Initial Reaction - Weak Readings

  • Last month was a shocker, this month forecasters changed their tune and came much closer to another set of weak readings.
  • The Econoday consensus was for a payroll expansion of 145,000 jobs, 135,000 of them private.
  • The ADP forecast was 135,000 jobs.
  • ADP revised its estimate last month from 195,000 to 157,000.
  • Revisions were positive for the first time in four months.

The dip in the unemployment rate is likely artificial and related to temporary census hiring.

Wage growth was negative for all workers but up for production workers.

Job Revisions

The change in total nonfarm payroll employment for July was revised up by 7,000 from +159,000 to +166,000, and the change for August was revised up by 38,000 from +130,000 to +168,000. With these revisions, employment gains in July and August combined were 45,000 more than previously reported. After revisions, job gains have averaged 157,000 per
month over the last 3 months.

Also recall my August 21 report: BLS Revises Payrolls 501,000 Lower Through March.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +136,000 - Establishment Survey
  • Private Nonfarm Payroll: +114,000 - Establishment Survey
  • Employment: +391,000 - Household Survey
  • Unemployment: -275,000 - Household Survey
  • Involuntary Part-Time Work: -31,000 - Household Survey
  • Voluntary Part-Time Work:-124,000 - Household Survey
  • Baseline Unemployment Rate: 3.5% - Household Survey
  • U-6 unemployment: -0.3 to 6.9% - Household Survey
  • Civilian Non-institutional Population: +206,000
  • Civilian Labor Force: +117,000 - Household Survey
  • Not in Labor Force: +89,000 - Household Survey
  • Participation Rate: +0.0 to 63.2% - Household Survey

Employment Report Statement

The unemployment rate declined to 3.5 percent in September, and total nonfarm payroll employment rose by 136,000, the U.S. Bureau of Labor Statistics reported today. Employment in health care and in professional and business services continued to trend up.

Unemployment Rate – Seasonally Adjusted

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The above Unemployment Rate Chart is from the BLS. Click on the link for an interactive chart.

Nonfarm Employment Change from Previous Month

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Hours and Wages

Average weekly hours of all private employees were steady at 34.4 hours. Average weekly hours of all private service-providing were steady at 33.2 hours. Average weekly hours of manufacturers were steady at 40.5 hours.

Average Hourly Earnings of All Nonfarm Workers fell $0.01 to $28.09. A revision took away another penny, down from $28.11. That's a loss of .07%.

Average hourly earnings of Production and Supervisory Workers rose $0.04 to $23.65. That's a 0.17% gain.

Year-Over-Year Wage Growth

  • All Private Nonfarm rose from $27.30 to $28.09, a gain of 2.9%, down from 3.2% last month.
  • All production and supervisory rose from $22.86 to $23.65, a gain of 3.5%.

For a discussion of income distribution, please see What’s “Really” Behind Gross Inequalities In Income Distribution?

Birth Death Model

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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

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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 6.9%. 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

The addition of temporary census workers is not a positive. And Temporary census hiring skews the reports.

Job report volatility and revisions remains high.

Indications suggest weakening in the employment picture.

Mike “Mish” Shedlock

Payrolls Expand by Whopping 312,000 as Unemployment Rate Rises to 3.9%

Nonfarm payrolls jumped by 312,000 and the unemployment rate rose by 0.2 PP as the labor force expanded by 419,000.

Payrolls Underperform Expectations at 155,000 Jobs, Unemployment Rate Steady

The unemployment rate was steady at 3.7% as the rise in employment was close enough to the labor force rise of 133,000.

Payrolls Exceed Expectations at 250,000 Jobs, Unemployment Rate Steady at 3.7%

The BLS reports jobs expanded by 250,000 vs the Econoday consensus estimate of 190,000 jobs and ADP at 227,000.

Job Report: Weak Earnings, Unemployment Rate Up, Upward Revisions

Job growth was a modest 128,000. The unemployment rate ticked up to 3.6%. Revisions added 95,000.

Jobs Rose by 304k Although Employment Fell by 251k: Unemployment Rate 4.0%

Nonfarm payrolls rose by 304,000 but employment fell by 251,000. The unemployment rate rose to 4.0% from 3.9%

Unemployment Rate Jumps to 4.4% But Worst is Yet to Come

The unemployment rate jumped to 4.4% in March, but the stat is more than a bit misleading. Things will get much worse.

Payroll Jobs +215,000, Unemployment Rate Ticks Up to 5.0% as More People Enter Labor Force

Initial Reaction Today’s employment report shows an increase of 215,000 jobs, very close to the Bloomberg consensus estimate of 210,000 jobs.

Payrolls “Unexpectedly” Weak, Negative Revisions, Earning Poor: What Happened?

Today’s establishment survey was a much weaker than expected at 138,000 jobs.

Nonfarm Jobs Expand by 164K, Unemployment Rate Remains 3.7%, Revisions Negative

Nonfarm payrolls expanded by 164,000 in June, slightly better than the ADP forecast and the Bloomberg consensus estimate