For the Second Month, the Jobs Report Falls Short of Lofty Expectations

For July, the BLS reports 187,000 jobs vs the Bloomberg Econoday consensus estimate of 200,000. ADP reported gain of 324,000. Last month, ADP reported a stunning jobs gain of 497,000 vs a BLS report of 149,000 private jobs.

Please consider the Bureau of Labor Statistics Monthly Payroll Report for July.

Initial Thoughts

• Four sectors lost jobs in July, Manufacturing, Transportation and warehousing, information, and professional and business services.
• Full time employment fell by 585,000 in July. Part time employment rose by 972,000.
• The civilian noninstitutional population is 267,002,000. Employment is 161,262,000. That means there are nearly 106 million people age 16 and older who are not working at all.
• Because of annual benchmark revisions, the way the BLS reports revisions, and the relatively small sample sizes of monthly jobs reports, we cannot, with strong confidence, suggest these reports portray an accurate picture of either jobs or employment.

Nonfarm Payrolls and Employment Levels

Payrolls vs Employment Since May 2022

• Nonfarm Payrolls: 4,300,000
• Employment Level: +2,963,000
• Full Time Employment: +1,531,000

Of the 894,000 rise in employment in January, 810,000 was due to annual benchmark revisions. And the BLS does not say what months were revised, just poof, here you go. Again, we cannot, with strong confidence, suggest these reports portray an accurate picture of either jobs or employment.

Job Report Details

• Nonfarm Payroll: +187,000 to 156,342,000 – Establishment Survey
• Civilian Non-institutional Population: +201,000 to 267,002,000
• Civilian Labor Force: +152,000 to 167,103,000 – Household Survey
• Participation Rate: +0.0 to 62.6% – Household Survey
• Employment: +268,000 to 161,262,000– Household Survey
• Unemployment: -116,000 to 5,841,000- Household Survey
• Baseline Unemployment Rate: -0.1 to 3.5% – Household Survey
• Not in Labor Force: +49,000 to 99,899,000 – Household Survey
• U-6 unemployment: -0.2 to 6.7% – Household Survey

Change in Nonfarm Payrolls

Monthly Revisions

The change in total nonfarm payroll employment for May was revised down by 25,000, from +306,000 to +281,000, and the change for June was revised down by 24,000, from +209,000 to +185,000. With these revisions, employment in May and June combined is 49,000 lower than previously reported.

Part-Time Jobs

• Involuntary Part-Time Work: -191,000 to 4,000,000
• Voluntary Part-Time Work: +704,000 to 21,971,000
• Total Full-Time Work: -585,000 to 134,274,000
• Total Part-Time Work: 972,000 to 27,153,000

The above numbers never total correctly due to the way the BLS makes seasonal adjustments. I list them as reported. But do not the huge changes in voluntary and involuntary part-time work while full-time employment jumps.

Hours and Wages

This data is frequently revised.

• Average weekly hours of all private employees fell 0.1 hour to 34.3 hours.
• Average weekly hours of all private service-providing employees was flat at 33.3 hours.
• Average weekly hours of manufacturers was flat at 40.1 hours.

An overall decline or rise of a tenth of an hour does not sound line much, but with employment at 160 million, it’s more significant than it appears at first glance.

A year ago average total private weekly hours were 34.6 hours. 

Hourly Earnings

This data is also frequently revised. Here are the numbers as reported this month.

Average Hourly Earnings of All Nonfarm Workers rose $0.14 to $33.74. A year ago the average wage was $32.33. That’s a gain of 4.4%.

Average hourly earnings of Production and Nonsupervisory Workers rose $0.13 to $28.96. A year ago the average wage was $27.64. That’s a gain of 4.8%.

Despite the gains, wages are barely keeping up with inflation after underperforming inflation for many months.

Unemployment Rate

The unemployment rate hit a 50-year low in January and April of 3.4 percent. This month it’s 3.5 percent.

Alternative Measures of Unemployment

Table A-15 is where one can find a better approximation of what the unemployment rate really is.

The official unemployment rate is 3.5%.

U-6 is much higher at 6.7%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Some of those dropping out of the labor force retired because they wanted to retire. Some dropped out over Covid fears and never returned. Still others took advantage of a strong stock market and retired early.

The rest is disability fraud, forced retirement (need for Social Security income), and discouraged workers.

Birth Death Model

Starting January 2014, I dropped the Birth/Death Model charts from this report.

The birth-death model pertains to the birth and death of corporations not individuals except by implication.

For those who follow the numbers, I retain this caution: Do not subtract the reported Birth-Death number from the reported headline number. That approach is statistically invalid.

The model is wrong at economic turning points and is also heavily revised and thus essentially useless.

Household Survey vs. Payroll Survey

• The payroll survey (sometimes called the establishment survey) is the headline jobs number. It is based on employer reporting.
• The household survey is a phone survey conducted by the BLS. It measures employment, unemployment and other factors.

If you work one hour, you are employed. If you don’t have a job and fail to look for one, you are not considered unemployed, rather, you drop out of the labor force.

Looking for job openings on Jooble or Monster or in the want ads does not count as “looking for a job”. You need an actual interview or send out a resume.

These distortions artificially lower the unemployment rate, artificially boost full-time employment, and artificially increase the payroll jobs report every month.

Expect a Long But Shallow Recession With Minimal Rise in Unemployment

Given hiring pressures and boomer retirements, Expect a Long But Shallow Recession With Minimal Unemployment Rise

Unlike many others, I expect the unemployment rate will not rise much in this recession compared to the average recession impact. Employment due to baby boomer retirement is another matter.

Demographically Sobering Thoughts on US Employment in the Next Five Years

In case you missed it, please see Demographically Sobering Thoughts on US Employment in the Next Five Years

Labor Productivity Jumps 3.7 Percent in 2023 Q2 as Hours Worked Declines

Yesterday, I reported Labor Productivity Jumps 3.7 Percent in 2023 Q2 as Hours Worked Declines

Actual hours worked fell in business, manufacturing, and nonfarm business.

What Do Federal Tax Receipts and Total Receipts Suggest About Recession?

In case you missed it, please see What Do Federal Tax Receipts and Total Receipts Suggest About Recession?

The above chart is through 2023 Q1. Tax data for the second quarter is not yet available. See the above link for details.

Final Thoughts

Gross Domestic Income (GDI) and Gross Domestic Product (GDP) are two measures of the same thing. They equal over time.

For discussion of GDI and GDP, please see Real GDP Beats Expectations, Rises 2.4 Percent in First Estimate for 2023 Q2

Once again, we see an enormous and rising discrepancy between jobs and employment, especially full time employment.

The weakness in full time employment also turns up in tax data, productivity, and GDP reports. Collectively, these data items suggest GDI, not GDP, is a better measure of the economy.