Looking Ahead to Friday’s Jobs Report

The big December jobs report is due out on Friday morning. The government will release several key figures regarding the employment situation including nonfarm payrolls, labor force participation and the unemployment rate.

This report will be one of the first times in a long time that I’m not so concerned about non-farm payrolls. Those have been growing at a steady clip for several months, and I expect that to continue. What I’m looking for now is to see an increase in average hourly earnings (AHE).

Until now, workers haven’t seen much of an increase in their wages. In fact, AHE has largely tacked 2% growth which is basically inline with inflation. The AHE for November wasn’t too bad. I’ll be very curious to see if there was more in December.

The other number to see will be hours worked. This is one of those reports that sounds counter-intuitive. You might think you’d want to see fewer hours worked, but in terms of the macro economy, we want to see more. More hours and at higher wages.

While inflation is still quite modest, an increase in wages will probably foreshadow an increase in consumer prices. As long as oil and other commodities are plunging, inflation isn’t a problem. The strong dollar has probably given the Fed a few more months to forego raising rates, but any sign of inflation will change that.

During the recession, the U-6 unemployment rate got a lot of attention. This is the regular unemployment rate plus part-time for economic reasons and marginally attached workers. This was considered a broader and more accurate gauge of the jobs market. In April 2010, it hit 17.2%%. It’s been dropping and for November, the U-6 was 11.4%. It’s taken a while but the jobs market is beginning to get back to something vaguely normal.

Posted by on January 7th, 2015 at 8:14 am


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