Average hourly earnings fuel worries on the inflation front.
By Wolf Richter for WOLF STREET.
It was the kind of jobs data you’d expect from an economy that is plugging along just fine. The number of payroll jobs created by employers was “better than expected,” the prior two months were revised down, and after revisions, over the past three months, companies added 494,000 workers to their payrolls, bringing the total number of jobs to a record 157.2 million, as per the surveys of employers.
In all of 2023, employers added 2.70 million workers to their payrolls, which was one of the better years of the past 25 years – despite the interest rates that the Fed jacked up to 5.5%:
Employment in the vast and diversified US labor market doesn’t suddenly plunge from one month to the next, unless there is some kind of shock, such as the Lehman bankruptcy or a lockdown. Efforts to measure the details of this vast and complex labor market monthly via surveys of employers and households create monthly ups and downs that then show up in the headlines, when in fact the trends did not change.
A cottage industry has sprung up around predicting what this or that number would be for the month, and then the headlines will have “more than expected” or “less than expected” in it, as if it made any difference what anyone expected about this monthly up-and-down noise.
So people poured over today’s jobs data, picking apart the monthly ups and downs, arguing over the seasonal adjustments, revisions, the structure of the data itself, and whatnot. But we want to see the trends.
Overall employment, those with salaried jobs and the self-employed, a broader and more volatile measure based on a survey of households, dropped bigly in December, after a big jump in November, after a drop in October, etc., and that stuff happens, I mean who wants to answer surveys just before Christmas or Thanksgiving.
So over the past three months, the total number of working people fell by 367,000. But over the prior three months, they’d jumped by 546,000, and that’s how it goes with this volatile stuff, and one month doesn’t show anything other than noise.
In all of 2023, total employment increased by 1.88 million, which is typical for an economy that is plugging along just fine – despite the 5.5% interest rates.
The number of unemployed people who are actively looking for a job, after wobbling higher from historic lows at the beginning of 2023, thereby showing some cooling of the overheated labor market, suddenly dipped by 446,000 over the past three months, and the three-month moving average shows this. Maybe more noise, maybe the beginning of a trend:
All year, folks have been hoping that a significant drop in the labor market would “force” the Fed to cut rates in 2023. But that didn’t happen. The labor market has been plugging along at a good clip all year, and the expected decline in jobs packaged with a recession – the most widely anticipated recession ever – has failed to appear.
We can quibble with some of the details, but overall, the jobs data has been fine all year, exactly what you’d expect from an economy that’s just plugging right along.
And there has been nothing in this labor market data that would “force” the Fed to cut rates and end this horrible record QT and start QE all over again in their dreams because QE, or the hopes for QE, has been the only thing that works for stocks.
But on the inflation front, some concerns are building up in the other direction: Average hourly earnings of “production and non-supervisory employees,” after cooling sharply, are reaccelerating.
These “production and non-supervisory employees” – the bulk of total employment but excluding the management types – include working supervisors and all employees in nonsupervisory roles, including engineers, designers, doctors and nurses, teachers, office workers, sales people, bartenders, technicians, drivers, retail workers, wait staff, construction workers, plumbers, etc.
The 3MMA in December rose to 0.39%. Annualized, that’s 4.8%, the highest since January 2023. The month-to-month wage increases jump up and down a lot. Maybe just more noise, or maybe the beginning of a new trend of wage growth in the 4% to 5% range:
Hot wage increases were a persistent topic during Powell’s press conferences in 2022 and earlier in 2023. Then the topic shifted to wage increases cooling off, which introduced the hot-button topic of being done with the rate hikes, and maybe seeing a few cuts in 2024 – a gazillion rate cuts, according to Wall Street bets, because, well, we don’t know why. So now we can look forward to the new topic of wage growth re-accelerating?
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