The Most Important US Employment Stat Improved And 2 Other Employment Charts by Eric Bush, CFA
We have said before that the most important US employment stat each month is the index of aggregate weekly hours worked. The good news for September is that we saw an improvement in the year-over-year rate of change from 1.05% to 1.63%. Perhaps this is why odds of a rate hike in December of increased to over 65% and the bond market has backed yields up to multi-month highs? All in all, however, the improvement in the labor market seems to suggest that third quarter GDP will continue on its recent growth trajectory of around 1.5%-2% year-over-year growth. So, unfortunately, it seems that this employment report isn’t some sort of game changer for the US economy.
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US Employment Stat
A uniquely bad characteristic of this recovery has been how long many people who have been unemployed have remained unemployed. In every economic cycle since World War 2 prior to our current one, at no point did the workers who were unemployed the longest (27 weeks or more) make up for than 26% of the total number of unemployed. That dramatically changed in this cycle when, at the peak, those unemployed for 27 weeks or more accounted for a painful 44.9%. Fortunately, far fewer people remain out of work for more than 27 weeks today as this series has dropped to a cycle low of 24.9%. It will be interesting to see if eventually this group of unemployed workers eventually accounts for a smaller percentage of the overall unemployed than the group of workers who have been out of work 15 to 26 weeks. This could be a mark that the expansionary period is ending as this usually occurs near the end of an economic cycle (note: it never happened in the 2002-2007 cycle).
Another uniquely bad characteristic of this recovery has been the poor growth in the labor force. Coming right out of the recession the labor force actually was contracting on a year-over-year basis for several years. The only other period when the labor force was contracting for several years in a row was in the early 1950s. The good news is the labor force is now growing at the quickest year-over-year rate since July 2007 and if it can get over the 2% hurdle rate than it will be growing like its 1999.