March 8, 2024
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 275 thousand in february. At the same time the nonfarm workweek rose 0.1 hour to 34.3 hours.
The monthly employment gains are only slightly smaller than where they were at the beginning of last year. Thus, hiring has held up remarkably well given sharply higher interest rates. However, the workweek has fallen sharply. It appears that employers are choosing to cut hours worked by existing employees as demand slackens rather than reduce headcount for fear they may not be able to get those workers back when demand picks up.
The changes in employment and hours worked are reflected in the aggregate hours index which rose 0.4% in February to 115.9 after having declined 0.4% in January This index increased 1.4% in the fourth quarter and we ended up with a 3.2% increase in GDP given a huge increase in productivity in that quarter. In the first quarter this index could rise 0.6% which seems relatively consistent with our projected GDP growth rate of 2.2% for that quarter.
The factory workweek rose 0.1 hour in February to 39.9 hours after having been unchanged in January. The manufacturing sector has been slowing gradually in response to higher interest rates..
Overtime hours rose 0.2 hour in February to 3.0 hours after having fallen 0.1 hour in December. Manufacturers appear to have adjusted to the prospect of reduced demand by cutting overtime hours.
Stephen Slifer
NumberNomics
Charleston, SC
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