Popular Economics Weekly
“The unemployment rate declined to 3.7 percent in September, and total nonfarm payroll employment increased by 134,000, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, in health care, and in transportation and warehousing.”
Why fewer jobs this month? A special mention of Hurricane by the BLS attempted to explain the low job formation number, said the survey. “Hurricane Florence affected parts of the East Coast during the September reference periods for the establishment and household surveys. Response rates for the two surveys were within normal ranges.”
It is possible the east coast hurricane affected Leisure and hospitality and Retail trade, which lost -37,000 jobs cumulatively. White-collar firms added 54,000 job and health-care providers filled 26,000 positions. Builders hired 23,000 workers and manufacturers 18,000.Pundits and economists are saying this happened during prior bad weather episodes as well.
“We have seen this time and time again after big hurricanes (last September being a very good example after Hurricane Harvey, when payrolls fell 33K in the initial print),” said Thomas Simons, senior money market economist, Jefferies LLC as cited by MarketWatch. “So, ignore the weakness in payrolls.”
A lack of skilled workers is holding back more job gains, particularly in construction. The number of people working in construction was 315,000 higher compared to a year earlier. But there were 273,000 open construction jobs at the end of July, according to a separate Labor Department report. And the pay is better, with average hourly wages now $30.18 per hour vs. $27.24 for all hourly workers.
The smaller Household Data survey that calculates the unemployment rate was more upbeat. “The unemployment rate declined by 0.2 percentage point to 3.7 percent in September, and the number of unemployed persons decreased by 270,000 to 6.0 million. The unemployment rate and the number of unemployed persons declined by 0.5 percentage points and 795,000, respectively, over the year,” per the BLS.
We could be reaching the lower limits of the unemployment rate, now at 3.7 percent, in other words, the lowest in 48 years. This could in itself prevent further GDP growth as hiring stagnates and more than 6 million job opening go unfilled, per U.S. Labor’s JOLTS report.
“The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 1.4 million over the month; these individuals accounted for 22.9 percent of the unemployed. In September, the labor force participation rate remained at 62.7 percent, and the employment-population ratio, at 60.4 percent, was little changed,” said the BLS.
“The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 263,000 to 4.6 million in September. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.
There will also be those workers either unable or unwilling to return to work, in part because of our aging workforce. The baby boomers are retiring en masse, and the native-born U.S. population isn’t growing fast enough to replace them. So it will be up to newly arrived immigrants or the children of immigrants to continue economic growth, as I said in my last blog.
The current administration seems to know very little of basic economics, if they don’t understand this basic fact—economic growth mirrors population growth, for the most part. Labor productivity is the other part of the economic equation for GDP growth, but labor productivity has been declining steadily since 2000, mostly because corporations have used their record profits for increased stock buybacks and stockholder dividends rather than boosting labor productivity—even after the latest corporate tax cuts.
This is not a formula for the prosperity of future generations.
Harlan Green © 2018
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