March 8, 2024
Private sector employment jumped by 223 thousand in January after climbing 177 thousand in January and 214 thousand in December. In the past three months the average increase has been 205 thousand. The February increase was larger than the 170 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 250 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.
February 2, 2024
Private sector employment jumped by 317 thousand in January after having climbed 278 thousand in December. In the past three months the average increase has been 249 thousand. At the beginning of last year we were routinely seeing employment gains of 230 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 fell 0.2 hour in January to 34.1 hours after declining 0.1 hour in December. It has plunged 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. Given the data on job openings and initial unemployment claims, it does not appear that the labor market is weakening much which makes the drop in hours worked very puzzling. Because the December/January period encompasses the Christmas holiday period and all economic indicators can be distorted in those two months it will not be clear exactly what is going on until we get data for February.
Job openings have fallen from a record high level of 11.7 million in early 2021 to 9.0 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 declined 0.3% in January to 115.2 after falling 0.1% in December. This index increased 1.0%% in the fourth quarter and we ended up with a GDP growth rate of 4.9% thanks to a big increase in productivity. This index may increase by 0.3% in the first quarter which appears to be relatively consistent with our projected 1.8% 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 rose 23 thousand. Construction employment rose by 11 thousand. Retail trade jobs rose by 45 thousand. Health care jobs gained 70 thousand. Social assistance climbed by 30 thousand. Info tech jobs rose 15 thousand. Transportation and warehousing rose by 16 thousand. Leisure and hospitality jobs climbed by 11 thousand. Professional and business services jumped by 74 thousand. Financial sector jobs rose 8 thousand. Government jobs rose by 36 thousand almost exclusively at the state and local level.
Given these steady employment gains we expect GDP growth of 1.8% in the first quarter.
Stephen Slifer
NumberNomics
Charleston, S.C.
We have seen a change in the way companies are hiring employees. As the owner of the staffing company temp to hire has been a very popular strategy the last several years. Now companies are actually hiring people directly to their payroll and willing to pay fees. That would seem to indicate that they do not expect a downturn in the near future. Good news for all of us.
Thanks for the comment, Neil. From what you said, it certainly suggests that if they do expect a recession it will be short and mild and they will soon need those bodies. But what if rates really do need to go to 6% to slow things down enough to trigger the recession? The outcome may not be quite so mild. We will see.