March 10, 2023
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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 311 thousand in February.. At the same time firms chose to work existing employees shorter hours as the nonfarm workweek fell 0.1 hour to 34.5 hours. While both hours and employment have shrunk from where they were at the beginning of last year, the labor market has held up remarkably well given the higher inflation and sharply higher interest rates. Keep in mind that prior to the recession the workweek was 34.4 hours so at 34.5 hours currently it is hardly indicative of economic weakness.
The changes in employment and hours worked are reflected in the aggregate hours index which is on track to increase 3.1% in the first quarter. We are currently projecting first quarter GDP growth of 2.0%
The factory workweek fell 0.2 hour in February to 40.3 hours after having jumped 0.4 hour in January. The manufacturing sector has been slowing gradually in response to higher interest rates, but the workweek now seems to have plateaued at a somewhat shorter length of time.
Overtime hours fell 0.1 hour in February to 3.0 hours after having risen by 0.2 hour in January. Manufacturers are finally beginning to adjust to the prospect of reduced demand by reducing overtime hours.
Stephen Slifer
NumberNomics
Charleston, SC
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