by 49 thousand. In the past three months the average increase has been 237 thousand. The Bureau of Labor Statistics said, “Wildfires in Southern California began in early January and continued through the reference periods for both the household and establishment surveys. Severe winter weather occurred in much of the country during the January reference periods for both surveys. These events had no discernible effect on national payroll employment, hours, and earnings from the establishment survey, nor on the national unemployment rate from the household survey.” While hard to believe that is what the BLS reported. If so, employment has risen sharply in the past three months, but with a very erratic monthly pattern.
The nonfarm workweek declined 0.1 hour in January to 34.1 hours after falling 0.1 hour in December. Prior to the recession the nonfarm workweek was averaging 34.4 hours so it is weaker than it was five years ago. It is hard to believe that employment has been so strong while at the same time employers have been significantly shortening the workweek. We suggest that in the past three months the labor market has remained relatively stable. It is important to remember that employment changes drastically with the hiring and subsequent laying off of temporary workers in connection with the Christmas holiday season and, in this cares the distortions may well be complicated by the California wildfires and extreme cold weather that existed throughout most of the country. Employment, hours worked, and average hourly earnings could all be distorted. Thus, we remain cautious about reading too much into the monthly changes for all of these series.
The changes in employment and hours worked are reflected in the aggregate hours index which declined 0.2% in January to 116.0 after falling 0.1% in December after having risen 0.2% in November The aggregate hours index increased 1.5% in the fourth quarter which led to 2.3% GDP growth in that quarter. In the first quarter the aggregate hours index appears to be on track to increase about 0.5% which we believe will lead to a 3.0% GDP growth rate in that quarter.
The factory workweek declined 0.1 hour in January to 40.0 after having been unchanged in December The manufacturing sector has been fairly steady in recent months.
Overtime hours were unchanged in January at 2.8 hours after having declined 0.1 hour in December.
Stephen Slifer
NumberNomics
Charleston, SC
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