Today, the Bureau of Labor Statistics released its Monthly Payroll Report.
Initial Thoughts
- The divergence between jobs and employment continues for the tenth month but lessened in December of 2022 and January of 2023.
- The full time employment divergence is still huge.
- The divergences between jobs and employment date back to May.
- The BLS announced huge annual revisions in jobs and employment.
- Finally, even discounting the revisions, there is still a huge divergence between jobs and full time employment. We do not know how it evolved because the BLS doesn’t say.
Payrolls vs Employment Since May 2022
- Nonfarm Payrolls: +3,031,000
- Employment Level: +1,893,000
- Full Time Employment: -166,000
The internal details have been weak for ten months and I have been talking about the discrepancy for seven of them.
In the last eight months, full time employment is negative.
But… Please see revision details below because of the 894,000 rise in employment in January, 810,000 was due to annual revisions. And the BLS does not say what months were revised.
In essence, the BLS admits all of its job reports are full of errors and it leaves the errors in place as discussed under revision details below.
Job Report Details
- Nonfarm Payroll: +517,000 to 155,073 – Establishment Survey
- Civilian Non-institutional Population: +1,118,000 to 265,962,000
- Civilian Labor Force: +866,000 to 165,832,000 – Household Survey
- Participation Rate: +0.1 to 62.4% – Household Survey
- Employment: +894,000 to 160,138,000– Household Survey
- Unemployment: -31,000 to 5,694,000- Household Survey
- Baseline Unemployment Rate: -0.1 to 3.4% – Household Survey
- Not in Labor Force: +252,000 to 99,878,000 – Household Survey
- U-6 unemployment: +0.1 to 6.6% – Household Survey
Payroll Survey Revision Details
Annual revisions were huge including a rise of over a million in population.
The BLS explains “Establishment survey data have been revised as a result of the annual benchmarking process, the NAICS 2022 conversion, and the updating of seasonal adjustment factors. Also, household survey data for January 2023 reflect updated population estimates.”
Household Survey Revision Details
“In accordance with usual practice, BLS will not revise the official household survey estimates for December 2022 and earlier months. However, to show the impact of the population adjustments, table B displays differences in selected December labor force series based on the old and new population estimates.”
“Data users are cautioned that these annual population adjustments can affect the comparability of household data series over time. Table C shows the effect of the introduction of new population estimates on the change in selected labor force measures between December 2022 and January 2023.”
Of the 894,000 rise in employment in January, 810,000 was due to revisions! And we do not know what months had revisions.
That said, no matter how you slice the revisions, full time employment has been very weak.
Change in Nonfarm Payrolls
Change in Nonfarm Payrolls Details
Leisure and hospitality, and education and health services were the strong gainers in December.
Manufacturing has peaked this cycle. For discussion, please see Manufacturing ISM Sinks to a New Low for the Move, Repeats Recession Warning
Part-Time Jobs
- Involuntary Part-Time Work: +172,000 to 4,050,000
- Voluntary Part-Time Work: +455,000 to 22,083,000
- Total Full-Time Work: +278,000 to 132,577,000
- Total Part-Time Work: +606,000 to 27,400,000
The above numbers never total correctly due to the way the BLS makes adjustments. I list them as reported.
Even with revisions, everything points to part time jobs to fueling the job gains since May with divergences starting in March.
Hours and Wages
- Average weekly hours of all private employees rose 0.3 hours to 34.7 hours.
- Average weekly hours of all private service-providing employees rose 0.2 hours to 33.6 hours.
- Average weekly hours of manufacturers rose 0.4 hours to 40.5 hours.
Hourly Earnings
The BLS revised the December up negating its initial report showing minimal change from November.
Average Hourly Earnings of All Nonfarm Workers rose $0.10 to $33.03. A year ago the average wage was $31.63. That’s a gain of 4.4%.
Average hourly earnings of Production and Nonsupervisory Workers rose $0.06 to $28.26. A year ago the average wage was $26.88. That’s a gain of 5.1%.
Despite the gains, wages have not kept up with inflation.
Unemployment Rate
The unemployment rate hit a new record low this month of 3.4 percent.
However, there are 100,130,000 people age 16 and older who are not working at all. They are not employed but not unemployed.
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 3.4%.
U-6 is much higher at 6.6%. 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.
Changing Employment Dynamics
There are over 22 million workers age 60 and over. Millions will retire soon which will put upward pressure on hiring and wages.
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.
Q&A What’s Going On?
Q: Hey Mish, What’s Going On?
A: People are taking on second part time jobs to make ends meet. But full time employment is stagnant no matter how one slices and dices the revisions.
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
While I expect the unemployment rate will not rise much in this recession, at least compared to the average recession impact, employment is another matter.
There’s a Huge Temporary Growth in Gig Work to Make Ends Meet
As noted on January 1, There’s a Huge Temporary Growth in Gig Work to Make Ends Meet
That puts a spotlight what I have been saying for months, that strength in these job reports have been exaggerated for months.
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
Final Thoughts
All of this still fits my overall thesis in place for nearly a year now: Recession sooner rather than later but with a minimal rise in the unemployment rate.
I know of no one else who has held that view.
This post originated at MishTalk.Com
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