Thread by @ernietedeschi

Happy Jobs Day all! Quick thread about how to think about the numbers.

First, what would a good jobs number be? I think the best signal of strong jobs growth is when jobs grow faster than both the labor force and population.

To exceed population growth, monthly payrolls need to beat ~+105K. To beat labor force growth, the threshold is ~+170K. /2

As the chart shows, jobs growth in the US has been doing well recently, comfortably exceeding population growth by a wide margin, and in line or slightly above labor force growth. Over the last 3 months, jobs have grown by an average of +176K. /3

Note that there's a big factor this month that will push the monthly jobs growth number higher one time: the end of the GM strike in late October. Striking workers are generally not counted in payroll employment, so they were out of the numbers before, and are now back in. /4

That's upward pressure of almost +50K on this month's number. But we should bear in mind that's not really a signal of greater labor market capacity utilization. Just as the strike overstated weakness in the the past couple of months, its end will overstate strength this month /5

What about wages? Wage growth is fine, but it seems to have stopped accelerating since late last year. That may in part be a sign of a *good* thing: if the recovery is bringing in more lower-skilled workers then average wages will be pulled down compositionally. But... /6

...if, like me, you think the labor share of the economy has more ground to make up, then we'd want wage growth to exceed nominal productivity. That means wage growth in excess of 3%, and maybe even 3.5%. We're around that range right now but not comfortably above it. /7

So to sum up: a great report would include jobs growth above +170K and wage growth accelerating towards 3.5%.

And on the household side, prime-age employment and labor force rising, along with long-term unemployment and part-time for economic reasons falling. /FIN