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Nonfarm Payrolls Jump by 531,000 and the Unemployment Rate Dips to 4.6%

Job Gains in October Easily Beat Consensus and the Unemployment Rate Dips as Well.
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Nonfarm Payrolls By Sector 2021-10

For October the the BLS reports a gain of 531,000 jobs with 604,000 private. The Econoday consensus was 450,000 and 400,000 respectively.

BLS Jobs Statistics at a Glance

Details from the monthly BLS Employment Report.

  • Nonfarm Payroll: +531,000 to 148,319,000 - Establishment Survey
  • Employment: +359,000 to 154,039,000- Household Survey
  • Unemployment: -255,000 to 7,419,000- Household Survey
  • Baseline Unemployment Rate: -0.2 to 4.6% - Household Survey
  • U-6 unemployment: -0.2 to 8.3% - Household Survey
  • Civilian Non-institutional Population: +142,000 to 291,908,000
  • Civilian Labor Force: +104,000 to 161,458,000 - Household Survey
  • Not in Labor Force: +38,000 to 100,450,000 - Household Survey
  • Participation Rate: +0.0 to 61.6% - Household Survey

Job Revisions

  • The change in total nonfarm payroll employment for August was revised up by 117,000, from +366,000 to +483,000
  • The change for September was revised up by 118,000, from +194,000 to +312,000. 
  • With these revisions, employment in August and September combined is 235,000 higher than previously reported. 

Part-Time Jobs

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

Unemployment Rate – Seasonally Adjusted

Unemployment Rate Seasonally Adjusted 2021-10

Nonfarm Payrolls

Nonfarm Payrolls 2021-10

The above chart puts a needed perspective on the jobs recovery.

  • Jobs are up 18,168,000 from the low in April 2020.
  • Jobs are still 4,204,000 from the February 2020 pre-Covid high.

Those numbers do not reflect increasing population or the type of job recovered.

Hours and Wages

Average weekly hours of all private employees fell 0.1 hour to 34.7 hours. Average weekly hours of all private service-providing employees rose 0.1 hour to 33.7 hours. Average weekly hours of manufacturers fell 0.1 hour to 40.3 hours.

Average Hourly Earnings of All Nonfarm Workers rose $0.11 to $30.96

Year-over-year, wages rose from $29.52 to $30.96. That's a gain of 4.88%.

The month-over-month and year-over-year gains are seriously distorted by Covid.

Average hourly earnings of Production and Supervisory Workers rose $0.10 to $26.26.

Year-over-year, wages rose from $24.83 to $26.26. That's a gain of 5.76%.

Again, these numbers are seriously distorted by Covid.

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.

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 2021-10

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

The official unemployment rate is 4.6%. 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 8.3%. 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.

Covid-19 had an enormous impact on the labor force. Many dropouts are really unemployed but are not counted as such, said Fed Chair Jerome Powell over a year ago. That still holds true today.

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.

Recovery Not Complete

This recovery has been fast, but it was also the deepest on record. Jobs are still over 4 million short of the pre-pandemic level.

Some losses are permanent due to a surge in work-at-home and online shopping (less office space and malls needed).

Final Thoughts

Federal pandemic benefits ended in September although many Republican states stopped the benefits earlier.

Many millions of people were paid more to not work than they made working. If they saved that money, they have a cushion that will allow them to wait for a job they really want.

Meanwhile, huge distortions remain.

Surprise of the Day

This was a stronger than expected jobs report with upward revisions as well. The reaction in the bond market was interesting. Yields fell steeply at the long end despite the apparent jobs strength.

The Fed Announces an Autopilot Strategy

Question of the Day: Can the Fed stick with its announced autopilot stance?

For discussion, please see The Fed Announces an Autopilot Strategy: How Long Can It Stick With It?

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