Payrolls Expand by Whopping 312,000 as Unemployment Rate Rises to 3.9%

Nonfarm payrolls jumped by 312,000 and the unemployment rate rose by 0.2 PP as the labor force expanded by 419,000.

Initial Reaction

A number of scheduled economic reports did not happen this month due to the government shutdown. Apparently, the BLS is deemed vital.

Job came in at 312,000 but employment only rose by 142,000. The unemployment rate rose by 0.2% because the labor force expanded by 419,000.

Somehow this reports smacks of seasonal adjustments gone haywire and or temporary seasonal hiring that will vanish. Time will tell.

Let’s dive into the details in the BLS Employment Situation Summary, unofficially called the Jobs Report.

Job Revisions

Seasonally adjusted household survey data have been revised using updated seasonal |adjustment factors, a procedure done at the end of each calendar year. Seasonally |adjusted estimates back to January 2014 were subject to revision.

The change in total nonfarm payroll employment for November was revised up from +155,000 to +176,000, and the change for October was revised up from +237,000 to +274,000. With these revisions, employment gains in October and November combined were 58,000 more than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 254,000 per month over the last 3 months.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +312,000 – Establishment Survey
  • Employment: +142,000 – Household Survey
  • Unemployment: +276,000 – Household Survey
  • Involuntary Part-Time Work: -124,000 – Household Survey
  • Voluntary Part-Time Work: +325,000 – Household Survey
  • Baseline Unemployment Rate: +0.2 to 3.9% – Household Survey
  • U-6 unemployment: steady at 7.6% – Household Survey
  • Civilian Non-institutional Population: +180,000
  • Civilian Labor Force: +419,000 – Household Survey
  • Not in Labor Force: -237,000 – Household Survey
  • Participation Rate: +0.2 to 63.1– Household Survey

Employment Report Statement

Total nonfarm payroll employment increased by 312,000 in December, and the unemployment rate rose to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, food services and drinking places, construction, manufacturing, and retail trade.

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 rose 0.1 hours to at 34.5 hours. Average weekly hours of all private service-providing employees was flat at 33.3 hours. Average weekly hours of manufacturers rose 0.1 hours to 40.9 hours.

Average Hourly Earnings of All Nonfarm Workers rose $0.11 to $27.48. That a 0.51% gain. Average hourly earnings of private service-providing employees rose $0.10 to $27.21, a gain of 0.37%. Average hourly earnings of manufacturers rose $0.07 to $27.30, a gain of 0.26%.

Average hourly earnings of Production and Supervisory Workers rose $0.09 to $23.05. That's a 0.39% gain. Average hourly earnings of private service-providing employees rose $0.09 to $22.77, a gain of 0.40%. Average hourly earnings of manufacturers rose $0.04 to $21.80, a gain of 0.18%

Year-Over-Year Wage Growth

  • All Private Nonfarm from $26.64 to $27.48, a gain of 3.2%
  • All production and supervisory from $22.31 to $23.05, a gain of 3.3%.

Wage inflation remains benign.

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 3.9%. 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 7.6%. 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

Despite the alleged robust jobs picture, wage growth has been benign. Wages have not kept up with inflation, especially for those in school, those seeking to buy a home, and those who buy their own health insurance.

Mike “Mish” Shedlock

Comments (22)
No. 1-10
Realist
Realist

Steady, slow, economic growth and job growth continues as it has for 10 years now. Employers are doing their best to fill the jobs that sit empty by hiring every available skilled worker and by enticing the unemployed (who often lack the necessary skills) to get back into the labour force by offering training and modestly higher wages. I still don’t see anything on the horizon to interrupt this steady slow growth, although you never know when you will get a black swan event. My biggest fear is Trump escalating his trade wars, though I still expect cooler heads to prevail.

2banana
2banana

Again - PDJT is a "yuge" step in the right direction.

"What is a danger is that we stay stuck in a new normal where unemployment rates stay high, people who have jobs see their incomes go up, businesses make big profits, but they've learned to do more with less, and so they don't hire,"

"And as a consequence, we keep on seeing growth that is just too slow to bring back the eight million jobs that were lost. That is a danger. So that's something that I spend a lot of time thinking about." -- obama, 2010

BornInZion
BornInZion

Here is another data point we can glom onto in our search for certainty: We can be certain this number will be revised!

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Somehow this reports smacks of seasonal adjustments gone haywire and or temporary seasonal hiring that will vanish. Time will tell.

jivefive99
jivefive99

Trump appointed 5,000+/- political appointees to the tops of every Federal department and agency ... am I going too far to suspect a big reason all those people got their jobs was to promise that no bad news of any kind will be released to the public for the next two years, unless it was so glaring that it couldnt be massaged ... just asking.

mark0f0
mark0f0

@Realist Ummm, disconnected from reality I see? Unemployment is horrifically high, particularly amongst the highly skilled. Most of the employment growth has been in low-end service sector jobs. Housekeepers. Bum wipers. Fast food workers. Highly skilled workers, such as STEM workers, continue to fall behind every year. Foreign nationals continue to displace large numbers of perfectly qualified US citizen STEM workers. Even mostly advertised skilled worker jobs are still receiving hundreds of applications from incredibly qualified individuals.

kilroy
kilroy

How can jobs come in at 312,000, but employment only rises 142,000?

Tengen
Tengen

Knowing the BLS, I would assert that the high potential for double-counting jobs in the survey is a feature, not a bug. They needed an impressive number to calm the markets, so lo and behold, they found one. As someone else pointed out, this will be revised downward later.

Today's Kudlow quote "there is no recession in sight" is a nice touch too. Something tells me that quote is going to be dug up again in the not-so-distant future to humorous effect.

Warms my heart to see the BLS is still working despite the shutdown, precisely for the purpose of uncorking numbers like this. Who cares about the other departments, the Ministry of Truth must stay open!

KansasDog
KansasDog

If the BLS had anything "not" good to report on then it wouldn't be an essential govt agency. With the markets in a down trend any bad news out of them will be muted anyway. Great way to build confidence of course the algos dont have feelings.

NM1999
NM1999

MMMM...apparently, the 312,000 new jobs for December came from those age 55 and older. Employment actually declined in the “prime age” 20-54 group.