November 1, 2019

In any given month employers can boost output by either additional hiring or by lengthening the number of  hours that their employees work.  Payroll employment for October rose 128 thousand  but that excludes 42 thousand G.M. workers that were on strike during the survey week.  September employment rose 180 thousand after having increased 219 thousand in August.  Our sense is that jobs are climbing by about 176 thousand per month which is  slower than the 223 thousand workers hired monthly last year.  About 16 thousand of the slower employment gains this year are attributable to the manufacturing sector which is legitimately weak,  But the remainder of the slowdown is attributable to the fact that the economy is at full employment.   Qualified workers become very difficult to find.

The nonfarm workweek was unchanged in October at 34.3 hours  This series has been bouncing around between 34.3 and 34.5 hours for the past year.  The current elevated level of the workweek  in most industries implies that employers are in need of workers and will continue to hire at a meaningful pace in the months ahead.

The increases in  employment and hours worked are reflected in the aggregate hours index which rose 0.1% in both August and September.  This index rose 1.0% in the third quarter.  With GDP having risen 1.9% it is  likely that productivity growth increased 0.9% in that quarter.

The factory workweek fell 0.3 hour in October to 40.2 hours.  However, this reflects the impact of the G.M. strike on the workweek.  Even without the September drop, the factory workweek is lower than it has been which reflects the toll  tariffs are taking on the manufacturing sector..  We expect the factory sector to be essentially unchanged for the balance of this year.

Overtime hours were unchanged in October at 3.2 hours.  They have declined in recent months which, like the factory workweek, reflects the impact of the tariffs.

The economy continues to expand at a respectable pace.  We currently expect GDP to increase 2.4% both this year and in 2020.  The economy is currently being supported by robust growth in consumer spending and moderate growth in investment, but is losing momentum in the manufacturing sector.

Stephen Slifer


Charleston, SC