Publish date:

What the Heck Happened to Employment (-18K) vs. Jobs (+850K) in June?

The BLS says jobs increased by 850,000 but Employment fell by 18,000.
Author:
Nonfarm Payrolls 2021-06

The BLS says nonfarm payrolls rose by a seasonally-adjusted 850,000 in June. Leisure and hospitality led the way, expanding by 343,000 jobs. Government added another 188,000 jobs. 

For more details and discussion, please see Jobs Expand by 850,000 with 188,000 of Them Government, But Employment Drops!

The above jobs numbers are from the Establishment Survey. Employment numbers are from a Household Survey.

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. 

Household Survey Employment by Age Group

Employment May-June 2021 In Thousands

BLS Process

The BLS takes raw numbers (unadjusted) and applies seasonal adjustments. The BLS reports the seasonal adjustments for some age groups but not others. 

Typically, when comparing month-to-month totals, one uses seasonally adjusted data. To understand why, think of kids in school or employment that rises in November and December then falls in January after Christmas.

But we do not have that data. It's not as important for older age groups because school isn't as big a factor although it does affect teachers. 

Surprising Drops

Seasonally adjusted, employment in age group 16-19 fell by 228,000. It fell by 122,000 in age group 25-34. 

Add it all up it comes to -221,000 but reported as -18,000. Part of that discrepancy stems from a combination of using a mix of seasonally adjusted and unadjusted number (but I only have what the BLS provides). 

Yet I assure you, the numbers would not add up anyway. BLS data never adds up. Consider an example from this morning's job report.

Part-Time Jobs

Involuntary + Voluntary Part-Time Work = 4,627,000 + 20,337,000 = 24,964,000 

Total Part Time Work = 25,610,000

Once again, seasonal adjustments and the order they are applied came into play.  

Birth-Death Adjustments

Prior to seasonal adjustments we also have Birth-Death Adjustments, a perennially disputed number that is widely misunderstood.

Every month I add this comment to my jobs 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 Birth-Death adjustment is a measure of employment the BLS assumes it missed in the monthly jobs report. It measures employment in assumed new businesses (the birth or deaths of businesses, not individuals).

The reported numbers are not seasonally adjusted, but added to the total, then the whole mess is seasonally adjusted.  

This month, a rarity, the adjustment went down by 19,000. In some months, the positive adjustment is nearly as big as the total. But the point that most people miss is that 19,000 (or whatever the total for the month is), is applied to the overall total then that total is adjusted. 

For example, Nonfarm Payrolls was 145,759,000. The 19,000 adjustment applies to that huge number, then the total is seasonally adjusted.  19,000 out of 146 million seems statistically irrelevant, which is why I stopped reporting on it.

What's Going On Synopsis

Seasonally adjusting the parts separately does not match adding everything together and then seasonally adjusting the total.

That means we cannot precisely say why there is an enormous discrepancy between jobs and employment.  

RECOMMENDED ARTICLES

One set of numbers is surely wrong. I suspect they both are wrong, and by a lot. Age group 16-19 really stands out.

Conclusion

Even if the headline number of +850,000 is in the ballpark, today's report was not a strong one.

In see Jobs Expand by 850,000 with 188,000 of Them Government, But Employment Drops! I commented “The biggest gain was leisure and hospitality work at 343,000. It's good that people are going back to work, but those are low-paying jobs for sure."

A couple of my regular readers added pertinent comments.

Casual Observer: "This month's stats show signs that unemployment benefits ended and that people took jobs to survive. The story of American economy continues to be the hollowing out of the middle class and the forces of globalization. Jobs will tend to be lower paying across the board unless you happen to be in a professional or technical skilled person who can retrain themselves repeatedly to compete. No wonder many Americans give up and go into the FIRE - financial services, insurance and real estate. I would add government and healthcare to this. These are all wholly unproductive fields from a productivity growth standpoint which is required for a rising standard living. The bottom line is about 20% of employed people are pulling up the other 80%. This is part of why growth has been poor overall the last two decades."

Realist: "The low-paying, lower skilled jobs are the ones being filled because the vast majority of US unemployed workers don’t have the skills needed to fill the millions of high-paying, higher skilled jobs that currently sit empty, as indicated by the Jolts reports.  High-paid, high skilled jobs are not sitting empty because workers prefer to sit at home collecting social assistance payments. The US could stop all social assistance and most of these jobs would still be sitting empty for lack of the right people.  This mismatch will continue for some time, resulting in slightly less economic growth, and slightly higher unemployment than desired.  The US needs to improve training to reduce this mismatch."

Nature of the Beast

While it's true that jobs sit empty due to lack of skills, Casual Observer has the more realistic observation: People returned to work (assuming the establishment survey is correct) because they had to. 

Following the Great Recession we also heard of the huge need for retraining.

I then commented, what are we going to do, retrain blicklayers and make them Java programmers? 

Today we see it is bricklayers who are in demand. Retraining is nearly always one step behind. 

Age comes into play. Even if you retrain someone aged 55, are companies going to hire that person or someone younger then train that person themselves? 

Retraining Better On Paper Than In Practice

Retraining is an idea that seems great on paper but the education system preys on people who think it's easy to be retrained then get a job. 

Retraining is hugely costly; many are uncapable of being retrained; and it's easy to be retrained for jobs that will be obsolete or careers that no longer need employees by the time training ends.

Instead of retraining, it's better to get a degree or a needed skill in the first place. 

Not everyone is suited for college, and most of the degrees students get are close to worthless. That's the place to start. 

SAT Profiling

On May 16, 2019 I discussed College Entrance Exam SAT Score Racial Profiling where 964=1223.

To compensate for the fact that Blacks score lower on average than Asians and Whites, SAT to Give Students ‘Adversity Score’ and colleges are using that score. Numerous lawsuits ensued.

Dumbing Down of US Education

On December 9, 2019, diversity scores were in full swing as noted in Adversity Scores: The Latest Dumbing Down of US Education

Math is Racist

On May 4, 2021, I noted To Promote Equality, California Proposes a Ban on Advanced Math Classes

It seems we are going to need more and more "retraining" starting with education administration top down.

Subscribe!

Like these reports? I hope so, and if you do, please Subscribe to MishTalk Email Alerts.

Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.

If you have subscribed and do not get email alerts, please check your spam folder.

Mish

Jobs +201,000 vs Employment -423,000: Another BLS Divergence

Nonfarm jobs rose but actual employment fell in two different measures of the BLS July jobs report.

November Jobs +228,000: Employment Only +57,000

The number of nonfarm jobs in November increased by 228K. The household survey says employment increased by only 57K.

Examining the Discrepancy Between Jobs and Employment

In the past year, the BLS says the number of jobs rose by 2.62 million. Employment rose by 1.429 million.

Jobs +75,000 vs Employment +113,000: Revisions -75,000

Jobs missed expectations by a mile but were well above the ADP forecast of +27,000. Revisions took the gain away.

Jobs Rise 225,000 But Employment Fell by 89,000

The BLS reports jobs rose by 225,000 in January but the manufacturing recession continues.

Another Wild Jobs Report: Payroll Employment Rose a Disappointing 20,000

The BLS gave us another wild jobs report. Unemployment fell to a new low for the cycle but the jobs gain was only 20K.

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%

Wild Job Fluctuations Again: Payrolls Rose by 196K but Employment Fell by 200K

The wild ride in job reports continues, this time to the upside with the unemployment unchanged but employment down.