Initial Reaction

Today’s establishment employment report shows a huge, 211,000 jump in reported jobs vs a downward revised March. The BLS revised March even lower, to 79,000 from 98,000. Revisions also took February up to 232,000 from 219,000.

Last month, economists blamed the weather. If so, the correct thing to do is average both months as employees not hired in March due to weather would have been hired in April instead.

The two-month average is 145,000 per month. That’s not a disaster, but it’s not particularly strong either.

The internals of the report as measured by the household survey were average. The household survey shows a gain in employment of 156,000, close to the two-month average in jobs.

Revisions

Last month the BLS revised February from +235,000 to +219,000. This month the BLS changed its mind and revised February back up to 232,000.

Other revisions are as noted above.

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: +211,000 – Establishment Survey
  • Employment: +156,000 – Household Survey
  • Unemployment: -146,000 – Household Survey
  • Involuntary Part-Time Work: -281,000 – Household Survey
  • Voluntary Part-Time Work: -23,000 – Household Survey
  • Baseline Unemployment Rate: -0.1 to 4.4% – Household Survey
  • U-6 unemployment: -0.3 to 8.6% – Household Survey
  • Civilian Noninstitutional Population: +175,000
  • Civilian Labor Force: +12,000 – Household Survey
  • Not in Labor Force: +162,000 – Household Survey
  • Participation Rate: -0.1 to 62.9 – Household Survey

Employment Report Statement

Total nonfarm payroll employment increased by 211,000 in April, and the unemployment rate was little changed at 4.4 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in leisure and hospitality, health care and social assistance, financial activities, and mining.

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

Nonfarm Employment Change from Previous Month by Job Type

Hours and Wages

Average weekly hours of all private employees rose 0.1 hours to 34.4 hours. Average weekly hours of all private service-providing employees rose 0.1 hours to 33.2 hours. Average weekly hours of manufacturers rose 0.1 hours to 40.7 hours. All are the same as a year ago.

Average hourly earnings of private workers rose $0.06 to $21.96. Average hourly earnings of private service-providing employees rose $0.06 to $21.75. Average hourly earnings of manufacturers rose $0.03 to $20.72.

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 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 4.4%. 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 8.6%. 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.

  1. In the household survey, if you work as little as 1 hour a week, even selling trinkets on eBay, you are considered employed.
  2. In the household survey, if you work three part-time jobs, 12 hours each, the BLS considers you a full-time employee.
  3. 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

 

It is difficult to know how best to treat March. If a snowstorm on the East coast disrupted counting in March, then the bounce back today should have been stronger than it was.

If March was just a random fluctuation, then averaging over three or four months might be the correct procedure.

Either way, the second chart shows this is not 2014. Hiring has slowed and is increasingly volatile as well.

Mike “Mish” Shedlock