Employment Situation: Hints of Deceleration in Labor Trends

December 7, 2018
Bottom Line: Payrolls rose less than expected in November as the unemployment rate held steady and average hourly earnings growth decelerated modestly. Average hourly earnings growth over the last three months has slowed to 2.7%, down from the 3.1% pace seen over the last 12 months and in-line with the pace of 2017. Weekly earnings fell in November and have grown just 1.5% over the last three months. Overall, earnings data suggest wage growth is steady to slightly slower overall, despite anecdotal reports of tight labor markets and nine years of 150 - 200k monthly job gains. Overall job gains are starting to decelerate modestly too. While there has been significant volatility, mostly from the hospitality sector, the three month average gains in private services sectors shows slowing. Additionally, slower growth in November was nearly across the board -- brick-and-mortar saw a sharp gain but that looks heavily seasonal and likely to come back down in the coming months. Overall, the trend shows a very modest deceleration in labor market gains. Payroll Employment rose by 155k in November, compared with market expectations for an increase of 198k. The prior 2 months were revised, lower in October by 13k and higher in September by 1k. Government jobs FELL by 6k. Consequently, private sector jobs ROSE by 161k. Overall employment is now 1.7% ABOVE its year ago level, Over the past 12 months, 2,443k jobs have been created. In November, the job gains were in Trade, Transportation & Utilities (+35k with 18k of those in Retail Trade), Professional & Business Services (+32k with the addition of 8.3k in Temp Help Services), Education & Health Services (+40k), Manufacturing (+27k), Leisure & Hospitality (+15k), Financial Activities (+6k), Construction (+5k), and Other Services (-0k). Jobs were shed in Government (-6k), and Information (-8k). The Unemployment Rate was UNCHANGED in November at 3.7%, compared with market expectations for a no change to 3.7%. Household employment rose by 233k while the labor force increased by 133k, resulting in a decrease in the number of unemployed of 100k. The Labor Force Participation Rate was UNCHANGED at 62.9%. The Employment-Population Ratio at 60.6%. The number of people Working Part-Time for Economic Reasons ROSE by 211k to 4,734k. while Long-Term Unemployment FELL by 120k to 1,253k (accounting for 21.0% of the unemployed), while the Mean Duration of Unemployment FELL by 0.8 weeks to 21.7 weeks. There are now 6.0 million people officially unemployed. In addition, there are another 5,397k people who say they want a job but are not currently looking for one. Finally, another 4,734k people are working part-time because of slack economic conditions. The Index of Aggregate Hours FELL by 0.2%, combining the moderate gain in private payroll employment and the shorter workweek. Hourly Earnings ROSE by 0.2% in November, below market expectations of 0.3%. Hourly earnings are now 3.1% ABOVE their year ago level. Weekly Earnings FELL by 0.1%, the result of the change in hourly earnings and a shorter workweek. Weekly earnings are now 2.8% ABOVE their year ago level. The Average Workweek FELL by 0.1 to 34.4 hours, BELOW the market consensus at 34.5 hours.