Initial Reaction

The payroll survey shows a net gain of 248,000 jobs vs. an expectation of 215,000 jobs. Last month was revised up by 69,000 to 180,000. The six-month string of plus 200,000 jobs remains broken.

Last month the household survey had a gain in employment of only 16,000. That number was not revised up.

This month the household survey shows a respectable gain of 232,000, pretty much in line with the establishment survey.

Nonetheless the household survey over the past six months has been much weaker than the establishment survey. One or the other is apt for some serious revisions.

The labor force fell by 97,000. Those not in the labor force increased by 315,000. This follows  last month’s increase of those not in the labor force of 268,000.

The civilian labor force rose by 217,000. It would take that increase in employment to hold the unemployment rate steady.

Thus, the unemployment rate fell by 0.2% primarily on the basis of people dropping out of the labor force.

All things considered, this was a pretty strong report.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +248,000 – Establishment Survey
  • Employment: +232,000 – Household Survey
  • Unemployment: -329,000 – Household Survey
  • Involuntary Part-Time Work: -174,000 – Household Survey
  • Voluntary Part-Time Work: +35,000 – Household Survey
  • Baseline Unemployment Rate: -0.2 at 5.9% – Household Survey
  • U-6 unemployment: -0.2 to 12.0% – Household Survey
  • Civilian Non-institutional Population: +217,000
  • Civilian Labor Force: -97,000 – Household Survey
  • Not in Labor Force: +315,000 – Household Survey
  • Participation Rate: -0.1 at 62.7 – Household Survey

Additional Notes About the Unemployment Rate

  • The unemployment rate varies in accordance with the Household Survey, not the reported headline jobs number, and not in accordance with the weekly claims data.
  • In the past year the working-age population rose by 2,278,000.
  • In the last year the labor force rose by 389,000.
  • In the last year, those “not” in the labor force rose by 1,889,000
  • In the past year, the number of people employed rose by 2,330,000 (an average of 194,1677 a month)

Please note that over the course of the last year, the working-age population rose by more than the number of people employed. In normal times, the unemployment rate would have gone up slightly. Instead, the unemployment rate fell from 7.2% to 5.9%.

Over 100% of the decline in unemployment in the past year is due to people dropping out of the labor force, rather than strength in employment!

September 2014 Employment Report

Please consider the Bureau of Labor Statistics (BLS) July 2014 Employment Report.

Total nonfarm payroll employment increased by 248,000 in September, and the unemployment rate declined to 5.9 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services, retail trade, and health care.

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Unemployment Rate – Seasonally Adjusted

Nonfarm Employment January 2003 – September 2014

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Nonfarm Employment Change from Previous Month by Job Type

Hours and Wages

Average weekly hours of all private employees rose by 0.1 hours to 34.6 hours. This was the first increase in seven months. Average weekly hours of all private service-providing employees also rose by 0.1 hours to at 33.4 hours.

Average hourly earnings of production and non-supervisory private workers was flat at $20.67. Average hourly earnings of production and non-supervisory private service-providing employees was flat at $20.46.

Last month numbers appear to have been revised lower by $0.01 as last month I reported production and non-supervisory private at $20.68 and service-providing at $20.47.

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

Birth Death Model

Starting January, I dropped the Birth/Death Model charts from this report. For those who follow the numbers, I keep 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 add the charts back.

Table 15 BLS Alternate 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 5.9%. 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 11.8.0%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Labor Force Factors

  1. Discouraged workers stop looking for jobs
  2. People retire because they cannot find jobs
  3. People go back to school hoping it will improve their chances of getting a job
  4. People stay in school longer because they cannot find a job
  5. Disability and disability fraud

Were it not for people dropping out of the labor force over the past several years, the unemployment rate would be well over 9%. Some of those dropping out genuinely retired. However, millions retired involuntarily. That is, they needed to retire and collect social security because they had no job and no income. Such folks are no longer in the labor force even if they want a job. The falling unemployment rate is very deceiving, painting a picture of improvement that simply does not exist.

A gallup survey on the economy better reflects how the average Joe feels: 38% Think Economy Getting Better, 56% Say Worse.

Mike “Mish” Shedlock