Unemployment Rate Drops to 4.5% in March as Job and Earnings Growth Stall

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Unemployment rate FELL in March to 4.5 percent, the lowest rate in almost 10 years (May 2007);
  • Payroll jobs INCREASED 98,000 in March, the weakest job growth since last May;
  • Prior month job totals were revised down: February from a gain of 235,000 to a gain of 219,000 and January from a gain of 238,000 to an increase of 216,000 jobs;
  • Private sector payrolls rose 89,000 in March, also the weakest growth since last May;
  • Average weekly hours in March FELL to 34.3, the lowest since last November;
  • Average weekly earnings INCREASED in March to $896.60 — up $1.77 from February but the 2.4 percent year-year growth was slightly weaker than the 2.5 percent annual growth recorded in February;
  • Average hourly earnings ROSE 5¢ in March to $26.14, a 2.7 percent year-year jump; in February average, hourly earnings registered a 2.8 percent year-year improvement;
  • The number of full-time workers INCREASED 326,000 in February; the number of part-time workers ROSE 149,000;
  • Labor force participation rate HELD at 63.0 percent;
  • Employment-Population ratio ROSE to 60.1 percent, the highest level since February 2009;
  • The number of multiple jobholder went UP 138,000; multiple jobholders represent 5.2 percent of all employed individuals, up from 5.1 percent in February;

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Despite the lowest unemployment rate in almost 10 years, this has to be considered a disappointing Employment Situation report, with the weakest job growth in 10 months and downward revisions to the job totals reported for the first two months of the Trump Administration. The revisions to January and February job growth trimmed the number of new jobs by 38,000.

So, what happened?

Some of the changes can be attributed simply to the calendar as the number of retail jobs fell marking the official end of the holiday shopping season. Some too relates to the weather with 6,000 new construction jobs in March, down from the addition of 15,000 in February.

Unusually good winter weather in the Midwest and Northeast probably strengthened job growth in January and February. March was payback time.,

Offsetting the drop in retail jobs, the number of restaurant jobs grew 21,700. Restaurant jobs have been a steady source of job growth having increased for 57 consecutive months. But, those jobs remain among the lowest paying jobs.

The health care sector too remained a strong source of new jobs, adding 16,700 jobs in March, the 54th straight month of job growth. The health care sector, of course, dodged a bullet when the House cancelled a vote on a replacement for the Affordable Care Act. Since the ACA took effect, the number of health care jobs has increased by 1.5 million or just over 39,000 per month.

Wage growth, though up in March appears to be slowing slightly. Coupled with the dip in average weekly hours, it means workers have less, not more, money in their pockets. Indeed, the slight drop in weekly hours is a bad omen for future hiring. An increase in hours would mean employers have to add to staff. In the immediate aftermath of the onset of the Great Recession, hours fell below 34, dropping as low as 33.8.

Average weekly earnings fell in the construction, and manufacturing sectors. The construction sector is one of the highest paying industry sectors with average weekly earnings of $1,039.77, topped only by the utilities sector ($1,5550.86) and the mining and logging sector ($1,262.69). Manufacturing workers earned an average of $864.84 per week in March, down $2.04 from February. Construction worker earnings fell $6.97 a week in March.

The weakness in hours and the mild slowing in wage growth suggest a weaker labor market than we’d like to see but there also seems to be little basis for concern about inflationary pressures.

The overall job growth should be tempered by the increase of 138,000 multiple jobholders.

The drop in the unemployment rate though remains the redeeming factor in this report. The number of persons unemployed fell 326,000 to 7.2 million, the lowest level since September 2007. Delving into that number, the number of individuals unemployed because of layoffs dropped 190,000 in March and the number of individuals unemployed for fewer than five week dropped 232,000. Some of those could have left that bracket and are now unemployed for 5-14 weeks, but that category fell 29,000. Together that suggest that new entrants to the ranks of the unemployed don’t remain there very long.

Unemployment rates for sub-categories also showed improvement. The unemployment rate for blacks dipped to a still high 8.0 percent from 8.1 percent in February and the unemployment rate for Hispanics dropped 0.5 percent to 5.1 percent. Even the teenage unemployment rate was down, dropping 1.3 percentage points to 13.7 percent, the lowest it has been since May 2001 when it stood at 13.4 percent.

Hear Mark Lieberman every Friday morning at 6:20 am on The Morning Briefing on POTUS on Sirius-XM 124.

You can follow Mark Lieberman on Twitter at @foxeconomics.

 

1st Time Jobless Claims Remain Highly Volatile, Falling 10,000 in Last Week

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • 1st time claims for unemployment insurance for the week ended December 3 FELL 10,000 to 258,000;
  • The number of claims for the week ended November 28 was unchanged at 268,000
  • Filings remained under 300,000 for the 92nd straight week, the longest streak since 1970;
  • Four week moving average of first time claims INCREASED 1,000 to 252,500;
  • The four week moving average represented 0.166 percent of total employment, UP .001 percentage points from a week earlier;
  • Continuing claims for the week ended November 28 – reported on a one-week lag – DECREASED 79,000 – largest week-week drop since July 2015 — to 2,005,000;
  • The number of continuing claims for the week ended November 21 was REVISED UP 3,000 to 2,084.000;
  • Four-week moving average of continuing claims FELL 9,500 to 2,028,750;

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First time claims for unemployment insurance remained extremely volatile as the calendar turned to December, with a five-figure swing for the fifth straight week, according to the Labor Department.

The average change (regardless of direction) for the last five weeks has been 15,400 compared 6,600 for the previous five weeks. To be sure, the net change has been a drop of 7,000 claims over the last five weeks, but the wide swings suggest some instability in labor markets which would call into question the wisdom of tinkering with interest rates in the short term. Nonetheless, “body language” from the Federal Open Market Committee – the federal Reserve Board’s policy-setting arm – suggest the FOMC is poised to lower the target fed funds rate when it convenes next Tuesday. Though widely anticipated, the FOMC action could our a damper on holiday sales. Retailers had been anticipating strong sales, up about 3.6 percent, according to the National Retail Federation (NRF).

The NRF estimated retailers would add between 640,000 and 690,000 jobs to deal with the increased sales volume for the holiday season which, according to NRF, covers all of November and December.

The four week moving average, designed to smooth the volatility of the weekly numbers, is showing less of a swing in the last five weeks ranging from an increase of 1,000 to a drop of 6,000 and a net decline of 5,250 for the period dropping the total to 252,500, 6.7 percent below the level a year ago.

Despite the recent volatility, both initial claims and continuing claims have been on a relatively stable downward trajectory over the past year. Continuing claims, often seen as a surrogate for hiring, are down 10.7 percent from a year ago. The four-week moving average of continuing claims has dropped a more modest7.1 percent.

In raw numbers, continuing claims fell 241,000 in the last year with most of that decline, 137,000, since September 1.

You can hear Mark Lieberman every Friday at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

New Home Sales Drop Sharply in April Even As  Prices Fall

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Pace of contracts for new home sales FELL a staggering 11.4 percent in April, largest month-month drop in almost four years;
  • March’s 5.8 percent increase in new home sales was unchanged;
  • Unsold inventory ROSE 3,000 to 264,000 – highest level since July;
  • With lower sales rate, months’ supply of new homes for sale ROSE to 4.8 months in April from 4.3 months in March;
  • Median price of a new home FELL 3.0 percent or $9,500 from March to $309,200.

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Though home builder confidence was up at the beginning of May, continuing a steady climb, sale of new single family homes fell a sobering 11.4 percent in April, the Census Bureau and Department of Housing and Urban Development reported Tuesday.

The weaker sales had an almost immediate impact as rates of permits and starts for new construction slipped in April.

The slowdown in sales reflected a slippage in buyer traffic, even as builders were bullish about sales in the short and long term That upbeat attitude though did not translate into stronger starts or permit applications.

The attitudes do little to affect underlying economics, but there is reason to believe those could change. Income growth, according to latest data from the Bureau of Labor Statistics, has been accelerating and, if reported labor shortages continue, should only improve. Some of that labor shortage though could be construction workers to build those new homes. To the extent builders must pay up to get the talent they need – for an industry sector that cannot spread beyond our borders – that would only increase the cost of building.

Although the median price of a new home fell in April – the third month-month decline this year – it reflects buyer attitudes as more new home in lower price brackets were sold. Buyer are still grappling with rising mortgage rates. As that trend picks up steam, more lower end homes could be under construction. IN April, 51 percent of new homes sold carried price tags of less than $300,000, up from 44 percent in March. For the first four months of the year, about 47 percent of new homes sold were priced under $300,000, up from 45 percent in all of 2016.

The pricing follows a pattern set by existing home sales. The median price of an existing home averaged almost $232,000 in 2016. Thus far this year, it has averaged just a bit over $230,000. The lower prices mean fewer owners are willing to put their homes on the market, reducing the options for potential buyers.

To the extent prices mean supplies will contract in the new home sale marketplace, buyers would be faced with fewer choices there as well.

The government report on new home sales tracks contracts for sale, not closings. The National Association of Realtors reports on closings of sales of existing home. The report on existing home sales for April is expected to be released Wednesday.

April new home sales, according to the government data, fell to their lowest level of the year, a pace of 569,000, just 3,000 higher than the sales pace in April 2016, the smallest year-year gain in 14 months.

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

Will White House Drama Hurt the Economy? Historic Evidence is Mixed

By Mark Lieberman

Managing Director and Senior Economist

The President was under siege. Members of the House of Representatives, at least some, were openly discussing impeachment. The nation watched, white-knuckled, not knowing what might come out in an ongoing drama in Washington as the recently elected President defiantly stared down his critics.

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Not today, but 1973-74. President Richard M. Nixon was embroiled in the Watergate morass which eventually brought down his reign in the White House.

It would be easy to say the economy kept rolling along during the constitutional crisis of the early 70’s but businesses dislike uncertainty. Business could perhaps take comfort in the 24-hour news cycle which would give them a chance to digest and analyze new political developments, but that era is long-since passed. That 24-hour cycle has been reduced to perhaps 24 seconds.

The Dow Jones Industrial Average, which dropped sharply Wednesday with the announcement of the appointment of a Special Counsel to oversee the investigation into alleged ties between President Trump’s election campaign and the Russian government. Is that the beginning of a sharp decline? Or will the market self-correct? Obviously one day does not make a trend, but it could start one.

We have to dust off history books to discover the impact of Watergate on the economy in 1973-74. The congressional hearings into Watergate began in June 1973, about a year after the bumbled attempt by Nixon supporters to break into and bug the headquarters of the Democratic National Committee. The episode culminated in Nixon’s resignation 14 months later in August, 1974. Here’s what happened to the economy:

  • The Dow Jones Industrial Average fell 16.58 percent in 1973 and another 25.57 percent in 1974. It rose 28.3 percent in 1975.
  • Gross Domestic Product, which had grown at 5.6 percent in 1973, actually declined 0.5 percent in 1974, falling in three of the four quarters that year. GDP declined in three of the five quarters from the beginning of the Watergate hearings until President Nixon’s resignation.
  • The unemployment rate was 4.9 percent when the hearings began and moved up to 5.5 percent by the time the President left office.
  • In the 14 months from the beginning of the hearings until Nixon resigned, the economy added an average of 132,000 jobs each month; in the previous 14 months, jobs grew an average of 264,000 per month.

To be sure, Watergate wasn’t the only news backdrop. And indeed, according to the National Bureau of Economic Research which establishes the beginning and end point of recessions, the nation entered a recession in November 1972 from which it did not emerge until March 1975.

Because of the then-coming recession, it would be hard to attribute the negative economic data to the impeachment turmoil itself but one of the factors which led to Nixon’s resignation was his loss of support from his voters who in 1972 had given him a (real) landslide victory.

The erosion of his support came not only from disclosures during the hearings but from a fading economy. It’s hard to say what was chicken or egg.

  • The first quarter GDP report showed the economy grew at 0.7 percent, down from 2.1 percent in the fourth quarter of 2016. But Trump was not president for the entire first quarter.
  • The DJIA at 20,606 was 19,827 on Inauguration Day.
  • The unemployment rate since Trump took office has gone down from 4.8 percent to 4.4 percent.
  • Since he took office, President Trump has benefited from a continuation of the jobs picture painted by President Obama. Trump has been in office for three months during which time the economy has added an average of 174,000 jobs per month. In the last three months of the Obama Administration, the average job gain was 173,000.

Will the investigations bring an abrupt end to the Trump Administration? It’s certainly hard to tell but the weaker GDP and job growth could further undermine his public support.

You can hear Mark Lieberman every Friday 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

 

 

 

Continued Claims for Unemployment Insurance Plunge Again – to 43 Year Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 232,000 1st time claims for unemployment insurance for the week ended May 11, 4,000 FEWER than the prior week’s 236,000 filings;
  •  The number of initial claims for the week ended May 4 was unchanged from the initial report;
  • The smoothing four-week moving average of first time claims was 240,750, DOWN 2,750 from the previous week’s average of 243,500;
  • There were 1,898,000 continued claims for unemployment insurance – the lowest level since November 1988 and 22,000 FEWER than the previous week;
  • Four-week moving average of continued claims DROPPED 20,000 to 1,946,500, the lowest level since January 1974!

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Filings for unemployment insurance maintained their downward trajectory with fewer first time claims for benefits and fewer continued claims, the Department of Labor reported Thursday. The moving average of continued claims dropped to its lowest level in more than 43 years.

The favorable labor numbers could provide cover for the still-fledgling Trump Administration as it dodges criticism for its failure to develop – or at least announce – a comprehensive jobs program. To be sure, unemployment remains high in some sub-categories – to wit teenagers, minorities and those without college degrees. That said, the declining numbers of unemployed makes the labor sector a seller’s market. That’s not to say it will be easier for an unemployed person to get a job but just that there’s reduced competition.

As with any historic comparisons, the 43-year low for the moving average of continued claims needs some perspective. The labor force in 1974 was considerably smaller than it is today: 91 million in 1974 compared with 160 million now which means the situation today is much improved over 43 years ago.

As noted, the lower number of continued claims recipients could itself out a damper on a further economic expansion as existing businesses contemplated growth or startups have a smaller pool of workers from which to choose. Employers still must get past the hurdle of revenue or profit per employee to justify hiring at what would have to be a higher wage.

You can hear Mark Lieberman tomorrow, Friday May 5, at 8:45 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124 and again at 12:05 pm. You can follow him on Twitter at @foxeconomics.

Housing Construction Activity Sputters in April

 

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of housing starts in April FELL 2.6 percent to a seasonally adjusted 1.172 million unit — the third decline in the first four months of the year;
  • An increase in the pace of multi-family permits was not enough to overcome a decline in single-family permits which dropped to 1.229 million in April;
  • Permits for single-family homes FELL 5.4 percent in April, the sharpest decline since February 2015;
  • The rate of home completions FELL 8.6 percent with declines in both single-family and multi-family completions

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Despite a positive report on builder confidence by the National Association of Home Builders Monday, data on housing construction reported Tuesday – permits and starts – continued to show weakness with permits and starts falling, according to the Census Bureau and Department of Housing and Urban Development.

Change since March 2017

Permits Starts Completions
Total
Single-Family
Multi-Family

 

 

 

 

The NAHB’s report showed confidence up two points at the beginning of May to 70 (out of 100) after slight dip in April. The survey – the Housing Market Index – showed buyer traffic for new homes was down for the second straight month though current and future sales prospects improved after falling in April.

Mortgage interest rates moved up at the beginning of May after falling in April, according to Freddie Mac, which could have influenced builder activity. But as rates have fluctuated, so have deed current sales prospects jumped to the highest level since July 2005 while the outlook for future sales moved the highest level since June 2005.  The favorable outlook did not translate into activity with both permits and starts in April showing particular weakness in the Northeast and the West. Some of the multi-family activity in the Northeast may have affected by continued legislative wrangling over s multi-family tax incentive program in New York City.

One of the anomalies of the construction data is the continued decline in multi-family starts even as single-family activity – both permits and starts – appears to be moving sideways. The drop in multi-family starts though appears inconsistent with a smattering of single-family activity. While millennials appear to have shied away from home buying, they had – until this most recent set of data – been opting instead for multi-family units.

The homebuilder confidence could have been affected by the increase in the “gap” between new home completions and sales in March (the last month for which both data sets are available). According to Census and HUD reports for completions and sales, builders finished 24,000 more new homes than were sold in March. In February, sales exceeded completions by 41,000.

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics. .m

Continued Claims for Unemployment Insurance Plunge to 29-year Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 236,000 1st time claims for unemployment insurance for the week ended May 4, 2,000 FEWER than the prior week’s 238,000 filings;
  •  The number of initial claims for the week ended April 29 was unchanged from the initial report;
  • The smoothing four-week moving average of first time claims was 243,500, UP 500 from the previous week’s average of 243,000;
  • There were 1,918,000 continued claims for unemployment insurance – the lowest level since November 1988 and 61,000 FEWER than the previous week;
  • Four-week moving average of continued claims DROPPED 27,500 to 1,965,500, the lowest level since November 1974!

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Filings for unemployment insurance continued to trend downward for the week ended last Saturday, May 6 with continued claims falling to the lowest level in almost 29 years. It was the second week in a row continued claims dropped to a decades-low, another indicator of labor market strength.

The claims reports the Labor Department followed data earlier this week in the Job Openings and Labor Turnover Survey (JOLTS) which also indicated a tighter labor market with the ratio measuring unemployed to job openings falling to the lowest level since January 2001.

While this may not be great news for potential employers, it is good news for jobseekers and jobholders who could see wages increasing. But, if they do, it would the Federal Open Market Committee could interpret that as inflationary and use it as rationale for yet another increase in the fed funds rate.

That said the tighter labor market itself could slow the economy by making business growth difficult.

You can hear Mark Lieberman tomorrow, Friday May 5, at 8:45 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124 and again at 12:05 pm. You can follow him on Twitter at @foxeconomics.

Job Openings Ratio at 16-year Low

 By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Job openings at the end of March WERE UP 12.1 percent from February at 5.743 million – highest level since last July
  • Hiring was essentially FLAT in March, up just 11,000 or 0.2 percent from February. The number of jobs in March was up 79,000;
  • The ratio of unemployed to job opening in March FELL to 1.25 in March, lowest level since January 2001;
  • In March 2017, there were 3.1 million quits and 1.6 million layoffs and discharges, a sign that workers’ willingness to leave their jobs is increasing along with confidence of finding a new job.

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Even in a month with relatively weak job creation – just 79,000 according to the Bureau of Labor Statistics – the ratio of unemployed to jobs openings fell in March to the lowest level since January 2001 – one month after the monthly Job Openings and Labor Turnover Survey (JOLTS) began.  Tuesday’s JOLTS report  showed a sharp increase in jobs openings which, with an increasingly tight labor pool, could mean higher wages.

In a telling sign, the number of job openings, exceeded the number of hires data for the 15th straight month suggesting employers may be having difficulty finding candidates for available jobs, another indicator of higher wages. At the same time the number of “quits” increased for the 10th time in the last 15 months, another indicator of an improving labor market.

The survey tracks the ins and outs of the labor market as contrasted with the BLS Employment Situation report which reports net changes. Differences can result the same individual is counted in more than one category.

According to the preliminary March, 2017 hires are on a pace to exceed hires in 2016 by about 1 million: 63.7 million compared with 62.7 million, while quits are on track to be up 1.2 million from 2016.

You can hear Mark Lieberman on P.O.T.U.S Morning Briefing (Sirius 124) every Friday at 6:20 am Eastern Time. Follow him on Twitter at @foxeconomics.

Unemployment Rate Drops to 4.4% in April as Jobs and Earnings Growth Improve

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Unemployment rate FELL in April to 4.4 percent, the lowest in almost 10 years (May 2007);
  • Payroll jobs rebounded from a weak March; INCREASED 211,000 in April;
  • Prior month job totals were revised down a net 6,000: March from a gain of 98,000 to a gain of 79,000 and February from a gain of 219,000 to an increase of 232,000 jobs;
  • Private sector payrolls ROSE 194,000 in April after growing 77,000 in March;
  • Average weekly hours in April ROSE to 34.4, possibly signaling further new hiring;
  • Average weekly earnings INCREASED in April to $900.94, up $5.02 from March; strongest month-month gain since last September;
  • Weekly earnings GREW 2.6 percent year-year to $900.94;
  • Average hourly earnings ROSE 7¢ in April to $26.19, a 2.6 percent year-year jump;
  • The number of full-time workers INCREASED 430,000 in April; the number of part-time workers FELL 370,000;
  • Labor force participation rate DIPPED 0.1 percentage point to 62.9 percent in April;
  • Employment-Population ratio ROSE to 60.2 percent, the highest level since February 2009;
  • The number of multiple jobholder went DOWN 277,000.

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With just a couple of slight hiccups, the April Employment Situation report was a “yuge” positive for the still fledgling Trump administration: a gain of 211,000 payroll jobs and a further decline in the unemployment rate to 4.4 percent, lowest in eight year. The unemployment rate then was on its way up. But the hiccups in the Bureau of Labor Statistics report could signal the improvement is transitory.

Coming against the backdrop of the House vote to repeal Obamacare, the report thrust health care jobs back into the spotlight. The number of health care jobs rose 37,000 in April and have increased an average of 39,000 per month since the Affordable Care Act took effect in January 2014. Only the number of professional and business service jobs had a higher monthly average growth in that period, boosted by the monthly gain of 8,300 temporary jobs.

The dip in the unemployment rate was due largely to very slow growth in the labor force which increased by a scant 12,000 in April. Since the unemployment rate is expressed as a percentage of the labor force, weak growth in the labor force (the sum of those employed and unemployed) will yield a lower unemployment rate. So much for the arithmetic lesson.

Of greater concern is the increase of 162,000 in the number of people not in the labor force, sitting on the sidelines as it were, the largest such increase since last November. The increase could have been explained when job growth was slow, but with job growth accelerating, it is hard to understand, especially as earnings have been rising steadily. Indeed, average weekly earnings rose $5.02 in April, the strongest monthl increase since last September. The increase in earnings reflects the tighter labor market as would-be employers must pay up for new employees.

Another sign of the tighter labor market is the increase in average weekly hours, back up to 34.4 in April. As workers are called on to put in more hours, businesses could be compelled to increase the number of jobs and hiring.

That said, the growth in the number of jobs in some industry categories slowed. The number of construction jobs, for example, increased by just 5,000 in April after growing by 1,000 in March but 54,000 in February. The number of residential construction jobs went up by just 1,000 hinting at slowdown in new home building.

The growth in the number of manufacturing also slowed. After growing an average of 16,000 per month, manufacturers added just 6,000jobs in April.

The increase in average weekly and hourly earnings came despite the fact low paying jobs – leisure and hospitality and retail – accounted for 26.1 percent of the total job growth with the number of restaurant wait staff jobs increasing by 26,200.

While still higher than the overall unemployment rate, the unemployment rate for blacks dropped from 8.0 percent to 7.9 percent and but increased for Hispanics from 5.1 percent to 5.2 percent. The teenage unemployment rate jumped a full percentage point to 14.7 percent. The unemployment rate for those without a high school diploma fell to 6.5 percent from 6.8 percent, for high school graduates with no college fell to 4.6 percent from 4.9 percent and for college graduates dropped to 2.4 percent from 2.5 percent,

Long-term unemployment (27 weeks or more) fell 61,000 and in the last years has declined 433,000, and in the last year has fallen 21 percent.\Some of the changes can be attributed simply to the calendar as the number of retail jobs fell marking the official end of the holiday shopping season. Some too relates to the weather with 6,000 new construction jobs in March, down from the addition of 15,000 in February.

Hear Mark Lieberman every Friday morning at 6:20 am on The Morning Briefing on POTUS on Sirius-XM 124.

You can follow Mark Lieberman on Twitter at @foxeconomics.

 

Continued Claims for Unemployment Insurance Fall to near 30-year Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 238,000 1st time claims for unemployment insurance for the week ended April 29, 19,000 FEWER than the prior week’s 257,000 filings;
  •  The number of initial claims for the week ended April 22 was unchanged from the initial report;
  • The smoothing four-week moving average of first time claims was 243,000, UP 750 from the previous week’s average of 242.250;
  • There were 1,964,000 continued claims for unemployment insurance – the lowest level since April 2000 and 23,000 FEWER than the previous week;
  • Four-week moving average of continued claims DROPPED 17,750 to 1,989,250, the lowest level since November 1988!.

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There comes a point at which historical comparisons of first time or continued claims for unemployment insurance become nonsensical. We reached that point this week.

Although the Labor Department’s report on unemployment insurance claims noted continued claims dropped to their lowest level in 17 years and the four-week moving average of continued fell to 29-year low, both comparisons need context. In November 1988, there were 116,100 people employed in the United States, in April 2000 137,720, today about 153,000 according to the latest Employment Situation report. Employment is up 31.8 percent since 1988 and 11.5 percent since 2000. For the moving average of continued unemployment claims to keep pace with the historic lows in 1988 and 2000, the four-week moving average would have to be over 2.6 million and the weekly number of continued claims.would have to be 2.26 million. So much for historic comparisons!

By any measure the number of continued claims — which represents those who had filed claims in the past and remain on the rolls – has dropped considerably reflecting continued strength in hiring which will be borne out in tomorrow’s Employment Situation report to be released by the Bureau of Labor Statistics. While there are no forecasts for household employment, the consensus forecast for new jobs in April is 185,000, slightly above the three month average of new jobs. 178,000.

The Federal Open Market Committee, in deciding Wednesday to no raise the target fed funds rate, asserted however the “labor market has continued to strengthen even as growth in economic activity slowed.”  The economic slowdown was a reference to last week’s report that Gross Domestic Product rose by just 0.7 percent in the first quarter.

As expected, the stronger labor market was “topic A” in the FOMC meeting at which the Committee all but dismissed the weak GDP report. “Job gains,” the Committee said in its meeting-end statement “were solid, on average, in recent months, and the unemployment rate declined.”

The favorable trend in unemployment insurance claims reported Thursday will have no impact on the unemployment rate to be reported Friday but will have forecasters sharpening their pencils for the May employment situation report to be released June 2. For April, initial claims for unemployment insurance dropped 18,000 from mid-March to mid-April, the measuring points and the four-week moving average of first time claims fell 3,750 from mid-month to mid-month which point to a further decline in the unemployment rate which fell to 4.5 percent in March, the lowest it has been in almost 10 years.

The reports on unemployment insurance claims have been particularly volatile in the last couple of weeks reflecting a volatility in the seasonal adjustment factors which are computed to take into account predictable recurring events which will have an impact on claims. In the last three weeks, the seasonal adjustment factors used by the Department of Labor ranged from 88.9 to 94,1 as the unadjusted number of claims went from 211,287 to 241,780. The adjusted number of claims went from238,000 to 257,000 in

You can hear Mark Lieberman tomorrow, Friday May 5, at 8:45 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124 and again at 12:05 pm. You can follow him on Twitter at @foxeconomics.

Homeownership Rate Slips in 1Q; Household Formations Slow; Homes for Sale Fall

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Homeownership rate in 1Q 2017 slipped 0.1 percentage points to 63.6 percent but for the first time in over 10 years, the homeownership rate improved from year to year, up 0.1 percent from 1Q 2016;
  • Number of households owning homes in 1Q dipped slightly from 4Q as the number of renters increased;
  • Number of vacant homes for sale fell in 1Q to 1,292,000, lowest level since 2Q 2003.

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The nation’s housing market slipped in the first quarter with some key indicators slowing or declining, according to a new report from the Census Bureau. The homeownership rate fell, but remained above the 48-year low, 62.9 percent, recorded in 2Q 2016. The homeownership rate has fell for the tenth time in the last 14 quarters.

The drop in the homeownership rate which fell for seven straight quarters before improving in the second quarter of 2015, hints that households may again be souring on homeownership, stressed by weak earnings growth and still burned by the experience of neighbor or relatives during the mortgage meltdown.

The number of households owning homes fell 48,000 from the end of 2016 to the end of March while the number of households renting increased 206,000 in the same period.

To be sure the less than robust sales numbers reported by the National Association of Realtors for existing homes, and the Commerce Department in its monthly report on new home sales feed into the homeownership data and the narrative. It’s hard to disaggregate though whether homeownership affordability or confidence might be the culprit. What is clear though is the impact of the ever-so-slight shift to renting.

In the most recent reports both existing and new home sales improved in March of this year

The moribund household formation data reflects an economy in which millennials struggle to strike out on their own either because they can’t find jobs or because the jobs they do find make living on their own, as a new household, a financial challenge.

That flows logically into the third warning sign: the sharp drop in the number of homes for sale as “empty nesters” discover their nests are not as empty as they had thought.

Hear Mark Lieberman every Friday on the Morning Briefing on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 am Eastern Time.. Follow Mark Lieberman on Twitter at @foxeconomics.

 

Moving Averages of Both 1st Time and Continued Claims for Unemployment Insurance Drop Again

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • 1st time claims for unemployment insurance for the week ended April 22 ROSE 14,000 to 257,000;
  • The number of initial claims for the week ended April 15 was REVISED DOWN 1,000 to 243,000;
  • The smoothing four-week moving average of first time claims DIPPED 500 to 242,250 or 0.15.8 percent of total employment;
  • Continued claims – reported on a one-week lag – ROSE 10,000 for the week ended April 8 to 1,988,000;
  • Four-week moving average of continued claims DROPPED 16,000 to 2,007,250.

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It was another up-and-down week for data on unemployment insurance claims. While the number of new first time claims filed rose as did the number of continued claims, the smoothing four-week moving average for each data series dropped. The weekly claims as reported by the Department of Labor are highly volatile thus the four-week moving average is a better guide for trends.  Indeed, with its drop this week, the four-week moving average fell to its lowest level since June 2000, continuing to add statistical evidence to the strength of the labor market.

The stronger labor market will likely be “Topic A” when the Federal Open Market Committee meets next week to review interest rates.

What the FOMC must keep a weather eye out for now is the possibility the tighter labor market will lead to significantly higher wages and inflation. Inflation has been on the mind of the FOMC since it began to ratchet down interest rates to shake the economy out of recession.  After dropping the target fed funds rate to near zero, the FOMC set an inflation goal as a condition for raising rates. Though the goal – a 2 percent inflation rate — was not met and the other target, a 5 percent unemployment rate – a surrogate for sustainable economic growth – was surpassed, the FOMC did not raise rates until the economy was well on its way to the inflation target.

Raising rates – which the FOMC is expected to do twice more this year – will be a tap on the brakes to keep the economy from careening off the road.

Of course, the FOMC does not act in a vacuum and is also considering the new tax proposals – most of which are shorn of details – from the Trump White House. The tax plan, doubling the standard deduction for individuals could, if it succeeds in putting spending cash back in the pockets of individuals, itself be inflationary which would lead to another round of interest rate increases.

The unemployment claims report will have no direct impact on the Employment Situation report for March to be released May 5. Reading tea leaves, the unemployment claims data suggest a further drip in the unemployment rate and perhaps the largest job gain of the fledgling Trump Administration.

You can hear Mark Lieberman every Friday at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.