Good News-Bad News Employment Revision

Today's employment report were relatively weak, at least with regards to December-January changes. Payrolls rose less than expected and the household survey employment number rose even less. As a result, unemployment rose from 4.5% to 4.6%. Meanwhile, hours worked fell back and average hourly earnings rose a mere 0.2%.

However, far more interesting than the December-January changes was the revision of previous data. Payroll employment were upwardly revised by 894,000, while total hours worked were upwardly revised by 0,9%.

This is both good news and bad news for the U.S. economy. On the one hand, this means that the supposedly relatively weak employment growth of the last few years wasn't so weak after all. On the other hand, as output levels have not been upwardly revised, a increase in hours worked also means that the supposedly strong productivity growth wasn't so strong after all. This means that either real hourly compensation of workers or corporate profits must be downwardly revised. Given the fact that average hourly earnings were not downwardly revised in this report (they were in fact slightly upwardly revised), most, if not all, of it will probably represent lower corporate profits.