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Another Month of Weaker Than Expected Job Gains in September

Nonfarm payrolls missed expectations again but the unemployment rate declined to 4.8%.
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Nonfarm Payrolls MM 2021-09

For September, the the BLS reports a gain of 194,000 jobs  with 317,000 private. The Econoday consensus was 475,000 and 445,000 respectively.

BLS Jobs Statistics at a Glance

Details from the monthly BLS Employment Report.

  • Nonfarm Payroll: +194,000 to 147,553,000 - Establishment Survey
  • Employment: +526,000 to 153,680,000- Household Survey
  • Unemployment: -710,000 to 7,674,000- Household Survey
  • Baseline Unemployment Rate: -0.4 to 4.8% - Household Survey
  • U-6 unemployment: -0.3 to 8.5% - Household Survey
  • Civilian Non-institutional Population: +155,000 to 261,766,000
  • Civilian Labor Force: -183,000 to 161,354,000 - Household Survey
  • Not in Labor Force: -+338,000 to 100,412,000 - Household Survey
  • Participation Rate: -0.1 to 61.6% - Household Survey

Job Revisions

  • The change in total nonfarm payroll employment for July was revised up by 38,000, from +1,053,000 to +1,091,000
  • The change for August was revised up by 131,000, from +235,000 to +366,000.
  • With these revisions, employment in July and August combined is 169,000 higher than previously reported.

Part-Time Jobs

The above numbers never total correctly. I list them as reported.

Unemployment Rate – Seasonally Adjusted

Unemployment Rate Seasonally Adjusted 2021-09

Nonfarm Payrolls

Nonfarm Payrolls 2021-09

The above chart puts a needed perspective on the jobs recovery.

  • Jobs are up 17,393,000 from the low in April 2020.
  • Jobs are still 4,970,000 from the February 2020 pre-Covid high.

Those numbers do not reflect increasing population or the type of job recovered.

Hours and Wages

Average weekly hours of all private employees rose 0.2 hour to 34.8 hours. Average weekly hours of all private service-providing employees was flat at 33.6 hours. Average weekly hours of manufacturers was flat at 40.4 hours.

Average Hourly Earnings of All Nonfarm Workers rose $0.19 to $30.85

Year-over-year, wages rose from $29.50 to $30.85. That's a gain of 4.58%.

The month-over-month and year-over-year gains are seriously distorted by Covid.

Average hourly earnings of Production and Supervisory Workers rose $0.14 to $26.15.

Year-over-year, wages rose from $24.79 to $26.15. That's a gain of 5.49%.

Again, these numbers are seriously distorted by Covid.

For a discussion of income distribution, please see What’s “Really” Behind Gross Inequalities In Income Distribution?

Birth Death Model

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

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 wildly wrong at turning points but otherwise means little. It is also heavily revised and thus useless. 

Alternative Measures of Unemployment

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Table A-15 2021-09

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

The official unemployment rate is 4.8%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 8.5%. 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. The rest is disability fraud, forced retirement, discouraged workers, and kids moving back home because they cannot find a job.

Covid-19 had an enormous impact on the labor force. Many dropouts are really unemployed but are not counted as such, said Fed Chair Jerome Powell.

Strength is Relative

It’s important to put the jobs numbers into proper perspective.

In the household survey, if you work as little as 1 hour a week, even selling trinkets on eBay, you are considered employed.

In the household survey, if you work three part-time jobs, 12 hours each, the BLS considers you a full-time employee.

In the payroll survey, three part-time jobs count as three jobs. The BLS attempts to factor this in, but they do not weed out duplicate Social Security numbers. The potential for double-counting jobs in the payroll survey is large.

Household Survey vs. Payroll Survey

The payroll survey (sometimes called the establishment survey) is the headline jobs number, generally released the first Friday of every month. It is based on employer reporting.

The household survey is a phone survey conducted by the BLS. It measures unemployment and many 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 jobs on Monster 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.

Recovery Not Complete

This recovery has been fast, but it was also the deepest on record. Jobs are still 5 million short of the pre-pandemic level.

Some losses are permanent due to a surge in work-at-home and online shopping (less office space and malls needed).

Final Thoughts

Federal pandemic benefits ends in September although many Republican states stopped the benefits earlier. 

Many millions of people were paid more to not work than they made working. If they saved that money, they have a cushion that will allow them to wait for a job they really want. 

Older workers may simply say "Thank you for the free money, I will retire now." There is a hint of that in the declining labor force this month.

Meanwhile, huge distortions in both parts and labor remain.

Despite millions of job openings in Leisure and Hospitality, the sector added only 74,000 jobs in August.

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