Job Report: Weak Earnings, Unemployment Rate Up, Upward Revisions

-edited

Job growth was a modest 128,000. The unemployment rate ticked up to 3.6%. Revisions added 95,000.

Initial Reaction

  • The core reading was a bit better than expected. The Econoday consensus was 90,000 in a range of 50,000 to 155,000.
  • Manufacturing lost 36,000 jobs vs a consensus of 50,000.
  • Job revisions were positive.
  • Hourly earnings were weak .

This was a mixed bag that can be spun in numerous ways.

Job Revisions

The change in total nonfarm payroll employment for August was revised up by 51,000 from +168,000 to +219,000, and the change for September was revised up by 44,000 from +136,000 to +180,000. With these revisions, employment gains in August and September combined were 95,000 more than previously reported. After revisions, job gains have averaged 176,000 over the last 3 months.

Also recall my August 21 report: BLS Revises Payrolls 501,000 Lower Through March.

Those revisions are not reflected in the charts. The newer revisions are.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +128,000 - Establishment Survey
  • Private Nonfarm Payroll: +131,000 - Establishment Survey
  • Employment: +391,000 - Household Survey
  • Unemployment: +241,000 - Household Survey
  • Involuntary Part-Time Work: +88,000 - Household Survey
  • Voluntary Part-Time Work:-24,000 - Household Survey
  • Baseline Unemployment Rate: +0.1 to 3.5% - Household Survey
  • U-6 unemployment: +0.1 to 7.0% - Household Survey
  • Civilian Non-institutional Population: +207,000
  • Civilian Labor Force: +325,000 - Household Survey
  • Not in Labor Force: -118,000 - Household Survey
  • Participation Rate: +0.1 to 63.3% - Household Survey

Employment Report Statement

The unemployment rate declined to 3.5 percent in September, and total nonfarm payroll employment rose by 136,000, the U.S. Bureau of Labor Statistics reported today. Employment in health care and in professional and business services continued to trend up.

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

Hours and Wages

Average weekly hours of all private employees were steady at 34.4 hours. Average weekly hours of all private service-providing were steady at 33.2 hours. Average weekly hours of manufacturers was down 0.2 hours to 40.2 hours.

Average Hourly Earnings of All Nonfarm Workers rose $0.06 to $28.18 following a weak $0.01 rise last month.That's a gain of .21%.

Average hourly earnings of Production and Supervisory Workers rose $0.04 to $23.70. That's a second-consecutive feeble 0.17% gain.

Year-Over-Year Wage Growth

  • All Private Nonfarm rose from $27.35 to $28.18, a gain of 3.0%.
  • All production and supervisory rose from $22.90 to $23.70, a gain of 3.5%.

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 Alternative 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 3.6%. 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 7.0%. 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

Job report volatility and revisions remains high.

Wage growth shows no pressures month-over-month and has been mostly hovering near 3.0% for a while.

The biggest strength this month was in low-wage leisure and hospitality category.

Construction was very weak.

Looking ahead, the GM strike is over.

Mike “Mish” Shedlock

Comments (17)
No. 1-9
Matt3
Matt3

New Headline for this. Solid Job growth, Improved labor participation and increasing wages. Mish's recession still a figment of his imagination.

Mish
Mish

Editor

Matt3 Stop dreaming.

Wages Anemic

Aug $28.11 Oct 28.18. That is .25% total about 1.5% annualized.

Hell, I even touted upward revisions. I gave a very balanced report.

If all you are going to do is nitpick and bitch at least be reasonable instead of looking like a silly troll which of course you are.

Mish
Mish

Editor

KidHorn
KidHorn

Leisure and Hospitality growing faster than everything else? Seems implausible. So, how are the people in other sectors going to pay for their restaurant food and vacations if their jobs aren't growing nearly as much? Are the wealthy eating a lot more.

Casual_Observer
Casual_Observer

Well here is the story on the ground. There are still well-qualified people who can't land a job:

Most of these people do not show up in the stunningly low official unemployment rate, which was 3.6 percent in October. Working even one hour during the week when the Labor Department does its employment survey keeps you out of the jobless category.

Many more show up in a broader measure, which includes people who are working part time but would prefer full-time employment, and those who want to work but have given up an active job search. That rate in September was 6.9 percent, some 11 million people.

But there are also many others, like Ms. Ward, who work temporary jobs for months at a time and are not necessarily captured in either measure. And millions of contract workers — freelancers, consultants, Lyft drivers — lack benefits, regular schedules and job security. They have found a foothold, but it rests on loose rock.

A recent survey by Gallup found that a majority of Americans do not consider themselves to be in a “good job.” https://www.nytimes.com/2019/10/31/business/economy/long-term-unemployed.html?action=click&module=Top%20Stories&pgtype=Homepage

Casual_Observer
Casual_Observer

I also have anecdotal evidence a lot of people have become contractors and consultants in order to reduce their overall tax burden. The Trump tax cut really favored anyone working for themselves over someone in W-2 status. I know of some businesses that reclassified themselves as architecture firms to get an even lower tax rate and full well knowing the IRS under Trump would not go after very many of these 1-man operations. There is more reliance on pulling income forward and not saving for retirement or anything else with the new tax code. I see that in both W-2, LLC and other corps. People are sacrificing long term planning for short-term survival.

Ian Alexander
Ian Alexander

The payroll numbers are way out of line from what the PMIs would suggest. One of them is probably wrong.

Realist
Realist

Looks like slow growth, low inflation to me. Ten years and counting.