The one fact you probably didn’t pick up on in November’s jobs report
November's jobs report appears to have sealed the deal for an interest rate hike in 2015, the economy apparently growing so quickly that the Federal Reserve will feel the need to slow it down some. The Dow gained 370 points today, presumably because the U.S. economy was reported to have added 211,000 jobs in November, beating out economists' forecasts of 200,000, while the unemployment rate remained unchanged at 5 percent. Moreover, the Bureau of Labor Statistics revised October's and September's jobs numbers upwards some 27,000 and 8,000 respectively. That's 35,000 jobs added to the economy that were not previously reported.
On Thursday, Federal Reserve Chair Janet Yellen suggested that the economy was on the right track for a small interest rate hike, cautioning against waiting too long to increase rates. Increasing rates gradually now, she said, lowers the risk of having to raise interest rates quickly in the future, which might disrupt financial markets. With November's strong jobs report, when Federal Open Market Committee meets in two weeks, it seems almost certain that the Fed will raise rates for the first time since 2006. Economist Justin Wolfers of the centrist Peterson Institute certainly thinks so:
Yet, fiscal doves continue to argue that it's too soon to raise rates. On Twitter, Elise Gould of the left-leaning Economic Policy Institute cautioned against scratching the itch — that is, moving on interest rates — too soon:
"I don't think the matter of time should determine it, the data should determine it," Gould told the PBS NewsHour. She points to wages as one place that still needs improving. Average hourly earnings rose a mere 4 cents to $25.25 in November, following a 9 cent gain in October, and have risen by only 2.3 percent over the year. Moreover, over at the ever-provocative Zero Hedge website, proprietor and chief contributor "Tyler Durden" wrote that "an even worse picture emerges when looking at the average weekly earnings, which actually declined to $871.13 from $872.27 last month." That, Durden points out, "represents just a 2% increase from a year ago… This is the result of weekly hours worked declining."
And later today Durden posted this startling statistic: "since January, the US has added 293,900 waiter & bartender positions and zero manufacturing workers." The data bear him out.
There's something else in November's jobs report that's a cause for concern.
The U6 — which measures the total unemployed, those employed for part time reasons, as well as the marginally attached to the labor force — actually went up .1 percent for the first time since January. Why? The number of people working part-time for economic reasons increased by 319,000.
So why did this number increase when all the other numbers seem to be heading in the right direction? When the Bureau of Labor Statistics reports the number of jobs created, they don't say what kinds of jobs have been created. As Paul Solman reported in October, the U.S. is increasingly moving towards a freelance economy. In fact, contingent workers — freelancers, part-time workers, self-employed workers and the like — make up more than 40 percent of the workforce, in the sense that they get the majority of their income from 1099 forms. Hopefully, most of the part-time jobs created in November were a symptom of the holiday season, or a one-month statistical anomaly, and not an omen of future job growth.
PNC senior economist Gus Faucher has a longer and more optimistic view take on the part-time numbers. He notes that while the number of people working part-time for economic reasons rose by 319,000 in November, the number of people working part-time for economic reasons is still down 765,000 from a year ago. Additionally, voluntary part-time jobs are up by 161,000 from a year ago. Faucher notes that between November 2014 and November 2015, fully 2 million new jobs were created. Thus, he concludes, with 2 million net new jobs and 600,000 workers who went from part-time jobs to full-time jobs, there are 2.6 million more full-time jobs than there were a year ago.
So yes, the part-time explosion in November could be ominous, but it would be a reversal of the trend so far this year.
There's one last thing to note in November's jobs report that doesn't seem to be getting much attention.
Zero Hedge has been harping on the fact that all the new jobs have been taken by older Americans. In theme he wrote about in a post from April and has pursued since, "Tyler Durden" states: "America continues to be a country where there are only jobs for old men, those 55 and older… Every other age group saw job losses!"
Now, if you are like us here at Making Sen$e, this line would give you pause. With older workers facing discrimination in the workplace, this is not what you would expect.
But then we looked at the numbers that came out today:
Note that jobs for 16-19 year-olds are down, although only slightly; there's almost no change at all for 20-24 year-olds; and one million jobs were added for everyone between the ages of 25 and 54 — that's most of the workforce. So what age group got the other million new jobs in the past year? Fifty-five and above!
Why then are employers hiring older workers? It could be that they're seen as more reliable, harder workers, less entitled than, say, a millennial applying for the same job.
But Zero Hedge points to another possibility — that older workers have less leverage to demand higher wages, making them more pliant employees. They suggest that this lack of leverage — some might call it desperation — may be the reason why there's little to no wage growth.