Initial Reaction
Today’s establishment survey shows jobs declined by 33,000.
The way the BLS accumulates household survey stats leads to some seemingly-wild mathematical discrepancies.
Supposedly, employment rose by 906,000 (Table A).
Full-time employment (Table A-9) declined by 65,000 but part-time employment rose by only 81,000.
Of the 81,000 increase in part-time workers, those who are employed part-time for economic reasons (Once again Table A) declined by 133,000 and the number of voluntary part-time workers declined by 436,000.
None of this ever adds up, but the BLS says it’s not supposed to. This month was particularly wild.
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: -33,000 – Establishment Survey
- Employment: +906,000 – Household Survey
- Unemployment: -331,000 – Household Survey
- Involuntary Part-Time Work: -133,000 – Household Survey
- Voluntary Part-Time Work: -436,000 – Household Survey
- Baseline Unemployment Rate: -0.2 to 4.2% – Household Survey
- U-6 unemployment: -0.3 to 8.3% – Household Survey
- Civilian Noninstitutional Population: +205,000
- Civilian Labor Force: +575,000 – Household Survey
- Not in Labor Force: -368,000 – Household Survey
- Participation Rate: +0.0 to 663.1 – Household Survey
Employment Report Statement
The unemployment rate declined to 4.2 percent in September; total nonfarm payroll employment changed little (-33,000). A sharp employment decline in food services and drinking places and below-trend growth in some other industries likely reflected the impact of Hurricanes Irma and Harvey.
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
The Average Weekly Hours of all private employees was flat at 34.4 hours. The average weekly hours of all private service-providing employees fell was flat at 34.2 hours. Average weekly hours of manufacturers was flat at 40.7 hours. All are the same or within 0.1 hours from a year ago.
The Average Hourly Earnings of private workers rose $0.08 to $22.23. Average hourly earnings of private service-providing employees rose $0.09 to $22.01. Average hourly earnings of manufacturers rose $0.02 to $20.93 following a downward revision in July.
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 4.2%. 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 8.3%. 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.
Final Thoughts
There is a clear weakening pattern in establishment survey jobs from year to year.
The hurricane impact is unknown at this point, but weakening started well before the hurricanes.
Weak wage growth has not kept up with inflation, despite the BLS purporting otherwise.
Mike “Mish” Shedlock
Purely “data driven” FED ignoring it’s own data. At this unemployment rate, the alarm bells would be blaring red to increase interest rates to 5% plus, but that was in another era. Tells it all about the confidence level.
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There is like trillions of dollars in cash laying around in accounts earning nothing all over the globe. As it gets clearer and clearer that rates will not rise, that money is going to go somewhere.
Right now, that somewhere is equity markets, in the US specifically. The S&P was very stubborn about crossing the 2500 mark, and then, boom! It’s at 2550 for no apparent reason. It doesn’t require good news anymore. That cash, like a jealous mistress, will go where it gets treated best. It ainnt sticking around.
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Right DoS, “for no apparent reason”. If this isn’t the blowoff top, what is? Stockman called the blowoff top months ago, and he doesn’t just say stuff.
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When, though. If the money lasts long enough, prosperity will be the conclusion. We’re already seeing this. That slide in unemployment may be full of holes, but the trend is impressive. What do odds favor, the continuation of a trend or a sudden reversal? Trend long eough, eight years now, odds go toward prosperity.
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Well since Warsh, a real hawk is the big favorite to replace Janet Yellen as chairman of the Fed, the bond market has already been selling off in anticipation of this event, and the dollar has turned around moving up as gold heads down making it easier to call for a recession IMO.
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A hawk is the last thing the Fed neds now, but they’re stubbornly keping on normalizing when nothing is normal.
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Irrespective of whatever degrees these people at BLS sport, their report seems like fake news. It is more sophisticated than that of cnn, nyt, and wapo, but sounds all made up.
Fails the smell test. Jobs went down by 33k but employment rose by almost a million?
To quote Buffett, beware of geeks presenting probability distributions. Most don’t appreciate the subtleties of probability and statistics. So they do inane things like interpret the event with the highest probability to be a sure shot event such as the one they had for Hillary for 2016 election. It doesn’t occur to them that the event with lower probability exists because it happens from time to time. Never mind that that data itself was curated to support their points of view. Just like BLS which believes the model it uses to generate the data is the source of truth. They smoke the drugs they peddle to the rest of us.
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Have you ever taken the Household Survey?
It takes maybe 30 minutes tops. The last one I did I failed to finish as I was called away from my computer by some unexpected task that needed my attention. The Survey times out after so much time passes without a keystroke and my task took longer than expected.
A couple of days later, I tried to finish up the Survey by logging back into my PIN protected session. The message I got was that the Survey was already completed. I have no idea what data got recorded for my own home address. Why should I put faith into the results of the Household Survey?
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Time to consider that bearishness is a personality trait irrespective of facts? Not yours necessarily, but when even faulty data perports a years long trend, and our eyes see signs of a recovery everywhere we look, might be time to take a look at our biases. That’s what I’m doing.
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I focus on aggregate hours worked and those are much weaker than the employment data. (Table B-9) Up only 1.5% year on year. Well spotted Mish. While everyone concentrates on the benefit to the economy of replacement cars, furniture and white goods , it is the other industries that will suffer like eating out, clothing, even food sales as people affected by the hurricanes cut back on non-essential and discretionary spending. I concur. Natural calamities do not benefit the economy, even when, like QE, insurance companies are forced to make pay outs.
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where is there any evidence that people are cutting back on spending? If anything consumer spending has been accelerating and even as prices in all those categories you have mentioned (especially clothing , eating out & electronics) have risen noticeably in the past few years with far far fewer promotions or discounts in the past few years than before the great recession. Not to mention the replacement cycle of electronics is now 1 -3 years i all categories.. people upgrade their TVs & computers every 2 years, smartphones are on a 6 mth – 1 year replacement cycle as well and for cars i still use the 10 years or 100,000 mile rule (which ever comes first) as maximum usefull life..
and puleeze can someone break out jobs between high paying (paying over $100,000 a year) and low skilled or no skilled (retail ) to determine job growth… the only jobs that really should “count” are jobs that pay over $100,000 a year since that is really the minimum you need now to survive in the tri state NYC metropolitan area, eastern Massachusetts or in California
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“cars i still use the 10 years or 100,000 mile rule (which ever comes first) as maximum usefull life.”
Really? I routinely get 250K plus miles from any vehicle that I have owned. Some much greater than that.
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“where is there any evidence that people are cutting back on spending?”
…
Uh, how about where you are supposed to look?
Latest total retail sales (August) down 0.2% … with major downward revisions to June and July numbers.
But, hey, don’t let facts get in the way of your tri state drive – by anecdotes …
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Mish highlighted the fall in employment in the eating out sector. “A sharp employment decline in food services and drinking places and below-trend growth in some other industries likely reflected the impact of Hurricanes Irma and Harvey.”
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Tax receipts can’t be faked, as Stockman has pointed out.
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Looks like everything is in place for another 25bps rate hike next month.
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The US is as close to full employment as it has been in a long time. There will always be some amount of unemployed, but basically anyone with the right skills and a work ethic is currently employed.
Many jobs that require high skill levels are actually sitting empty. One of the biggest impediments to faster growth in the US is a lack of skilled workers.
I continue to expect slow growth of 1-2% for several years (barring a black swan event). Wage growth will only occur in select high skilled jobs. Inflation and interest rates will remain low.
Recoveries in Texas, Florida and Puerto Rico will be slow due to a lack of skilled workers.
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I Hope the October job report makes up for the September one.
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