What’s the News in the November Payroll Release?
Little change, but a hint of problems in manufacturing, says UCLA economist Edward Leamer
Los Angeles (January 10, 2020) — With the release of today’s December 2019 employment report, UCLA Anderson Professor Emeritus Edward Leamer offers an analysis of the data behind the report. Leamer, who is also director emeritus of the UCLA Anderson Forecast, writes that the latest payroll numbers show little actual change from last month, but hints at weakness in manufacturing.
Read on for Leamer’s analysis:
The December payroll release of 145,000 jobs is noticeably smaller than last month’s number of 256,000. But it is difficult to discern the real meaning of that big reduction because the payroll data have some extreme ups and downs, with a big increase followed in the next month by a corrective big decrease.
The real news in these releases can be captured by two smoothed series, one based on just the overall payroll data and another that includes the components of payroll data like nondurable manufacturing. The actual and the smoothed versions are illustrated in the figure below.
THE NEWS: The fall in total payroll jobs this month is noticeable mostly because last month’s number was exceptionally high. The smoothed series based on overall job growth shows little change from last month’s data, still above 200,000; however, the smoothed series that accounts for the composition of payrolls noticeably softened. This is because of weakness in manufacturing, captured by two figures below. One figure is the early-warning sign of weakness in manufacturing — a decline in overtime and a reduction in average weekly hours in manufacturing. The other figure illustrates no growth in jobs in durables during 2019 and a slight softening in nondurables. Expect further weakness in manufacturing in 2020
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