January 10, 2020

Payroll employment rose 145 thousand in December after having surged by 256 thousand in November.  The  3-month moving average of payroll employment is now 184 thousand.  Thus, the pace of hiring has slowed from 223 thousand per month in 2018, to about 184 or so currently.  About 16 thousand of the slowdown in employment is attributable to the manufacturing sector which is legitimately weak.  The remaining 23 thousand of the smaller employment gains is attributable to the economy being at full employment.  There are simply not enough adequately trained workers available to hire.  Labor force growth rose about 165 thousand in the past year.  With employment gains continuing to exceed growth in the labor force, the unemployment rate should continue to decline slowly.

Amongst the various employment categories construction employment rose 20 thousand in December after having gained 2 thousand in November.  Over the past year construction employment has risen by 12 thousand per month.

Manufacturing employment fell by 12 thousand in December after having climbed by 54 thousand in November.  The November increase includes the return to work of 42 thousand G.M. workers that were on strike.  Factory employment is now rising by about 5 thousand per month.  It is struggling as the tariffs take a toll on growth on the goods sector.

Elsewhere, health care  climbed by 28 thousand.   Professional and business services increased 10 thousand in December.   Transportation and warehousing fell 10 thousand.  Retail employment increased 41 thousand.  Employment in leisure and hospitality establishments climbed by 40  thousand.

In any given month employers can boost output by either additional hiring or by lengthening the number of  hours that their employees work.  The nonfarm workweek was unchanged in December at 34.3 hours.  It has been bouncing around between 34.3 and 34.5 hours for the past year.  The still  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 December after having increased 0.2% in November.  The index rose 1.1% in the third quarter which, if combined with a projected increase of 1.3% increase in productivity gives us our  projected GDP growth rate for the fourth quarter of 2.4%.

.There is no doubt that the consumer sector of the economy is expanding at roughly a 2.5% pace.   The stock market is at a record level. Consumer confidence remains at a relatively high level consistent with a roughly 2.5% pace of consumer spending.

The sectors of the economy that remains under pressure are the various production industries.  They are largely unchanged.  As noted earlier, factory employment is barely increasing.  Construction employment has been rising slowly but steadily.  Mining employment is essentially unchanged.  The service sector, however, is booming.

Looking ahead, steady consumer spending and continued rapid growth rate in investment should cause  GDP to grow 2.4%  in 2020.

Stephen Slifer

NumberNomics

Charleston, S.C.