Nonfarm Payrolls Were Another Big Upside Surprise to Economists, What Happened?

Two Hints of a Strong Report

Last month I commented on the Hidden Strength in the December Jobs Report. 

“For the second straight month the Household Survey was far stronger than the Establishment Survey.” 

This month, the jobs report caught up.

And yesterday, for no discernable, reason I noticed something else.

Bond Yields Up Huge Today

Hmmm. Do we have an upside surprise in jobs tomorrow?

— Mike “Mish” Shedlock (@MishGEA) February 3, 2022

Was I surprised today? No. 

I have seen this movie before. Unusual bond market moves on no news usually have a reason. 

Now we see the reason. And yields blasted higher again today on the strength of these numbers.

Here are the details with a whopping increase in employment in the Household Survey.

BLS Jobs Statistics at a Glance

Details from the monthly BLS Employment Report. – But See Revision Detail Below Before Accepting the Changes as Displayed

• Nonfarm Payroll: +467,000 to 149,629,000 – Establishment Survey
• Employment: +1,199,000 to 157,174,000– Household Survey 
• Unemployment: +194,000 to 6,613,000- Household Survey
• Baseline Unemployment Rate: +0.1 to 4.0% – Household Survey
• U-6 unemployment: -0.2 to 7.1% – Household Survey
• Civilian Non-institutional Population: +1,066,000 to 262,136,000
• Civilian Labor Force: +1,393,000 to 163,687,000 – Household Survey
• Not in Labor Force: -326,000 to 99,516,000 – Household Survey
• Participation Rate: +0.2 to 62.2% – Household Survey

Revision Details

Normally the BLS calculates numbers similar to what I posted above. This month, the BLS month-over-month totals are blank. 

Population did not go up by over a million people in a month. Nor was there a gain in employment in January of 1.2 million. 

The culprit is annual benchmark revisions on top of the normal monthly benchmark revisions. 

For the month, the BLS revised December jobs from +211,000 to +503,000, an increase of 292,000.

From the BLS

In accordance with annual practice, the establishment survey data released today have been benchmarked to reflect comprehensive counts of payroll jobs for March 2021. These counts are derived principally from the Quarterly Census of Employment and Wages (QCEW), which counts jobs covered by the Unemployment Insurance (UI) tax system. The benchmark process results in revisions to not seasonally adjusted data from April 2020 forward. Seasonally adjusted data from January 2017 forward are subject to revision. In addition, data for some series prior to 2017, both seasonally adjusted and unadjusted, incorporate other revisions.

I will have additional comments on annual revision data in a subsequent post. 

Part-Time Jobs

• Involuntary Part-Time Work: -212,000 to 3,717,000
• Voluntary Part-Time Work: -278,000 to 20,198,000
• Total Full-Time Work: +973,000 to 131,164,000
• Total Part-Time Work: +136,000 to 25,817,000

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

Unemployment Rate – Seasonally Adjusted

Nonfarm Payrolls

Recovery Synopsis 

• Jobs are up 18,646,000 from the low in April 2020.
• Jobs are down 2,875,000 from the February 2020 pre-Covid high.

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

The red dotted line shows the still significant impact Covid has on the economy.

Hours and Wages

Average weekly hours of all private employees was -0.2 hours to 34.5 hours. Average weekly hours of all private service-providing employees was also down 0.2 hours to at 33.5 hours. Average weekly hours of manufacturers fell 0.1 hour to 40.2 hours.

Average Hourly Earnings of All Nonfarm Workers jumped $0.23 to $31.63

Year-over-year, wages rose from $29.93 to $31.63. That’s a gain of 5.7%.

Average hourly earnings of Production and Supervisory Workers rose $0.17 to $26.75.

Year-over-year, wages rose from $25.18 to $26.75. That’s a gain of 6.2%.

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 is where one can find a better approximation of what the unemployment rate really is.

The official unemployment rate is 4.0%. 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 7.1%. 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 still others took advantage of the strong stock market and retired early.

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 and want a job but are not counted as such because they have not looked.

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 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.

Recovery Not Complete

This recovery has been fast, but it was also the deepest on record.

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

Continued Surprises 

Last month I commented “For the second month, the surprise of the day was the huge gain in the household survey vs the establishment survey.”

This month makes three. 

• In November the household survey rose by 1,136,000 vs a payroll gain of of only 210,000.
• In December, the household survey rose by 651,000 vs the establishment survey of 199,000.
• This month, annual revisions heavily revised the establishment survey jobs report for all of 2021.

This post originated at MishTalk.Com

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