December's Jobs Report, in 3 Easy Pictures

Posted by jbrumley on January 6, 2017 2:12 PM
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On Friday, the Department of Labor posted the highly-anticipated employment report for December. It was... not bad.  The unemployment rate edged a little higher, to 4.7% (from 4.6%), but only because a great number of people poured into the workforce last month. The number of people who are employed moved higher, to 145.3 million; the DOL says we added 156,000 new jobs last month. That's sub-par relative to the recent pace, and that pace is slowing down. On the other hand, being at or near full employment can make it difficult log big progress in job growth.

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Beyond the superficial headlines and the commonly-discussed numbers though, there's a slightly bigger glimmer of hope.

One of those glimmers is ongoing persistence in the numbers of people with jobs. As of last month, 145.3 people in the United States have jobs... a record. Conversely, only 7.529 million people are officially unemployed. That's near a multi-year low record. Perhaps the most meaningful measure of employment progress we can examine, however, is the number of people who are not employed, but who are also NOT counted as part of the labor force, but want a job all the same. That figure fell to 5.66 million last month, almost reaching a multi-year low and decidedly extending what's become a long-term downtrend.

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The same measurement can be taken from a different perspective, using the percentage of the population that actually has a job (the employment/population ratio) and the percentage of the population that is actually in the labor force, employed or not (the labor force participation rate). This is where December's  job report start to partially unravel.

The good news is, the employment/population ratio is on the rise. It didn't move higher last month, rolling in again at 59.7%. But, it's in a longer-term uptrend. That's still considerably less than the 61+ reading we were seeing in the early 2000's. Meanwhile, though the labor force participation rate moved a little higher to 62.7%, it's still broadly stuck at multi-year lows, and isn't moving higher.

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In many regards it's not only confusing, but contradictory. Logic says that if a greater number of the people in a population are employed, then by default a great number of people have to be part of the work force. The naunces of the calculations though -- and all of the calculations above for that matter -- allow for odd differences. Sometimes those differences can be striking.

Whatever the reason, it's those differences that mar an otherwise solid December jobs report. Regardless, flaws or not, the employment picture is looking healthier, particularly now that hourly wages are growing around 3.9%, and the pace of that growth is improving. This will sooner and/or later provide a boost to corporate earnings.

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