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Jobs Grow by 372,000 but Employment Shrinks by 315,000

The economy added a higher than expected 372,000 jobs in June. Revisions subtracted 74,000 from previous reports. Employment declined by 315,000.
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Payroll and employment data from the BLS, chart by Mish

Payroll and employment data from the BLS, chart by Mish

BLS Jobs Statistics at a Glance

Total nonfarm payroll employment rose by 372,000 in June, and the unemployment rate remained at 3.6 percent, the U.S. Bureau of Labor Statistics reported today.

 Notable job gains occurred in professional and business services, leisure and hospitality, and health care.

Details from the monthly BLS Employment Report.

  • Nonfarm Payroll: +372,000 to 151,980,000 - Establishment Survey
  • Employment: -315,000 to 158,111,000- Household Survey
  • Unemployment: -38,000 to 5,912,000- Household Survey
  • Baseline Unemployment Rate: unchanged at 3.6% - Household Survey
  • U-6 unemployment: -0.4 to 6.7% - Household Survey
  • Civilian Non-institutional Population: +156,000 to 263,835,000
  • Civilian Labor Force: -353,000 to 164,023,000 - Household Survey
  • Not in Labor Force: +510,000 to 99,812,000 - Household Survey
  • Participation Rate: -0.1 to 62.2% - Household Survey

Revision Details

  • The change in total nonfarm payroll employment for April was revised down by 68,000, from +436,000 to +368,000
  • The change for May was revised down by 6,000, from +390,000 to +384,000.
  • With these revisions, employment in April and May combined is 74,000 lower than previously reported.

Economists' Estimates

  • Nonfarm Payrolls: 270,000 expected vs 372,000 actual
  • Unemployment Rate: 3.6% expected vs 3.6% actual
  • Manufacturing Payrolls: 23,000 expected vs 29,000 actual
  • Hourly Earnings: +0.3% expected vs 0.3% actual

The above estimates from Bloomberg Econoday.

Payrolls were stronger than expected. The unemployment rate and hourly earnings were as expected. There's another divergence between jobs and employment.

Change in Nonfarm Payrolls 

Change in Nonfarm Payrolls from the BLS

Change in Nonfarm Payrolls from the BLS

For the second month we see strength in lagging sectors: Leisure and hospitality, and health services. 

Despite these gains, Leisure and hospitality employment is 1.3 million lower than in February 2020.

Part-Time Jobs

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

Unemployment Rate – Seasonally Adjusted

Unemployment rate data from the BLS, chart by Mish

Unemployment rate data from the BLS, chart by Mish

That's 4 consecutive months of 3.6 percent unemployment.

Nonfarm Payrolls and Employment Levels

Payroll and employment data from the BLS, chart by Mish

Payroll and employment data from the BLS, chart by Mish

Recovery Synopsis

  • The employment level and jobs have nearly recovered all losses.
  • Employment is down by 755,000
  • Jobs are down by 525,000
  • The numbers do not reflect increasing population or the type of job recovered.
  • The red and blue dotted lines show the still significant impact Covid has on the economy.

Change in Nonfarm Payrolls Since February 2020

Change in Nonfarm Payrolls from the BLS

Change in Nonfarm Payrolls from the BLS

Leisure and Hospitality is still down by 1.3 million workers. Education and Health Care is down by 259,000 workers. 

Professional services and transportation are humming. Expect the latter to weaken soon.

Hours and Wages

Average weekly hours of all private employees was unchanged at 34.5 hours. Average weekly hours of all private service-providing employees was unchanged at 33.5 hours. Average weekly hours of manufacturers fell 0.1 hours 40.3 hours.

Average Hourly Earnings of All Nonfarm Workers rose $0.10 to $32.08

Year-over-year, wages rose from $30.52 to $32.08. That's a gain of 5.2%.

Average hourly earnings of Production and Supervisory Workers rose $0.13 to $27.45.

Year-over-year, wages rose from $25.81 to $27.45. That's a gain of 6.4%.

Despite the gains, wages have not kept up with inflation.

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 Alternative Unemployment from BLS

Table A-15 Alternative Unemployment from BLS

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

The official unemployment rate is 3.6%. 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 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 still others took advantage of the strong stock market and retired early.

The rest is disability fraud, forced retirement, discouraged workers, and kids moving back home because they cannot find a job.

Changing Employment Dynamics

Covid-19 had an enormous impact on the labor force. Some job losses are permanent, millions of other other people now work from home.

Stimulus provided incentives to not work and some of those workers are returning to the labor markets now.

As of January 2022, there were 22 million workers age 60 and over. Millions will retire soon which will put upward pressure on hiring. 

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 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.

Recovery Not Complete

This recovery has been fast, but it was also the deepest on record. Some job losses are permanent.

Leisure and hospitality still has huge job needs.

Divergences

Once again we see a divergence between jobs and employment. These divergences have resolved in the direction of jobs. One of them likely won't. 

  • March employment level: 158,458,000.
  • April employment level: 158,105,000.
  • May employment level: 158,426,000.
  • June employment level: 158,111,000.

That's four months of heading nowhere or down as jobs have soared. Change since March: -347,000.

In expanding economies, discrepancies tend to resolve higher. At turns, discrepancies tend to resolver lower. 

Rising Rates and Fed Tightening

This may be nearly as good as things get before rising interest rates and mortgage rates start impacting jobs. At best, things will slow looking ahead.

Yet, the overall trends are far below where they should be. Some of that is retirement, some the result of lingering free money handouts.

The decline in the hospitality and retail sector employment stands out.

This ties in nicely with the warnings from Target, Walmart, and Amazon on building inventories and slowing consumer discretionary spending.

Expect a Long But Shallow Recession With Minimal Job Losses

Given hiring pressures and boomer retirements, Expect a Long But Shallow Recession With Minimal Job Losses

The stock market is another issue. For discussion, please see Artificial Wealth vs GDP: Why Earnings and the Stock Market Will Get Crushed

This post originated at MishTalk.Com

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