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warranty is made as to accuracy.

Trend Macrolytics, LLC

Donald Luskin, Chief Investment Officer

Thomas Demas, Managing Director

Michael Warren, Energy Strategist

Data Insights: Jobs Friday, April 7, 2017

Today's jobs data: what you need to know

Non-farm payrolls Change Mar: +98 Revision Feb: -16 Revision Jan: -22

Private payrolls Change Mar: +89 Revision Feb: -6 Revision Jan: -17

Employment Change Mar: +472

Unemployment Change Mar: -326

Long -term unemployment Change Mar: -123

Civilian labor force Change Mar: +145

Unemployment rate Mar: 4.50% Change Mar: -0.21%

Underemployment rate Mar: 8.9% Change Mar: -0.3%

Participation rate Mar: 63.0% Change Mar: unch

UE adjusted for participation Mar: 8.8% Change Mar: -0.20%

Average weeks unemployed Mar: 25.3 Change Mar: +0.2

% longterm unemployed Mar: 23.3% Change Mar: -0.5%

Aggregate hours worked index Mar: 106.4 Change Mar: +0.1% Revision Feb: -0

Average hourly earnings Mar: +0.2% Change Mar: -0.1% Revision Feb: +0.1%

Aggregate weekly earnings Mar: 132.9 Change Mar: +0.2% Revision Feb: -0.3

Monthly job-finding probability Mar: 35.3% Change Mar: +0.3%

Monthly separation probability Mar: 1.9% Change Mar: -0.1%

% involuntary part-time Mar: 3.6% Change Mar: -0.1%

"Household" vs "Payroll" jobs Change Mar: +438

More than all entrants employed4.72 million below trend

Source: Bureau of Labor Statistics, TrendMacro calculations

For more information contact us: Donald Luskin: 312 273 6766 don@trendmacro.com Thomas Demas: 704 552 3625 tdemas@trendmacro.com

2

Today's payroll data: what you need to know -- where did the jobs come from? Sequential month change, thousands SA ---- Net job losses Biggest change per detail module: best worst

Durable goods +11

Nondurable goods unch

Temp services +25

Other +43

Education -4

Motor vehicles +3

Other +8

Health care +20

Retail -30

Transportation +0

Utilities -1

Service-providing +61

Other +1

Federal -1

Local +9 Financial +9

Government +9

Pro/Business +68

Edu/Health +16

Leisure/Hospitality +1

Information -12State +1

Manufacturing +11

Mining/logging +15

Construction +1

Private +66

Non-farm +60

Wholesale -0

Goods-producing +26

Where is the pay coming from? Vertical: Hourly wages vs average Horizontal: Payrolls change this month Circle size: Share of all employment

Energy/Mining

Construction

Manufacturing

Wholesale

Retail

Transportation

UtilitiesInformation

FinancialPro Services

Education/Health

Leisure

Other

-60%

-40%

-20%

+20%

+40%

+60%

-40 -20 0 +20 +40 +60 +80

Source: BLS, TrendMacro calculations

Job growth associated with higher-wage sectors this month.

3

The payroll cycle in the Not So Great Expansion following the Great Recession Growth MOM from July — 09-10 — 10-11 — 11-12 — 12-13 — 13-14 — 14-15 — 2015-16 2016-17

-0.35%

-0.25%

-0.15%

-0.05%

+0.05%

+0.15%

+0.25%

+0.35%

+0.45%

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Source: BLS Current Population Survey, TrendMacro calculations

The ultimate jobless recovery is becoming jobful Unemployment: thousands Short-term = <27 weeks Long-term = >27 weeks

Income inflation adjusted to today's USD

Short-term unemployed

Long-term unemployed

Labor force drop-outs

Total unemployed

Total unemployed + dropouts

Median real household income

$48,000

$50,000

$52,000

$54,000

$56,000

$58,000

$60,000

$62,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: BLS Current Population Survey, TrendMacro calculations

4

— Unemployment rate normalized for participation rate December 2007 — Participation rate — Headline unemployment rate Recession

4%

5%

6%

7%

8%

9%

10%

11%

12%

62.0%

62.5%

63.0%

63.5%

64.0%

64.5%

65.0%

65.5%

66.0%

66.5%

Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16

Source: BLS Current Population Survey, TrendMacro calculations

Winner and losers in the Not So Great Expansion following the Great Recession Change in total payrolls from prior business cycle peak, millions

Management, professional

Services

Sales and office

Production, farming-7

-5

-3

-1

+1

+3

+5

+7

+9

Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016

Source: BLS, NBER, TrendMacro calculations

5

Monthly job-finding probability (the outflow rate from unemployment) Chance of an unemployed person becoming employed in one month (per Shimer 2005) Recession

15%

25%

35%

45%

55%

65%

48 51 54 57 60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08 11 14 17

15%

20%

25%

30%

35%

40%

45%

07 08 09 10 11 12 13 14 15 16 17

Source: BLS Current Population Survey, TrendMacro calculations

Monthly job-separation probability (the inflow rate to unemployment) Chance of an employed person becoming unemployed in one month (per Shimer 2005) Recession

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

48 51 54 57 60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08 11 14 17

1.6%

1.8%

2.0%

2.2%

2.4%

2.6%

2.8%

07 08 09 10 11 12 13 14 15 16 17

Source: BLS Current Population Survey, TrendMacro calculations

6

The Beveridge Curve Cycle relationship between unemployment and job openings

— Expansion — Recession Polynomial trend (order 2), plus monthly plots for 09-current expansion • Latest

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5%

Un

em

plo

yme

nt

rate

Vacancy rate

08-09 rec

53-54 rec

57-58 rec

60-61 rec

90-91 rec

73-75 rec

80 rec

81-82 rec

01 rec 70 rec

09-current exp

01-07 exp

61-69 exp

54-57 exp

70-73 exp

82-90 exp

75-80 exp

80-81 exp

58-60 exp

91-01 exp

+4%

+5%

+6%

+7%

+8%

+9%

+10%

+1.5% +2.5% +3.5% +4.5% +5.5%

08-09 recAvg exp

Avg rec

09-current exp

Source: BLS Current Population Survey & JOLTS. Pre-2000:Conference Board normalized per Valletta (2005),

TrendMacro calculations

7

Involuntary part-time workers as percentage of the employed labor force Persons available for full-time work Recession

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

48 51 54 57 60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08 11 14 17

2%

3%

4%

5%

6%

7%

07 08 09 10 11 12 13 14 15 16 17

Source: BLS Current Population Survey, TrendMacro calculations

Aggregate weekly private hours-worked index Recession

40

50

60

70

80

90

100

110

48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16

90

95

100

105

98 01 04 07 10 13 16

Source: BLS Productivity and Costs (quarterly) and Current Employment Stats (recent monthly), TrendMacro calcs

8

Difference in employment change: "household" minus "payroll" surveys Recession

-1500

-1000

-500

0

+500

+1000

+1500

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Small company bias

Big company bias

Source: BLS Current Population Survey and Current Employment Statistics, TrendMacro calculations

Civilian labor force versus 20-year trend, millions Recession

50

70

90

110

130

150

48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16

152

154

156

158

160

162

07 08 09 10 11 12 13 14 15 16 17

Source: BLS Current Population Survey, TrendMacro calculations