Orlando's Outlook: Ho-hum jobs report ends 2012
Bottom Line The labor market managed to shrug off the aftermath of Hurricane Sandy and the potential chilling effect from the fiscal-cliff negotiations in Washington, producing a relatively constructive set of employment data for December, which is consistent with the moderate path of growth in the U.S. economy. On the positive side of the ledger, nonfarm and private payrolls were slightly better than expected, with upward revisions for the two prior months. Construction and manufacturing jobs enjoyed a nice rebound, education, health and leisure remained strong, and both hours worked and wages improved. But government hiring fell again, with sizable downward revisions for the two previous months, while retail and temporary-help turned negative. Finally, the household survey returned to positive territory in December, but annual benchmark revisions took September and October results down sharply.
Nonfarm payrolls solid December rose by 155,000 jobs, which was slightly stronger than consensus estimates for a gain of 152,000 jobs. In addition, the Bureau of Labor Statistics (BLS) revised October and November results up by a modest 14,000 jobs. October’s preliminary gain of 171,000 nonfarm jobs, which had been revised down to a gain of 138,000 jobs last month, was revised a little lower to a final gain of 137,000 jobs. But November’s preliminary gain of 146,000 jobs was revised up to a stronger gain of 161,000 last month. So the average monthly employment gain for the fourth quarter was a moderate 151,000 jobs, which is weaker than the third-quarter pace of 168,000 jobs, more than double the tepid second-quarter average of only 67,000 jobs, and well below the more robust first-quarter pace of 226,000 jobs.
Private payrolls stronger December jumped by 168,000, which was modestly above the consensus forecast for a gain of 155,000 jobs, while the BLS collectively revised October and November up by 38,000 jobs. October’s preliminary increase of 184,000 jobs, which was revised up modestly to a gain of 189,000, was revised up again to a final gain of 203,000 jobs. November’s preliminary increase of 147,000 jobs was revised up to a stronger gain of 171,000. So the average monthly gain for the fourth quarter of 181,000 private jobs compares favorably with the third-quarter average of 140,000 jobs per month and the second-quarter average of only 88,000 jobs, but it remains well below the much stronger first-quarter average of 226,000 jobs.
Rebound in construction and manufacturing With Sandy now behind us and with continued secular strength in housing, construction surged by 30,000 jobs in December, which is the most since September 2011. This is a positive trend that should have legs into calendar 2013 as post-storm rebuilding efforts accelerate later this year in the Northeast. That compares with an upwardly revised loss of 10,000 jobs in November, after adding 25,000 jobs in October and losing 1,000 jobs in September. Manufacturing similarly enjoyed a much-stronger-than-expected bounce of 25,000 jobs in December, compared with more modest expectations for a gain of only 4,000 jobs, marking its strongest month since March 2012. Manufacturing had gained an upwardly revised 5,000 jobs in November and 7,000 jobs in October, after losing 16,000 jobs in September and 13,000 jobs in August.
Education & health and leisure remain strong These have been consistent pockets of job-creating strength for the economy over the past several months. Education & health surged to a gain of 65,000 jobs in December, after gains of 24,000 in November and 32,000 in October. The leisure industry added 31,000 jobs in December, which was slightly stronger than the gain of 29,000 jobs in November and 26,000 jobs in October.
Household survey returns to positive territory In December, the BLS went back from January 2008 through November 2012 and revised its historical seasonally adjusted household survey data. December’s reading of 28,000 household jobs marked a modest return into positive territory, while November’s preliminary loss of 122,000 jobs was revised up to a smaller loss of 51,000 jobs. Importantly, October and September were collectively revised down sharply by 119,000 jobs, from solid gains of 410,000 and 873,000 jobs, respectively, to smaller gains of 354,000 in October and 810,000 in September. In contrast, August was revised up, from job losses of 119,000 to losses of only 86,000. The household survey is an important leading employment indicator for both nonfarm and private payroll growth, so we’re going to be watching this trend closely.
Bah humbug for retail As we had feared, the ongoing fiscal-policy dysfunction in Washington as the fiscal cliff drew near created an economic chilling effect, which made consumers and businesses reticent to spend. Consequently, as the important Christmas season matured, retailers cut 11,000 jobs in December, after adding an upwardly revised 63,000 jobs in November and 44,000 jobs in October, when expectations for the strength of the season were more constructive.
Temps turn negative, too Temporary help—another important leading indicator of employment growth—lost 1,000 jobs in December, after adding a downwardly revised 8,000 jobs in November and 14,000 jobs in October.
More negative government revisions The difference between private and nonfarm payroll gains in December was the loss of 13,000 federal, state and local government jobs, which marked the third consecutive month of government job losses. But the BLS revised November and October down by another 24,000 jobs, on the heels of last month’s stunning downward revision of another 48,000 government jobs in October and September. October, which was gutted from a moderate loss of 13,000 jobs to a shocking plunge of 51,000 jobs last month, was revised down yet again to a final loss of 66,000 jobs. November was revised down from a modest preliminary loss of 1,000 jobs to a much-larger loss of 10,000 jobs. We still don’t know what happened to all of these government workers. Where did they go?
Wages and private hours worked improve Average hourly earnings in December rose by a better-than-expected 0.3%, which was unchanged from November’s upwardly revised levels. But that allowed year-over-year wage gains to tick up to a stronger-than-expected increase of 2.1% last month, which could help to fuel stronger income and spending gains. In addition, the average private workweek for all employees ticked up to 34.5 hours in December from 34.4 in November and from 34.3 in October. This is encouraging, because an improvement of 0.1 hour worked is the equivalent of adding an estimated 300,000 jobs to the economy.
Unemployment, participation and labor-impairment rates flat across the board The rate of unemployment (U3) remained unchanged from an upwardly revised 7.8% in December, while the labor impairment rate (U6)—also known as the “total” rate of unemployment because it more broadly includes discouraged workers and the underemployed—also was unchanged at 14.4% last month. The civilian labor force rose 192,000 last month as more folks began to look for work again, although the number of unemployed also increased by 164,000, resulting in the net gain of 28,000 household jobs. The labor force participation rate also held steady at 63.6% in December, which remains a tick above the 31-year cycle low of 63.5% achieved in August.
New ADP survey coming into focus This important proxy for private payroll growth was stronger than expected with a gain of 215,000 jobs in December, compared with consensus estimates for a gain of 140,000 jobs, while November was revised up from a preliminary gain of 118,000 to a final gain of 148,000 jobs. With October’s final revision at a gain of 157,000, that totals a three-month average of 173,000 jobs, which is solidly above the nonfarm payrolls’ fourth-quarter monthly average of 151,000 jobs. ADP reported that in December, 25,000 jobs came from small firms, 102,000 jobs came from mid-sized companies and 87,000 jobs came from larger companies. ADP has been an important leading employment indicator for us, and this is their third report using a larger sample size (406,000 corporate customers compared with 344,000 before) and new methodology. But the predecessor survey suffered from an upward year-end bias in the past, so we’re taking these positive results with a grain of salt.
Initial weekly jobless claims stable post Sandy Another important leading employment and economic indicator, weekly claims posted a mediocre reading of 372,000 for the week ended Dec. 29, slightly above the reading of 362,000 for the prior week. But the two weeks surrounding Christmas and New Year’s tend to be quirky, so we’re inclined to ignore them and wait for clean January data. Sandy-related claims had surged to a peak of 451,000 in November.
