Friday, November 01, 2019

Strength In Employment Not Indicative Of Near Term Recession

Today's October employment situation report goes a long way in discarding recent recession chatter. October nonfarm payrolls were reported at 128,000 versus consensus expectations of 90,000. The  previously reported September payroll number was revised higher to 180,000 nonfarm payrolls from 136,000. October's manufacturing employment declined 36,000; however, motor vehicles and parts fell 42,000, mostly reflecting the GM automobile labor strike.

The participation rate continues to trend higher and was reported at 63.3%. Over the last six months 1,894,000 individuals entered the labor force. The strength of the economy, and hence the labor market, is attracting individuals into the labor force that have been on the sidelines.

In reviewing the participation rate by age cohort, higher participation is being seen in previously lagging age groups. The 55 and over age group has maintained strength through and after the financial crisis. Now it appears the other age groups are getting back to levels seen prior to the financial crisis. One group experiencing strong improvement is the 16 to 24 year old age group.

The pre-financial crisis participation level equaled 66.1%.

With the headwind of baby-boomer retirements, maybe the current participation does not reach the prior level; however, recent labor market data does suggest further improvement in participation is likely. These additional consumers, and their pent up demand, is also a positive for economic activity in the near term. In short today's employment report certainly suggests the current economic environment is one not likely to dip into a recession anytime soon.

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