Two Unemployment Numbers Signal A Further Slowdown In The Economy

For most people, the unemployment rate and the number of jobs created is all they care about when the jobs report is released each month.  But, there are internal numbers buried in that report that can tell us a lot about what's happening in the economy in general. 

This month, two numbers were significant.

First, manufacturing jobs declined by 15,000 workers in August.  This is the first time this number has gone negative in almost a year.  Now, certainly, one month isn't a trend; but, the drop in manufacturing jobs does seem to be consistent with other economic numbers that have shown a slowdown in manufacturing.  Take, for example, the Institute for Supply Management's Factory Index measurement.  For 3 months in a row, it has fallen; and fallen below the 50% mark that would otherwise indicate an expansion of factory orders.  That index, now sitting at 49.6%, indicates that manufacturing is contracting, and the August drop in manufacturing jobs is consistent with that contraction.

Then, there's the decline in the average work week for manufacturing workers.  In the August jobs report, the average work week slipped by two-tenths of an hour to 40.5 hours.  Normally, a slippage in this number would mean that overtime hours were being minimized by hiring more workers.  But, the number actually fell in the month.  This, then, means that manufacturing overtime hours (those hours above a 40-hour workweek) were in decline.  This is just the opposite of what you want in a growing economy.  Increasing overtime hours -- hours paid at time-and-a-half or double-time -- usually force a manufacturer to hire new workers, but  falling hours without new hires means that manufacturing output is in decline.  And, if manufacturing output is falling, so is the economy.

August Jobs Report: http://www.bls.gov/news.release/empsit.nr0.htm

Institute for Supply Management's Factory Index report: ISM factory index contracts for third month: http://articles.marketwatch.com/2012-09-04/economy/33571413_1_ism-survey-new-orders-index-factory-sector