Today’s employment report shows an increase of 38,000 jobs, well under the Bloomberg Econoday consensus estimate of 158,000 jobs and below the entire consensus range of 110,000 to 219,000.
The change in total nonfarm payroll employment for March was revised from +208,000 to +186,000, and the change for April was revised from +160,000 to +123,000. With these revisions, employment gains in March and April combined were 59,000 less than previously reported. Over the past 3 months, job gains have averaged 116,000 per month.
The household survey was worse. Employment rose a mere 26,000. That is on top of a decline last month of 316,000.
Adding insult to injury, part-time employment for economic reasons soared by 468,000.
The unemployment rate declined to 4.7% because a whopping 458,000 people dropped out of the labor force.
Rate Hike Not
Let’s dive into the details in the BLS Employment Situation Summary, unofficially called the Jobs Report.
BLS Jobs Statistics at a Glance
- Nonfarm Payroll: +36,000 – Establishment Survey
- Employment: +26,000 – Household Survey
- Unemployment: -484,000 – Household Survey
- Involuntary Part-Time Work: +468,000 – Household Survey
- Voluntary Part-Time Work: +137,000 – Household Survey
- Baseline Unemployment Rate: -0.3 to 4.7% – Household Survey
- U-6 unemployment: +0.0 to 9.7% – Household Survey
- Civilian Non-institutional Population: +205,000
- Civilian Labor Force: -458,000 – Household Survey
- Not in Labor Force: +664,000 – Household Survey
- Participation Rate: -0.2 at 62.6 – Household Survey
Please consider the Bureau of Labor Statistics (BLS) Current Employment Report.
The unemployment rate declined by 0.3 percentage point to 4.7 percent in May, and nonfarm payroll employment changed little (+38,000), the U.S. Bureau of Labor Statistics reported today. Employment increased in health care. Mining continued to lose jobs, and employment in information decreased due to a strike.
Unemployment Rate – Seasonally Adjusted
Nonfarm Employment Change from Previous Month
Nonfarm Employment Change from Previous Month by Job Type
Hours and Wages
Average weekly hours of all private employees was flat at 34.4 hours. Average weekly hours of all private service-providing employees was flat at 33.3 hours. Average weekly hours of manufacturers rose 0.1 to 40.8 hours.
Average hourly earnings of private workers rose $0.03 to $21.49. Average hourly earnings of private service-providing employees rose $0.01 to $21.27.
For 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 add the charts back.
Table 15 BLS Alternate 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 4.7%. 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 9.7%. 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.
Last month I offered these final thoughts: “This report was much weaker than the headline number indicates. +160,000 jobs vs. -316,000 employed is quite the discrepancy. In the past, household survey weakness tended to be made up in subsequent months. One of these times, out of the blue, we will see sustained weakness.”
Today was “one of these times”. The household survey was bad two months in a row, the establishment survey was exceptionally weak, and there were significant downward revisions in prior establishment reports.
The Fed isn’t hiking in June.
Mike “Mish” Shedlock
It is comical to watch all the follow up comments on CNBC. I’m all for staying positive… but, come on!! Rick S. is on it though!
Yes, cause that’s 760 new jobs in each state!
Until find out next month those numbers are wrong and are really much lower!
Aren’t the jobs figures merely a convenient excuse for not raising interest rates? Rates cannot go up as carnage will ensue.
Tony Bennett said:
Eagerly awaiting Mark Zandi’s response.
Following the March NFP he uttered nonsense along the lines of “ignore GDP, the economy is doing well”
On the brighter side, those carping here “no recession in sight” will likely be, uh,… out playing golf … or something.
So, what about non treasury interest rates? The debt binge appears to be over but is Fed oriented financial engineering going to go next level, causing high demand for all yield bearing instruments? Or, will the economy be seen realistically and cause non treasuries to rise in rates, reflecting actual risk?
Damn it, I’m old and want low risk yield without the risk of capital loss when rates someday normalize a little. A mix of high yield and high quality bond funds was / is in my plans but not until I can see a glide path that at least resembles actual realistic financial and economic theory; not central bank financial engineering augmented by HFT.
The Fed should allow rates to rise and damn the consequences. You can’t fix problems caused by low rates by keeping rates artificially low. Even if rates rise, they will still be below historical averages. But Central Bankers are politicians first and responsible custodians last. I expect them to emulate goofy Japan and race them to newly discovered bottoms not even imagined a few years ago.
Michael B. said:
Amen! I was thinking the same thing. Can’t we separate what financial institutions charge each other from what a saver can earn? I can’t get a job anymore as I am over 60, I have savings but am not eligible for social security yet. In the past I could earn a decent return on my savings, and be rewarded for being fiscally conservative. Now they want to start charging me to penalize me for holding cash and not investing in the wall street casino, excuse me, I mean the stock market. I have no interest in throwing away money in a rigged casino where the house always wins. I am risk averse, but have prudently saved my entire life. Why can’t banks at least pay me a rate comparable to what they charge consumers for loans?
“Why can’t banks at least pay me a rate comparable to what they charge consumers for loans?”
Why should they? Banks are in the business of making money, which means paying you as little in interest as they can get away with and charging as much interest on loans as they can squeeze. You call yourself “risk averse,” and I believe you, but you really need to reevaluate banks in light of new rules, bail-ins, etc. I view banks as very risky. I prefer bank-less to a cashless society.
I ditched banks completely for almost two decades, doing checking and a credit card at a Wall Street casino that failed in 2009, fired my brokers and became a too-big-to-fail bank rewarded with a TARP bailout. Forced me into a more conventional bank to write rent checks. All my credit cards strangely enough got bought out by one major bank that I had sworn to stay away from. So, am now dealing with multiple banks when I prefer zero.
Latest experience with major bank: Tried to go online to pay an annual credit card fee (an airline card, to keep miles from expiring), and I am denied online access because I do not have the latest Microsoft compatible browser. Click for info on how to get the latest browser, and find that requires first installing Microsoft’s new WIN 10 operating system. Not time to avoid $35 late fee via snail mail. At least the major bank credit card has 24 hour phone help, so was able to cancel the card before the fee was due. Am mentioning this, because it is just part of a larger trend where we are “herded” into a system that can shut us down at any time. No Fly Lists, No Financial Transaction Lists, No Health Care Lists, etc. all become possible in this grand Central Planning scheme that includes Central Banking. I think you have your whole life at risk if banks are at your financial core. Personally, I’ve grown to like waltzing with the Wall Street casino. My mom is retired, gets zero on her bank accounts and pays the bills with dividends from inherited utility stocks (some tanked, but not all).
Also, I’m not sure I believe the monthly reports very much. I have a relative who manages a personnel department for several sites. They have voluminous job openings at above entry level. Lies in all forms appear to be the new normal. It’s impossible to know which is the anomaly.
Michael B. said:
Hi Mish – I asked this question last month and didn’t see a response. I really do want to know what it is that you feel is missing from my admittedly simple opinion on the job market. My thoughts are that each week approximately 275,000 people file new unemployment claims. Let’s round it down to 250,000. That would mean 1 million people file new claims in a month. Which would mean that 1 million people who held jobs long enough to qualify for unemployment benefits lost their jobs that month. If the alleged job creation is 38,000 new jobs, then why is it incorrect to say 38,000 – 1,000,000 = a loss of 962,000 jobs for the month? And none of this even gets into the real details of how useless these “statistics” are. Like job creation – I see the same job month after month listed as open. It shows up, goes away, shows up again … Also, it is listed multiple times by the company, and then multiple times by various recruiters. IMHO the job creation probably includes counting one job 5 to 10 times. So, the real number is much lower. Either way, this is all voodoo economics, and until they start just counting employed people by their payment of payroll taxes, it is meaningless propaganda. Anyway, I am not trying to be argumentative, I really do want to know what you think is wrong with my analysis. Thanks!
Just taking a guess at this, Michael B. But you may be taking “new jobs” too literally, and that by “new jobs” they really mean a net increase in jobs. So might just be semantics, the language, with “new jobs” really meaning “more jobs net than before.” So, all the lost jobs are actually factored into the equation and balanced out, net-net. .
Michael B. said:
Again, I get it, it is an increase in jobs. But, aren’t new unemployment claims decreases in jobs. Anyway, this is my last comment, the bottom line this is all overly complicated BS designed to support whatever point of view the government and business want to put forward. In the end, with statistics you can take the same set of data and use it to prove or disprove anything.
Eventually it will all be down so low it can only go up.
Not in Japan. Those people really know how to make a financial mess, and the citizenry excel at acting like sheep. Is that next for us? We’re starting to get the sheep part down pretty well. Oh please government agency, bend us over and do it again. We won’t complain and, if anyone does, we’ll consider them as disloyal or Trump lovers.
Tony Bennett said:
Michael – The employment situation is quite dynamic. The BLS (the folks who do the NFP report) come out monthly with JOLTS report. The NFP report is a NET number … but in any given month MILLIONS ARE HIRED. For March (latest) almost 5.3 million hired … “separations” over 5 million.
Michael B. said:
With all due respect, I am not a simpleton so I do know that the job market, like everything, is dynamic and complex. But, even by your statistics from the BLS, which I believe are BS anyway, the net increase is 300,000. Given that they don’t say how they know who is hired, etc. I assume the 300K is BS also. So, Mish doesn’t need to answer, and I can simplify my position to say that there is no explanation because all of this is made up BS. What I do know is that if it could be measured accurately, the Misery Index is probably quite high right now.
Tony Bennett said:
Did you bother to even read the link?
Report explains everything … and any discrepancy.
Remember, latest JOLTS is for March. NFP for march – 2 surveys in NFP – household and establishment. March Establishment +215K; Household+ 246K
JOLTS hires 5.292 million … separations 5.045 million …+247K
Tony Bennett said:
Today’s full report on manufacturers shipments, inventories and new orders a train wreck.
The advance durable report last week gave a heads up … but weakness (downward revisions) pervasive throughout total industry (beyond durable good manufacturers).
Eric Zuniga said:
Low unemployment rate with a large % of the population only able to find part time work. We’re becoming Japan.
Stuki Moi said:
If “we” are only that lucky…. Argentina is a more realistic end state.
Anyone think minimum wage is having an effect?
Jobs were lost before seasonal adjustments.