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Jobs Expand by 850,000 with 188,000 of Them Government, But Employment Drops!

Jobs expanded by 850,000 in June, beating expectations while the unemployment rate jumped to 5.9%. The BLS also reports employment dropped.
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Nonfarm Payrolls 2021-06

For June, the Econoday consensus was 703,000 with 600,000 of them private. The BLS reports 850,000 with 662,000 private. Leisure and Hospitality, and Government jobs were the biggest gainers. Employment fell by 18,000.

BLS Jobs Statistics at a Glance

Details from the monthly BLS Employment Report.

  • Nonfarm Payroll: +850,000 to 145,759,000 - Establishment Survey
  • Employment: -18,000 to 151,602,000- Household Survey
  • Unemployment: +168,000 to 9,484,000- Household Survey
  • Baseline Unemployment Rate: +0.1 to 5.9% - Household Survey
  • U-6 unemployment: -0.4 to 9.8% - Household Survey
  • Civilian Non-institutional Population: +128,000 to 261,338,000
  • Civilian Labor Force: +151,000 to 161,086,000 - Household Survey
  • Not in Labor Force: -22,000 to 100,253,000 - Household Survey
  • Participation Rate: +0.0 to 61.6% - Household Survey

BLS Error Rate

Since March 2020, BLS has published an estimate of what the unemployment rate might have been had misclassified workers been included among the unemployed. Repeating this same approach, the seasonally adjusted unemployment rate in June2021 would have been 0.2 percentage point higher than reported. However, this represents the upper bound of our estimate of misclassification and probably overstates the size of the misclassification error.

I strongly question the accuracy of the BLS assertion that 0.2% is the high end of their error rate.

Job Revisions

  • The change in total nonfarm payroll employment for April was revised down by 9,000, from +278,000 to +269,000
  • The change for May was revised up by 24,000, from +559,000 to +583,000. 
  • With these revisions, employment in April and May combined is 15,000 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 2021-06

Nonfarm Payrolls

Nonfarm Payrolls 2021-06A

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

  • Jobs are up 15,598,000 from the low in April 2020.
  • Jobs are still 6,764,000 from the February 2020 pre-Covid high.

Those numbers do not reflect increasing population nor the type of job recovered.

Hours and Wages

Average weekly hours of all private employees fell 0.1 hours to at 34.7 hours. Average weekly hours of all private service-providing employees fell 0.1 hours to 33.7 hours. Average weekly hours of manufacturers fell 0.2 hours plus another 0.1 hours in a  negative revision to 40.2 hours.

Average Hourly Earnings of All Nonfarm Workers rose $0.10 to $30.40.

Year-over-year, wages rose from $29.35 to $30.40. That's a gain of 3.60%.

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

Average hourly earnings of Production and Supervisory Workers rose $0.10 to $25.68.

Year-over-year, wages rose from $24.77 to $25.68. That's a gain of 3.7%.

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.

BLS Covid-19 Statement on the Birth-Death Model

The widespread disruption to labor markets due to the COVID-19 pandemic and the potential impact to the birth-death model have prompted BLS to both revisit research conducted in the aftermath of the Great Recession (2008-2009) and incorporate new ideas to account for changes in the number of business openings and closings. Two areas of research have been implemented to improve the accuracy of our birth-death model in the CES estimates. These adjustments will better reflect the net effect of the contribution of business births and deaths to the estimates. These two methodological changes are the following:

1: A portion of both reported zeros and returns from zero in the current month from the sample were used in estimation to better account for the fact that business births and deaths will not offset.

2: Current sample growth rates were included in the net birth-death forecasting model to better account for the changing relationships between business openings and closings.

BLS will determine on a monthly basis if the adjusted birth-death model described here continues to be necessary. We will disclose these changes each month in the Employment Situation news release. All months in the tables of net birth-death forecasts on this page include footnotes for any month in which a regressor was used to supplement the forecasts.

The Birth-Death model is essentially garbage but we likely will not find how distorted this is until the annual revisions next year.

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Alternative Measures of Unemployment

Table A-15 2021-06

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

The official unemployment rate is 5.9%. 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 9.8%. 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. Most of the recent dropouts are really unemployed but are not counted as such, said Fed Chair Jerome Powell.

I agree 100%. The stated unemployment rate is bogus.

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 Will Take Years

The improvements are welcome but huge headwinds remain.

This recovery is a year in the making but jobs are still 7.6 million short.

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

Final Thoughts

Beneath the headline numbers is one of the screwiest reports ever. Jobs are up by 850,000 but employment fell by 18,000.  

Hours fell across the board and that makes sense as more workers were added.

The biggest gain was leisure and hospitality work at 343,000. It's good that people are going back to work, but those are low-paying jobs for sure.

Government jobs rose by a whopping 188,000 and that's not a good thing. 

Voluntary part-time work expanded by over 1.1 million as involuntary work declined by over 640,000. Full time work fell by over 400,000.

Add it all up, the numbers look great but the details sure don't.


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