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
The above Unemployment Rate Chart is from the BLS. Click on the link for an interactive chart.
Nonfarm Employment Change from Previous Month
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
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 6.9%. 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
Milenials grew up getting participation trophies. They never learned how to operate a can opener. Then they spent $70K per year for 5-6 years playing in college, where they learned about gender neutral safe spaces. Once a day, they complain how long it is taking another college graduate to prepare their grande size chai latte with coconut milk. And what is this? No hand made scone to accompany my chai latte? Their whole day is ruined by the absent scone.
Obviously they will never truly join the work force — they can’t do anything, and lack enough basic education to even get training on the job. Politicians and government statistics offices are going to need to develop all new cover stories to make it appear like millennials are kind-a sort-a employed (but not really).
There will be resentment from older generations and LEGAL immigrants that these millennial babies never grew up, and now we need to work twice as hard while millennials pretend to work but not really.
Trying to make sense of statistics (like U-3), which are based on the assumption that everyone has a basic level of training, will be an exercise in futility.
Like virtually all 3rd world countries,Unless you get a check from govt ,there’s really no (legal) way to earn a living!
Obviously, we need negative unemployment to raise interest rates. How do you get a negative unemployment number? Well, how do you get a negative interest rate? Easy-peasy.
The deeper impact of this statement, Mish points out:
“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.”
is that due to the Gig Economy, the unemployment calculations are dropping. I charged scooters for side cash and saw in the forums how many people were doing this for their sole income. There are a lot of people doing 1-3 gig jobs and nothing else and apparently that counts as employed and not just once but multiple times. Add in to that how many people have been reduced from full time to part time.
Unless the administration wants to take credit for the gig economy, I don’t think there’s anything to celebrate here.
P.S.. I love reading about unemployment on Mish Talk. Always so informative. Thanks Mish!
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Extremely low unemployment means companies are having to hire under-qualified applicants. That’s a late-cycle phenomenon. It means there’s a mismatch between investment monies and actual productivity.
WSJ says unemployment was last this low in 1969. That’s not reassuring. Inflation-adjusted S&P500 went down for 12 years after that.
Extremely low unemployment, was the case in the Soviet Union. Theirs was zero, plus minus a few tenths. All the way up until the very end.
It was also the case for Antebellum cotton pickers. Not much opportunity for unemployment for them.
Combined, the two demonstrates quite clearly exactly how useful, and economically relevant, “unemployment,” like other “economic” statistics really is.
Make people desperate enough, and they won’t be “unemployed.” If Party Leadership benefits from reporting “low unemployment”, “low unemployment” is what will be reported. Neither has much, if any, relevance to the actual state of labor markets, though.
Unemployment hitting a new low is code for the BLS eliminating more people from the labor force statistics. We would need another 3-4 million employed just to have 50% participation! We’re not a nation of children and old people, these numbers are dismal for the Greatest Economy Ever™.
Agree with Mish that table 15 is a better approximation, albeit still on the low side.
Unemployment numbers are always a lagging indicator. ECRI and ISM data are far more relevant.
We actually need only about 100k jobs/month to keep a slow motion expansion going. The problem is many americans don’t want to learn skilled labor for high paying jobs. Not sure why this is. If we allowed any immigrant to come in legally and work and pay taxes the labor shortage issue could be resolved as well as bring in more badly needed tax revenue. The lazy people who don’t want to work can be supported by mom and dad instead of free stuff from the govt.
Still not buying the tight labor market theory. There are several sources online which publish job openings but most of them are double counting. Removing this reduces the number of job openings by at least 50 percent. It was actually more but because of cutbacks in postings for H1B and other labor visa programs the number of double postings has been reduced. The bottom line is it is not as tight a labor market due to this and not hiring older workers. The biggest fraud is in the number of tech jobs which never go filled.
Every time I speak with a business owner I hear the same story, they can not find enough help either skilled or not. I believe we are at full employment and labor rates are rising despite the govt statistics. These numbers will never show up in the data because it would deter the fed from interest rate suppression.
New headline for Mish
“Private employment continues to grow and unemployment remains historically low”
I fail to see the bad news.
There are more jobs than qualified applicants. This has slowed hiring.
Census added 1,000. Not a very significant number.
Retail expecting a good Holiday. Of course, they did last year … and actual was half of their expectation (4.3% to 4.8% growth).
WASHINGTON – The National Retail Federation today said it expects holiday retail sales during November and December to increase between 3.8 percent and 4.2 percent over 2018 to a total of between $727.9 billion and $730.7 billion.
Holiday sales during 2018 totaled $701.2 billion, an unusually small increase of 2.1 percent over the year before amid a government shutdown, stock market volatility, tariffs and other issues.
NRF expects seasonal hiring to grow at least 530,000
Even with trade uncertainty and the increasingly tight labor market, retailers have been hiring extra staff to meet expected demand during the holiday season. NRF expects retailers to hire between 530,000 and 590,000 temporary workers, which compares with 554,000 in 2018.
“kids moving back home because they cannot find a job.” Any kid that cannot find a job nowadays is hopeless. Then again, drug dealers probably do not report their employment.
Most kids want the title of CEO, or at least co-founder… despite having no experience outside a so-called “classroom” run by Peter Pan want-to-be professors (I don’t wanna grow up!)
We have job openings and all the resumes stink. Do all young people get new jobs every year? Not sure how you would acquire much responsibility or get much experience doing this. Always in training.
Obviously their lack of work ethic is the fault of Trump, or Putin, or everyone in China, or maybe the Loch Ness monster.
It can’t possibly be the fault of “training” received from college professors who barely teach one course per semester (with a TA correcting papers) and then whine about how over worked they are.
I assume you aren’t collecting resumes from kids who might repair lawn mowers… but don’t waste your time: milenials have no idea what a spark plug is.
This is a generation of kids who don’t know how to operate a can opener