Accounting for negative revisions, jobs effectively increased by 77,000 while unemployment surges as people looking for work can’t find it. Bloomberg labeled this “Goldilocks”. 
Please consider the Bureau of Labor Statistics Monthly Payroll Report for July.
Initial Thoughts
- A gain of 187,000 looks OK but negative revisions of 110,000 wipes out any semblance of OK.
- Employment rise by 222,000 but unemployment rose by 514,000. Over half a million people wanted jobs but couldn’t find them.
- The civilian noninstitutional population is 267,213,000. Employment is 161,484,000. That means there are nearly 106 million people age 16 and older who are not working at all.
- Because of annual benchmark revisions, the way the BLS reports revisions, and the relatively small sample sizes of monthly jobs reports, we cannot, with strong confidence, suggest these reports portray an accurate picture of either jobs or employment.
Nonfarm Payrolls and Employment Levels
About those strong jobs reports: Full time employment is down by 150,000 since January of 2023.
Payrolls vs Employment Gains Since May 2022
- Nonfarm Payrolls: 4,377,000
- Employment Level: +3,185,000
- Full Time Employment: +1,446,000
- Only 45.4 percent of the employment gains for the last 15 months was full time employment.
Of the 894,000 rise in employment in January, 810,000 was due to annual benchmark revisions. And the BLS does not say what months were revised, just poof, here you go. Again, we cannot, with strong confidence, suggest these reports portray an accurate picture of either jobs or employment.
Job Report Details
- Nonfarm Payroll: +187,000 to 156,419,000 – Establishment Survey
- Civilian Non-institutional Population: +211,000 to 267,213,000
- Civilian Labor Force: +736,000 to 167,839,000 – Household Survey
- Participation Rate: +0.2 to 62.8% – Household Survey
- Employment: +222,000 to 161,484,000– Household Survey
- Unemployment: +514,000 to 6,355,000- Household Survey
- Baseline Unemployment Rate: +0.3 to 3.8% – Household Survey
- Not in Labor Force: 525,000 to 99,374,000 – Household Survey
- U-6 unemployment: +0.4 to 7.1% – Household Survey
Change in Nonfarm Payrolls
Monthly Revisions
- August 2023: The change in total nonfarm payroll employment for June was revised down by 80,000, from +185,000 to +105,000, and the change for July was revised down by 30,000, from +187,000 to +157,000. With these revisions, employment in June and July combined is 110,000 lower than previously reported.
- July 2023: The change in total nonfarm payroll employment for May was revised down by 25,000, from +306,000 to +281,000, and the change for June was revised down by 24,000, from +209,000 to +185,000. With these revisions, employment in May and June combined is 49,000 lower than previously reported.
Last month the BLS revised the net gain in June from 209,000 to 185,000. This month the BLS revised June from 185,000 to 105,000.
Expect more negative revisions.
Part-Time Jobs
- Involuntary Part-Time Work: +197,000 to 4,221,000
- Voluntary Part-Time Work: +4,000 to 21,975,000
- Total Full-Time Work: -85,000 to 134,189,000
- Total Part-Time Work: +32,000 to 27,185,000
The above numbers never total correctly due to the way the BLS makes seasonal adjustments. I list them as reported.
In July, full-time employment declined by 585,000 and this month another 85,000.
Hours and Wages
This data is frequently revised.
- Average weekly hours of all private employees rose 0.1 hour to 34.4 hours.
- Average weekly hours of all private service-providing employees was flat at 33.3 hours.
- Average weekly hours of manufacturers was flat at 40.1 hours.
An overall decline or rise of a tenth of an hour does not sound line much, but with employment at 160 million, it’s more significant than it appears at first glance.
A year ago average total private weekly hours were 34.5 hours.
Hourly Earnings
This data is also frequently revised. Here are the numbers as reported this month.
Average Hourly Earnings of All Nonfarm Workers rose $0.08 to $33.82. A year ago the average wage was $32.43. That’s a gain of 4.3%.
Average hourly earnings of Production and Nonsupervisory Workers rose $0.06 to $29.00. A year ago the average wage was $27.75. That’s a gain of 4.5%.
Year-over-year wages are finally keeping up with inflation after underperforming for many months. However, the growth in wages is now shrinking. The monthly increased for production workers in August was only 0.2 percent.
Unemployment Rate
The unemployment rate hit a 50-year low in January and April of 3.4 percent. This month it’s 3.8 percent. That’s the highest since February of 2022.
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 3.8%.
U-6 is much higher at 7.1%. 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.
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.
Goldilocks!?
Let’s check back in on that porridge in a bit.
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
Unlike many others, I expect the unemployment rate will not rise much in this recession compared to the average recession impact. Employment due to baby boomer retirement is another matter.
Job Openings and Quits are in a Steep Plunge. The Fed Will Be Pleased.
Please note Job Openings and Quits are in a Steep Plunge. The Fed Will Be Pleased.
And The Labor Leverage Ratio, a Measure of Wage Bargaining Power, Is in Retreat.
Negative Revision to 2nd Quarter GDP, Huge Discrepancy with GDI Continues
Major Discrepancy Between GDP and GDI
On August 30, I noted Negative Revision to 2nd Quarter GDP, Huge Discrepancy with GDI Continues
Major Discrepancy Between GDP and GDI
GDP and GDI are two measures of the same thing, one from a product perspective, the other from an income perspective. Over time they merge.
The last three quarters of GDP starting with 2022 Q4 are 2.6 percent, 2.0 percent, and 2.1 percent. The last three quarters of GDI starting with 2022 Q4 are -3.3 percent, -1.8 percent, and 0.5 percent.
GDI is still consistent with a recession starting 2022 Q4. GDP isn’t. The NBER, the official arbiter of recessions, averages the two measures. The result is inconclusive for Q4 and Q1 combined.
Don’t be surprised if the NBER declares we had a recession and it is already over. It’s happened before.
Employment data is strongly consistent with GDI, not GDP. Moreover, jobs at economic turns are one of the more heavily revised measures.
Philadelphia Fed GDPplus Measure Sure Looks Like Recession Started in 2022 Q4
GDPplus is a measure of the quarter-over-quarter rate of growth of real output in continuously compounded annualized percentage points.
It’s a blend, but not an average, of Gross Domestic Product (GDP) and Gross Domestic Income (GDI). It is much smoother than either GDP or GDI as the above chart show.
For 2022 Q4 and 2023 Q1 the GDPplus numbers are -1.2 percent and -0.7 percent respectively.
For discussion, please see Philadelphia Fed GDPplus Measure Sure Looks Like Recession Started in 2022 Q4
In 100 percent of the cases, with no false signals, no misses, and no lead times more than two quarters, every time GDPplus had two consecutive quarters of negative growth, the economy was in recession.
On closer inspection, except for one reading of -0.1 percent, every time GDPplus went negative for even one quarter a recession soon followed.
Ignoring one barely negative print, GDPplus does not give false positives. And the lag is short compared to yield curve analysis.
The caveat is GDI and thus GDPplus are frequently revised. But the last revision was from -0.4 percent for 2023 Q1 to -0.7 percent.
This analysis strongly hints at a recession that started in 2022 Q4. Perhaps we had a recession and no one noticed. Don’t worry, there will be another one.
1)Construction is booming. Dalia and OH fab gave it a boost. Bidenomic is a
bootstrap economy.
2) Unions demand higher wages and they are right. Corp cannot raise prices to support higher costs and they are justified. Both sides fight in the trenches. Both
sides fight for survival. Congress 7 years civil war cont. Biden & Trump battle to stay out of jail.
3) Endogenous “events” destroy us after 250 years. CSPAN is blind.
SPX is hugging a support line coming from : Oct 2011 to Feb 2016 lows.
SPX 1M is DM #9. It might turn green for DM #13.
I think it will take awhile but eventually the economy will crater further in 2023 and early 2024. But a recovery in the 2nd half of 2024 will happen. Interest rates will get cut and Biden will win a 2nd term. The Fed wants no part of any instability created by Trump or his cronies so they will do everything possible to help Biden. I predict lower rates by mid 2024 once enough jobs have been lost and unemployment goes higher.
There is a paradox that few seem to talk about. One the one hand there is de-globalization and re-shoring to the US. Ohio is building a ton of microchip plants and other places are building electric batteries and cars.
We don’t have enough people now for all the work that needs to be done as we have 3.8% unemployment. We have millions of boomers retiring depleting the skilled labor force.
And with all of this, we somehow will have a deep recession with job losses? If I recall correctly, Mish thinks it will be a mild recession with minimal job losses and weak growth but that doesn’t jive with all the spend on plants, re-shoring, and de-globalization.
There are so many contradictory things being said everywhere, one wonders if anyone knows what will really happen.
At a bare minimum, as PapaDave states repeatedly, we will all need more energy in all forms to move ahead whether there is a recession or not.
Lol! I am very repetitive! Its all I know though.
You do not need to state the blatantly obvious.
Apparently, it is not very obvious. Given the number of folks here who disagree with virtually everything I say and the number of “thumbs down” that some of my posts receive. Which merely confirms that there are too many morons here who cannot see the obvious and we need an IGNORE button.
correct. i still do NOT know of a single person who is out of work, that wants to work. not a one. i speak with folks in all walks of life in 4 separate areas of usa, that i have lived. inflation is cumulative and most prices of most things still 20 to 50% higher today than they were in 2019. lunch to houses. this ain’t remotely anything that anyone would consider a recession. inflation is the common complaint i hear, and also feel. world demand of energy is gonna keep growing. no doubt papa D is correct on that
Dorthey get your butt in the cellar there’s a storm a comin.
Bloomberg and CNBC seem to always conveniently forget the last four words in the Goldilocks book.
1) In a moderate deflation the spending binge might stop, because tomorrow prices
will be cheaper than today. The cost of most items is down, relative to wages.
The real GDI might rise needing less Fed support. There might be a rotation from spending to saving.
2) Dark blue vs 12 months light blue. Dalia will further boost construction. Mfg and
Education & health service momentum is strong. Gov momentum is down. Gov and finance might soon turn red and join Info and transportation & warehousing.
3) The report excludes millions in the black market working for cash.
Big question is what percent of payroll growth has been shifting people from 1099 to payroll as has been forced by the administration. What percent of Uber drivers actually were shifted??
The unemployment chart clearly shows a bottom has been forming over the last 2 years. The two major themes for rising unemployment going forward are college debt repayment and inflation. Soon though, layoffs will add to unemployment.
Government data is lies. Seasonally adjusted data is buggered data. Please report unadjusted rail freight, credit card activity, transportation fuel consumption, retail sales, imports, exports, electricity consumption, grocery store receipts; used car sales, prices, interest rates, and defaults.
Joe Biden is offering $12 billion to auto companies that ramp EV manufactures while they hold a 90 day inventory. Government Motors is a likely taker.
Why don’t you report the correct data? The rest of us are too busy.
Expect a long slow recession with minimal job loss;
Or slow growth.
Either way; expect oil demand to keep growing, supplies to keep tightening; and WTI to stay above $80. And the oil companies I keep recommending to do very well.
It’s a beautiful day to sell November $57.50 covered calls on Devon and rake in some profits. Goes ex-Dividend Sept 14. All aboard the money train….choo! choo!
Covered? Or, do you sell nudes?
Mea culpa. I just reread the post. Sorry.
I wish you had told us to buy NVIDIA instead of oil stocks.
Somehow I don’t fashion PapaDave as a person who recommends investing in speculative bubbles.
Instead he’s stating that oil demand will keep growing in an environment when OPEC is cutting production in the hope of maintaining price levels. And if non-OPEC producers oversupply into those production constraints….
Correct Solon. Oil demand has been growing by 1 mbpd/a for 30 years, even as we have built out scads of renewables in that time frame. I expect that to continue. The oil sector has been reducing capex for a decade now, and instead focusing on producing everything they already have in reserves. Their new focus is on profitability, instead of growing reserves. And they are promising to reward shareholders with up to 100% of that free cash flow. I kinda like that.
Thanks Mish. And correct. Though we all take the occasional gamble.
Currently it is hard to ignore the market sector with the lowest PE, and highest free cash flow.
Hey, crypto didn’t work out, but language models will make us all rich!
I have done far better on the oils than I could have on Nvidia. Kudos to those who bought Nvidia a year ago. But over a three year period. CNQ $15 to $88. TOU $18 to $70. Etc etc..
And huge dividends along the way.
I WAS heavily into tech up till 2020. Then two amazingly prophetic people on this fabulous blog made the case for oil companies going forward. I was convinced by their arguments and began to accumulate the oils as I sold my tech. They were right. And I have profited. Since they are no longer here, I am humbly following in their footsteps.
Once AI gets rolling, one has to wonder if there will be a race to be bottom in terms of profitability. And, at some point (probably within 15 years) there’s going to be a massive social backlash.
Can’t wait to watch The Creator on 9/29 for a preview of what lies ahead. Looks like a fantastic movie.
I agree. Oil will remain a great bet for quite some time. Gone are the days of over investment.
O&G plays are not as sexy but clearly one of the promising sectors today. VTLE on a nice heater. The NG pipeline plays are probably my favorite within this sector.
Josh Young is a big promoter of VTLE. Check him out on X. Same for Eric Nuttall, who runs a large oil and gas fund in Canada.
I am not invested in VTLE personally, but it sounds promising.
WTI to stay above $80 in a recession? How? Oil got hammered the last three recessions. What is different this time?
It won’t be different if its a severe worldwide recession. Oil demand will drop in that scenario.
But most recessions are mild and local. A mild US recession will barely change global oil demand growth. Some here say we are already in a recession and yet oil demand keeps rising.
China’s growth has slowed from 6+% pre pandemic to 3% post pandemic, yet oil demand keeps rising.
And oil demand has been rising by 1mbpd/a on average for 30 years now, even as we have built out scads of renewables.
Most pundits expect oil demand to keep growing by 1mbpd/a for the rest of this decade.
And with oil companies committed to less capex, and primarily producing the reserves they already have, and focusing on profitability, supplies will tighten going forward. US rig counts have been dropping all year.
And the Saudi’s are determined to get the price to $90, and OPEC holds all the spare capacity (which isn’t much).
I like the setup for oil to staynover $80. But hey, that’s what makes a market. Different opinions.
We shall see what happens to oil demand when China’s economy crashes into a worse-than-1930’s depression.
Lol! I guess this blog does attract the doom and gloomers. There is always a 1930s crash and depression right around every corner.
Anything can happen. But when you are always scared of doom, you tend to be way too cautious.
I appreciate your oil analysis and recommendations. they have been profitable for me. hat tip to you. drinks on me if ever in gotham city or village of brooklyn. take a look at weed stocks. there is a rather big change in the works from DEA and HHS on rescheduling. might be a different game now with huge tax changes……not a done deal, but the weed stocks were up huge past few days.
And the recession I said we would be revised into enters the chat. Sixteen years of below par growth from 2007 and now a recession within that depression. Add in credit problems, bank failures and further risk aversion and this could be a doozy.
Expect more alphabet facilities, QEs, and a government who will take this as permission to spend like drunken sailors on favored things it wants to stimulate, ie not the real economy.
There is no one that can misallocate resources like 21st century humans. The tide needs to go out so all is revealed.
Wells Fargo limits withdrawals at the teller machines, but the law says a demand deposit is a demand deposit.
I can pull 1,000 in Benjamins any time I want. Pretty sure I can sit there and keep pulling big chunks at a time but I’ve never needed to score an elbow of coke. What kind of cash draw do you require? Sufficient number of Benjamins won’t even fit through the cash slot in the ATMs.
That much coke requires several hookers.
I beg your pardon!
You can “demand” all you want, but they won’t necessarily comply.
We couldn’t actually let capitalism operate as it should and kill off a bunch of debt zombie corporations. Some of the political mega donors might lose money.
All. Not some.
Looks like the investor sanction is working as intended.