August 2, 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 July rose 164 thousand after having climbed by 193 thousand in June.  These numbers tend to bounce around on a month-to-month basis, especially at this time of the year, as the seasonal workers are hired and then let go.  Our sense is that jobs are climbing by about 150 thousand per month which is considerably slower than the 200+ thousand workers hired monthly last year.  But that is also what one would expect when the economy is at full employment.   Qualified workers become very difficult to find.

The nonfarm workweek fell 0.1 hour in July to 34.3 hours after having been unchanged in both May and June at 34.4 hours.  This series has been bouncing around between 34.4 and 34.5 hours for the past year.  The current length of 34.3 hours is the shortest workweek we have seen since September 2017 so the situation bears watching.  It seems to largely reflect considerable softening in the manufacturing sector caused by the tariffs.  Nevertheless, the  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 fell 0.2% in July after having risen 0.2% in June.  This index rose 1.8% in the first quarter and climbed 0.6% in the second quarter,

The factory workweek fell 0.3 hour in July to 40.4 hours after having risen 0.1 hour in June.  The factory workweek is lower than it has been which reflects the toll the recently imposed tariffs are taking on the manufacturing sector..  We expect the factory sector to be essentially unchanged for the balance of this year.

Overtime hours also declined 0.2 hour in July to 3.2 hours 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 2.6% this year after having risen 3.0% in 2018 given the continuing impact of individual and corporate income tax cuts and repatriation of corporate earnings currently locked overseas.  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