Jack Dunn - Reclaiming Common Sense

The April ADP Payroll Report and the April Employment Situation Report was released May 4th. The data that was reported was the seasonally adjusted data. We saw a modest ADP number, just over 200,000, and a "weak" Employment Situation Report with 168,000 SA CES Private Sector workers joining the workforce, with an upward revision to the March data of 37,000 seasonal workers. This means that "215,000" workers joined the workforce in this report.  There are many ways to examine the data. Virtually every piece of data, except the workforce population, has a seasonally adjusted component and a non-seasonally adjusted component. The seasonal factors that are used to convert the non-seasonally adjusted data that is recorded to the seasonal adjusted data that is reported change by category, month and year. How are we doing with wages?

We saw the number of workers improve Month to Month for all sectors this month. Leisure and hospitality added 333,000 NSA CES workers. Professional business services added 248,000 workers. Construction added 192,000 workers. The smallest gains were in mining and logging and financial services. All sectors were up April to April except Information.

We had the highest weekly wages for each sector since January 2008. Average weekly wages were up month to month and April to April. That is obvious if we had the "highest" weekly wages "ever." The highest weekly wages were Mining and Logging. $1457, Information, $1379, Financial Services, $1278, Professional Business Services, $1144, and Manufacturing, $1092. The lowest wages were in Education and Health Services, Trade, Transportation, and Utilities (TTU,) "Other Services," and Leisure and Hospitality.

The weekly wage increases were up 2.4% to 5.82% for individual sectors. The largest growth was in Construction with 5.82%. TTU was only up 2.4%. Education and Health Services only saw an increase of 2.87% and Leisure and Hospitality saw an increase of only 2.85%. This is important because these are our larger segments. The slower growth in wages in our largest segments has been pulling down the average overall wage.

Garbage in, Garbage Out. The seasonally adjusted data that was reported in the Employment Situation Report was seasonally adjusted data. The Average Weekly Earning (AWE) during April 2017 was $900.25. The AWE during April 2018 was $925.98. (Both are from "Summary Table B.")  This means that the "average" growth was 2.86%. The problem is that if you take the seasonally adjusted number of workers (garbage,) and multiply that by the seasonally adjusted average wage (garbage) you get garbage times garbage. The seasonal factors that are used to convert the non-seasonally adjusted workers to the seasonally adjusted workers change month to month, season to season, and year to year. The same holds true for the seasonally adjusted average wage.

Increasing Wages - Increasing Worker - Increasing Take Home Pay. When we see increases in hiring in the lowest earning sectors the wages stay depressed. We have been seeing increases in workers in Construction, Mining/Logging, Manufacturing, and Profession and Business Service, the higher wage earning sectors. This is a virtuous cycle. Maybe people will be able to give up their restaurant and hospitality jobs and move up the corporate ladder.

We are on track to over $6 trillion in wages. Last year the annualized rate of wages was $5.861 trillion. This year the annualized rate is $6.165 trillion. This bodes well for the Monthly and Annual Retail Trade Survey (MARTS) data. Last year we had a record retail year. The first quarter was a record quarter. Wages are only part of the story. This is a survey. Surveys have variations. We need to watch the government revenue numbers.

There will be other days to cover the other normal topics that this column addresses. Five President at 15 months, the research is done. The Rebuilding of the Male workforce, working on it. The sector data, some is included here, some more detail later this week. The Red, Gray and Blue will be the final article.

It's the economy.