"The Big Lebowski."
What does Friday’s employment report have to do with the 1998 American neo-noir crime comedy film written, produced, and directed by Joel and Ethan Coen? “The Big Lebowski” starred Jeff Bridges as Jeffrey “The Dude” Lebowski, a Los Angeles slacker and avid bowler.
The U.S. labor market has been performing so well this year that even The Dude should be able to find more stable and safer employment than delivering ransom money in between bowling games.
On March 31 of last year, Fed Chair Janet Yellen gave a surprisingly impassioned speech in Chicago affirming that the Fed remains committed “to do what is necessary to help our nation recover from the Great Recession.”
She recounted the struggles of three Chicago workers in the labor market -- Dorine Poole, Jermaine Brownlee, and Vicki Lira -- practically vowing to maintain ultra-easy monetary policy until they and people like them have good jobs.
The next day, Jon Hilsenrath reported in the WSJ: “One person cited as an example of the hurdles faced by the long-term unemployed had a two-decade-old theft conviction. Another mentioned as an example of someone whose wages have dropped since the recession had a past drug conviction. Academic research suggests people with criminal backgrounds face unique obstacles to employment.”
Furthermore, a Fed spokeswoman said “that Ms. Yellen knew of the people’s criminal backgrounds and that they were ‘very forthright’ about it in conversations with the chairwoman before the speech. In her remarks she said they exemplified the trends she was discussing, such as downward pressure on wages or the challenge of finding a job for the long-term unemployed.”
The latest batch of employment indicators suggests that Friday’s payroll employment report will show another month of solid employment gains during November. If so, then the Fed is bound to start raising the federal funds rate following the next FOMC meeting on December 15-16.
However, there are a few soft spots in the latest batch.
- Jobless claims remain very low. Initial unemployment claims averaged only 271,000 over the four-week period through the 11/21 week. That’s in line with previous cyclical lows. Debbie and I are particularly impressed by the low level of jobless claims in the major oil-producing states. After a small spike late last year into early this year, they’ve settled down near last year’s cyclical lows. That suggests that there are plenty of job opportunities in other industries for workers who’ve lost their jobs in the oil patch.
- Purchasing managers survey shows services jobs expanding. So far this year through October, payroll employment in the private sector is up 1.98 million, with private service-producing jobs up 1.91 million, while manufacturing is up only 16,000. The ISM employment index for non-manufacturing industries has tended to exceed the one for manufacturing all year. That’s especially true in recent months. The average of the regional employment indexes included in the business surveys conducted by five Fed districts (NYC, Philly, Richmond, KC, and Dallas) is highly correlated with the national M-PMI employment index. It has also been weak in recent months, averaging slightly less than zero for the past five months through November. However, that’s not a concern given that employment gains have been concentrated in services. Nevertheless, it is noteworthy that the Dallas Fed reported a big jump in the region’s employment index during November to 11.6 from 0.3 the month before.
- Consumer confidence survey suggests some erosion. As we noted on Monday, November’s Consumer Confidence Index fell sharply to 90.4 from 99.1 during October while remaining range-bound at its cyclical highs since the start of the year. The latest decline was attributable to perceptions that jobs may be getting somewhat harder to get, as the percentage of respondents saying so rose from a cyclical low of 21.7% during August to 26.2% this month. The jobs-hard-to-get series is highly correlated with the unemployment rate. So it may be signaling that labor market conditions have at least stopped improving as rapidly as they did earlier this year.
- ADP payrolls show more consistent growth than official data. November’s ADP report on private-sector payrolls will be released today. Debbie and I aren’t sure why it doesn’t get at least as much attention as the official report. The former tends to be less volatile and less prone to revisions than the latter. It also does a good job of tracking the underlying trend in the bouncier official data. So far this year through October, monthly gains in the ADP series have fluctuated between a low and a high of 169,000 and 231,000, averaging 192,500. The official series for private-sector payrolls has bounced between a low and a high of 117,000 and 268,000, averaging 197,600. There’s every reason to expect another steady and solid gain in November’s ADP report. The only caveat is that the weather has been very balmy around the country, which might have boosted payrolls more than anticipated by the seasonal factor.
- Labor-intensive employment facing some headwinds. This time of year, retailers hire lots of part-time and seasonal workers. Consumers are clearly showing a growing preference for shopping online rather than waiting in lines at the box stores. This trend may not have an impact on overall employment this year, but it is bound to depress employment at the stores. Also, there may be fewer jobs for cashiers as retailers move to add more self-checkout lanes. On the other hand, seasonal demand for FedEx and UPS employees could get stronger, unless Amazon and Uber find alternative ways of delivering the holiday goods.
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