March 8, 2024

Payroll employment jumped by 275 thousand in January after climbing 229 thousand in January and 290 thousand in December.  In the past three months the average increase has been 265 thousand.  The February increase was larger than the 195 thousand increase that had been expected, but there were downward revisions to the employment gains in December in January.  The bottom line is that the employment gains remain sizeable.  At the beginning of last year we were routinely seeing employment gains of  300 thousand per month.  Thus, the labor market has not weakened much from where it was at that time.  It has held up well in the face of sharp increases in interest rates.

In addition to hiring workers employers can also alter the length of the workweek for their existing workers.  The nonfarm workweek rose 0.1 hour in February to 34.3 hours after  having fallen 0.2 hour in January.  It has continued its gradual descent in the past two months.  It appears that firms do not want to let workers go for fear they may not be able to get them back when they need them.  Instead, they are adjusting the workweek to contend with softening demand.

Job openings have fallen from a record high level of 11.7 million in early 2021 to 8.9 million, but firms continue to be unable to fill open positions.  In fact, there are currently 1.4 job openings for every unemployed worker.  The demand for labor continues to outpace supply.

The change in employment and hours worked are reflected in the aggregate hours index which rose 0.4% in January 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 GDP growth rate of 3.2% thanks to  a big increase in productivity.  This index may increase by 0.6% in the first quarter which appears to be relatively consistent with our projected 2.2% GDP growth rate for that quarter.

The demand side of the economy has softened slightly but not enough to cause workers to start laying off bodies.

Manufacturing employment fell 4 thousand.  Construction employment rose by 23 thousand.   Retail trade jobs rose by 19 thousand.  Health care jobs gained 67 thousand.   Social assistance climbed by 24 thousand.  Info tech jobs rose 2 thousand.  Transportation and warehousing rose by 20 thousand.  Leisure and hospitality jobs climbed by 58 thousand.  Professional and business services increased 9 thousand.   Financial sector jobs rose 1 thousand.  Government jobs rose by 52 thousand almost exclusively at the state and local level.

Given these steady employment gains we expect GDP growth of 2.2% in the first quarter.

Stephen Slifer

NumberNomics

Charleston, S.C.