It’s reasonably safe the take a September hike off the table following weak economic reports yesterday and a disappointing jobs report today.
Today’s employment report shows an increase of 151,000 jobs of which only 126,000 were private. Expectations were for 175,000 jobs of which 179,000 were supposed to be private.
Last month, the household survey broke a three month trend of weakness with an employment gain of 420,000. June employment rose by 67,000. In May, employment rose by a mere 26,000 and in April, employment declined by a whopping 316,000. This month employment only rose by 97,000.
The 5-month average in employment is only 58,800 so the household survey still has a lot of catching up to do.
Voluntary part-time employment rose by 113,000 following a jump of 212,000 last month. Involuntary part-time employment fell by 194,000. Because of how the BLS compiles these stats, one cannot add the numbers together.
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: +151,000 – Establishment Survey
- Employment: +97,000 – Household Survey
- Unemployment: -79,000 – Household Survey
- Involuntary Part-Time Work: +113,000 – Household Survey
- Voluntary Part-Time Work: -194,000 – Household Survey
- Baseline Unemployment Rate: +0.0 to 4.9% – Household Survey
- U-6 unemployment: +0.0 to 9.7% – Household Survey
- Civilian Non-institutional Population: +234,000
- Civilian Labor Force: +176,000 – Household Survey
- Not in Labor Force: +58,000 – Household Survey
- Participation Rate: +0.0 to 62.8 – Household Survey
Employment Report Statement
Total nonfarm payroll employment increased by 151,000 in August, and the unemployment rate remained at 4.9 percent. Employment continued to trend up in several service-providing industries.
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 declined 0.1 hours to 34.3 hours. Average weekly hours of all private service-providing employees declined 0.1 hours to 33.2 hours. Average weekly hours of manufacturers declined 0.2 hours to 40.6 hours.
Average hourly earnings of private workers rose $0.04 to $21.64. Average hourly earnings of private service-providing employees rose $0.04 to $21.43. Average hourly earnings of manufacturers rose $0.05 to $20.53.
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 4.9%. 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 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.
Mike “Mish” Shedlock
We all know that we can just take the”L” out of BLS.
john chew said:
Do you think the Fed will EVER raise rates in our lifetime? Say next 200 years
Yes they will, but the real question is whether or not they ever normalize rates and that answer is no.
Ron J said:
“These distortions artificially lower the unemployment rate, artificially boost full-time employment, and artificially increase the payroll jobs report every month.”
Artificial flavorings added.
I think the payroll tax data is a better measure of employment. Remember, this is an election year and it is too tempting to resist rigging the employment numbers to benefit crooked Hillary Clinton. It is unlikely that employers would pay a tax that is not required.
The stock market as usual is giddy today with another gap and go! Most of the gains in the stock market since 2009 have come from futures rigging between 2 and 3AM eastern time. They pump the futures and then it is gap and go day after day after day. I could benefit from this, but I choose not because it is immoral and greed and selfishness are always punished eventually. The iron law of valuation says that the higher the valuation for stocks the lower the return in the future no matter how high inflation and interest rates. The median stock valuation has never been higher than now! Expect a severe bear market decline 60 to 80% from the top.
Tony Bennett said:
“Average weekly hours of all private employees declined 0.1 hours to 34.3 hours.”
True, but decline from revised July number. July initially reported as 34.5 hours.
The buyout spreads:
LONDON, Sept 2 – The ECB may soon be forced to follow the Bank of Japan’s example and buy equities as part of any expanded stimulus programme, but it faces significant hurdles in helping all 19 euro zone members equally without distorting a key market for investors.
It’s good that a lot of waiters and waitresses are being hired. It’s not like they can be easily replaced with a touchscreen and someone behind the counter yelling out your number.