Today, the Bureau of Labor Statistics released its Monthly Payroll Report.
Initial Thoughts
- The discrepancy between jobs and employment continues for the seventh month.
- Last month the unemployment rate fell 0.2 percent to a record low 3.5 percent. Today it inched back up.
- Lost in the unemployment noise are huge divergences between jobs and employment dating back to March.
Payrolls vs Employment Since March 2022
- Nonfarm Payrolls: +2,452,000
- Employment Level: +150,000
- Full Time Employment: -490,000
Employment fell by 328,000 in October.
Full time employment is down 490,000 since March and down by 572,000 since May!
Job Report Details
- Nonfarm Payroll: +261,000 to 153,308,000 – Establishment Survey
- Civilian Non-institutional Population: +179,000 to 264,535,000
- Civilian Labor Force: -22,000 to 164,667,000 – Household Survey
- Participation Rate: -0.1 to 62.2% – Household Survey
- Employment: -328,000 to 158,608,000– Household Survey
- Unemployment: +306,000 to 6,059,000- Household Survey
- Baseline Unemployment Rate: +0.2 to 3.7% – Household Survey
- Not in Labor Force: +201,000 to 99,868,000 – Household Survey
- U-6 unemployment: +0.1 to 6.8% – Household Survey
Revision Details
- The change in total nonfarm payroll employment for August was revised down by 23,000, from +315,000 to +292,000
- The change for September was revised up by 52,000, from +263,000 to +315,000.
- With these revisions, employment gains in August and September combined were 29,000 higher than previously reported.
Change in Nonfarm Payrolls
Change in Nonfarm Payrolls Since February 2020
Despite recent gains, Leisure and hospitality employment is 1 million lower than in February 2020.
The biggest gains are in professional and business services, up over a million, and transportation and warehousing up 732,000.
Part-Time Jobs
- Involuntary Part-Time Work: -183,000 to 3,660,000
- Voluntary Part-Time Work: +41,000 to 21,274,000
- Total Full-Time Work: -433,000 to 132,228,000
- Total Part-Time Work: +164,000 to 26,394,000
The above numbers never total correctly due to the way the BLS makes adjustments. I list them as reported.
In March, the BLS said full-time employment was 132,718,000. Today it says 132,228,00.
Everything points to part time jobs to fueling the job gains.
Hours and Wages
Average weekly hours of all private employees was flat at 34.5 hours. Average weekly hours of all private service-providing was flat at 33.5 hours. Average weekly hours of manufacturers rose 0.1 hour to 40.4 hours.
Average Hourly Earnings of All Nonfarm Workers rose $0.12 to $32.58. A year ago the average wage was $31.11. That’s a gain of 4.7%.
Average hourly earnings of Production and Supervisory Workers rose $0.11 to $27.86. A year ago the average wage was $26.42. That’s a gain of 5.5%.
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
Table A-15 is where one can find a better approximation of what the unemployment rate really is.
The official unemployment rate is 3.7%.
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 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.
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.
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.
Household Survey vs. Payroll Survey
The payroll survey (sometimes called the establishment survey) is the headline jobs number. It is based on a subset of employer reporting.
The household survey is a phone survey conducted by the BLS. It measures unemployment and full vs part time status.
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. Instead, you are no longer in the work force.
Increasing Divergence
Nonfarm payrolls are a subset of all jobs, but generally the numbers move in the same direction over time.
The Employment (Household Survey) is noisy. However, 7 months is a reasonable time frame for discrepancies to resolve.
Since March of 2022, payrolls are up about 2.5 million but full time employment is down by 490,000.
All of the employment rise (and then some) since March is part-time employment. But that’s a mere 150,000 in seven months since March.
Q&A What’s Going On?
Q: Hey Mish, What’s Going On?
A: People are taking on second part time jobs to make ends meet. But overall employment (the number of people working is stagnant.
Even worse, full time employment is down by 572,000 since May.
Unemployment Rate
Today the unemployment rate rose to 3.7 percent. Last month it was at a record low.
But as I have been saying for many months, don’t watch the unemployment rate, watch employment levels.
Due to tech and finance layoffs, I expect significant employment declines starting next month.
Since March, these reports have been a tale of two headlines, seemingly at odds: strong jobs but weak employment.
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
While I expect the unemployment rate will not rise much in this recession, at least compared to the average recession impact, employment is another matter.
This post originated at MishTalk.Com
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