October Employment Picture: More of the Same

October Employment Picture: More of the Same
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We continue to see an underwhelming pattern of economic recovery. The worst of the initial economic dive is behind us. Political and economic risk clouds -- foreign and domestic -- continue to gather. Strong and sustained growth is proving elusive. The public sector continues to be a significant drag on hiring and private sector growth is lackluster. Public anger is congealing into political instability. Growth is particularly disappointing in light of the depth and length of the Great Recession.

In October 2011 we saw non-farm payrolls increase by 80,000 jobs. We added 104,000 private sector jobs and saw net losses of 24,000 jobs in the public sector. This continues a trend of slowly improving private sector job opportunity with continued significant and historically anomalous job loss in the public sector. State government employment, outside of education, accounted for a majority of public sector job loss in October, 20,000 of 24,000 total job losses. Administrative and support service gains accounted for more than half of net non-farm payroll gains. Long term unemployment, out of work for more than 27 weeks, declined to 43% of the unemployed.

Headline unemployment, The BLS U-3 measure, fell from 9.1% to 9.0%. The broad BLS U-6 measure of labor market weakness, including involuntary part-time employees and those who have given up looking, declined to 16.2% from 16.5%. Average weekly hours remained unchanged at the low rate of 34.3 hours per week in October. Average weekly earnings increased by $1.72, unadjusted for price increases.

Productivity remains a bright spot in the post 2008 economic numbers. We have seen long and dramatic periods of rising productivity and falling unit labor costs. This continued through Q3 2011. Third Quarter productivity rose 3.1%, quarter over quarter, and 1.1%, year over year. Output increased at a significantly greater pace than hours worked or compensation. In Q3 unit labor costs fell 2.4% as output increased by 3.1% and compensation increased by .6%. America's workers have been steadily producing more for less. This partially explains strong profit numbers with weak revenue prints and continued elevated joblessness. Real hourly compensation, earnings adjusted for changes in prices, were negative in all industry sectors in Q3. Unit labor costs have fallen as a feature of the Great Recession. Output increases well ahead of compensation. The future of corporate earnings hinges, in part, on how much longer this can be sustained.

Profits of non-financial corporations are at a 5 decade high as a percentage of value added. Hourly compensation is rising at about half the rate of consumer price inflation, as measured by the CPI. These are the numbers to watch as political and economic uncertainties gather.

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