Initial Reaction – Huge Misses
- The Econoday consensus was for a payroll expansion of 163,000 jobs, 150,000 of them private. The ADP forecast was 195,000 jobs.
- ADP missed consensus by 65,000 jobs.
- Econoday missed consensus by 33,000 jobs.
- Econonday missed the private consensus by 54,000 jobs.
- The Econoday lowest estimate missed the private consensus by 40,000 jobs.
A 34,000 surge in government jobs was primarily due to temporary census hiring of 25,000. So this report is far weaker than the headline number indicates.
By the way, revisions were negative for the third time.
The one positive in the report was a household survey surge in employment coupled with a household surge in the labor force thereby keeping the unemployment rate unchanged.
Even then, things are weaker than they look. The surge in involuntary part-time work was +397,000 and voluntary part-time work rose by +260,000. Don’t add those numbers together as it does not work that way.
U-6 Unemployment jumped 0.2% to 7.2%.
Job Revisions
The change in total nonfarm payroll employment for June was revised down by 15,000 from +193,000 to +178,000, and the change for July was revised down by 5,000 from +164,000 to +159,000. With these revisions, employment gains in June and July combined were 20,000 less than previously reported.
Also recall my August 21 report: BLS Revises Payrolls 501,000 Lower Through March.
BLS Jobs Statistics at a Glance
- Nonfarm Payroll: +130,000 – Establishment Survey
- Private Nonfarm Payroll: +96,000 – Establishment Survey
- Employment: +590,000 – Household Survey
- Unemployment: -19,000 – Household Survey
- Involuntary Part-Time Work: +397,000 – Household Survey
- Voluntary Part-Time Work:+260,000 – Household Survey
- Baseline Unemployment Rate: 3.7% – Household Survey
- U-6 unemployment: up 0.2 to 7.2% – Household Survey
- Civilian Non-institutional Population: +207,000
- Civilian Labor Force: +370,000 – Household Survey
- Not in Labor Force: -364,000 – Household Survey
- Participation Rate: +0.2 to 63.2% – Household Survey
Employment Report Statement
Total nonfarm payroll employment rose by 130,000 in August, and the unemployment rate was unchanged at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment in federal government rose, largely reflecting the hiring of temporary workers for the 2020 Census. Notable job gains also occurred in health care and financial activities, while mining lost jobs.
Unemployment Rate – Seasonally Adjusted
The above Unemployment Rate Chart is from the BLS. Click on the link for an interactive chart.
Nonfarm Employment Change from Previous Month
Hours and Wages
Average weekly hours of all private employees rose 0.1 hours to 34.4 hours. Average weekly hours of all private service-providing employees rose 0.1 hours to 34.3 hours. Average weekly hours of manufacturers rose 0.2 hours to 40.6 hours.
Average Hourly Earnings of All Nonfarm Workers rose $0.11 to $28.11. That a 0.39% gain.
Average hourly earnings of Production and Supervisory Workers rose $0.11 to $23.59. That’s a 0.47% gain.
Year-Over-Year Wage Growth
- All Private Nonfarm from $27.23 to $28.11, a gain of 3.2%
- All production and supervisory from $22.80 to $23.46, a gain of 3.5%.
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. Should anything interesting arise in the Birth/Death numbers, I will comment further.
Table 15 BLS Alternative Measures of Unemployment
Table A-15 is where one can find a better approximation of what the unemployment rate really is.
Notice I said “better” approximation not to be confused with “good” approximation.
The official unemployment rate is 3.7%. 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 7.2%. 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.
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.
Final Thoughts
This was a huge miss vs expectations, especially on the private side. The addition of temporary census workers is not a positive.
Job volatility remains high. Revisions continue to be negative. Excluding January, job growth is clearly slowing.
This report is way weaker than the headline numbers.
Mike “Mish” Shedlock
I don’t see a recession in the graph at the top of this story. I don’t see much of a pattern at all. It looks like noise.
Now, there are a certain group of never Trumpers who will look at a rorschach blot or a picture of a bunny rabbit and they will see a Putin induced recession…. but those people are insane.
Its noise. And it is a reflection of unemployment rates well below 6% for a decade or so — qualified people who want a job already have one.
Its also a reflection of the fact that low skill jobs are all temporary, no matter what government statisticians or employment lawyers think. Coffee barista is a temp job, not a career. Those jobs are important for college students and retirees looking to get out of the house — but they wont support a family.
High skill jobs are difficult to fill. Too many workers fail a drug test before they can even get to a skills test. And after 4 years of so called college, studying gender normative b%ll sh!t, will never prepare a young person for an actual job.
Also Putin. And the Loch Ness Monster. And I just saw Elvis.
The numbers are adjusted and then revised later. It’s tough to make heads or tales of the BLS reports.
Why can’t they just report the number of people having taxes withheld without any adjustments? I know some don’t have taxes withheld, but the pct doesn’t bounce around much from month to month. It won’t be prefect, but it will be an improvement.
And handle seasonal factors by comparing to the previous year instead of previous month.
Payroll growth can’t keep happening without available workers. Most companies in the private sector are limited by a lack of people. The applicant pool with 3.7% unemployment is not good. It’s hard to find people that can show up each day, perform any tasks and pass a drug screen.
As long as they can continue to eat, receive health care, housing, access NetFlix and play video games, they wont work.
I’m in manufacturing and all of our customers and suppliers are not building to plan due to lack of qualified employees. Demand has remained solid.
Exactly. I see signs for jobs everywhere and I keep hearing the number one problem for business’ is lack of labor. Wages seem to be going higher also. None of these facts will be taken into consideration as they continue to suppress interest rates below the level of true inflation.
I am surprised that with the lack of people to take jobs, there has not been more demand for immigrants. How do companies grow if they can not hire? Technology does not work for every business owner.
As Trinity would say:
“I don’t have time for this shit: It’s time for NIRP.”
This is what the decade of 1/1/1 looks like. Meager job growth, meager growth of any kind.
Annnnnd, this is bullish for stocks! Amazing…..
It shows that all the fed meddling and fiscal stimulus has no effect. Onerous levels of debt are what matters.
As more and more people realize that all the G7 governments (US, Europe, Canada and Japan) have spent themselves into irrelevancy, that is good for the private sector. Things don’t run perfectly of course, but generally the private sector is less inept than the public sector.
So yes, this is good for stocks. Just not in the way CNBC tells it
No, it’s not good for the private sector because the public sector will keep trying to tax themselves back into relevancy.
Govt jobs,census,prison guards ,at this rate Dept of Corrections could be the largest employer,bigger than Walmart and the Army…….combined!