Initial Reaction
Jobs came in worse than expected. ADP forecast a 202,000 jobs.The Bloomberg consensus was 157,000 jobs.
The GM strike ended last month causing a huge surge in manufacturing and auto parts jobs in November. For December, manufacturing unexpectedly fell by 12,000 jobs.Manufacturing was a one-hit, no-wonder, in this corner.
145,000 is not a bad number, but it is a letdown in expectations both from a manufacturing side and a private employment side. Private employment only rose by 139,000 be expectations of 150,000.
Job Revisions
The change in total nonfarm payroll employment for October was revised down by 4,000 from +156,000 to +152,000, and the change for November was revised down by 10,000 from +266,000 to +256,000. With these revisions, employment gains in October and November combined were 14,000 lower than previously reported.
Also recall my August 21 report: BLS Revises Payrolls 501,000 Lower Through March.
The August revisions are not reflected in the charts. The newer revisions are.
BLS Jobs Statistics at a Glance
- Nonfarm Payroll: +145,000 – Establishment Survey
- Private Nonfarm Payroll: +139,000 – Establishment Survey
- Employment: +267,000 – Household Survey
- Unemployment: -58,000 – Household Survey
- Involuntary Part-Time Work: -140,000 – Household Survey
- Voluntary Part-Time Work: +54,000 – Household Survey
- Baseline Unemployment Rate: Unchanged at 3.5% – Household Survey
- U-6 unemployment: -0.2 to 6.7% – Household Survey
- Civilian Non-institutional Population: +161,000
- Civilian Labor Force: +209,000 – Household Survey
- Not in Labor Force: -48,000 – Household Survey
- Participation Rate: Unchanged at 63.2% – Household Survey
BLS Employment Report Statement
“Total nonfarm payroll employment rose by 145,000 in December, and the unemployment rate was unchanged at 3.5 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in retail trade and health care, 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 Trends
Hours and Wages
Average weekly hours of all private employees were steady at 34.3 hours. Average weekly hours of all private service-providing were steady at 33.2 hours. Average weekly hours of manufacturers was steady at 40.5 hours.
Average Hourly Earnings of All Nonfarm Workers rose $0.03 to $28.32.That’s a gain of 0.11%.
Average hourly earnings of Production and Supervisory Workers rose $0.02 to $23.79. That’s a 0.08% gain.
Oops. It looks like we had a little revision here. Last month I reported wages rose $0.07 to $23.83.
Year-Over-Year Wage Growth
- All Private Nonfarm rose from $27.53 to $28.32, a gain of 2.9%.
- Production and supervisory rose from $23.09 to $23.79, a gain of 3.0%.
Wages are not rising as fast as previously reported. I will report on this separately.
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 3.5%. 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. 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
Last month I commented “The end of the GM strike provided a one month or perhaps 2-month lift in jobs. Next month will tell.” One month it was.
Manufacturing will likely remain very weak due to problems at Boeing.
Wage growth was a huge disappointment. There may be a jump next month as states raise minimum wages at the beginning of the year.
Mike “Mish” Shedlock
Speaking of Boeing..
Slow growth has been the secular trend since 2012. It continues.