Revisions Save an Overhyped Employment Report as Jobs Rise by 134,000

Some expected 300,000 or more jobs in today's report. Instead, payrolls rose by 134,000. Revisions substantial.

Initial Reaction

The consensus estimate was 180,000 jobs. The ADP estimate was 230,000, and based on ISM reports, I saw talk of 300,000.

Today’s establishment survey shows jobs rose by 134,000 with only 121,000 private jobs.

The hype would have been laughable except for positive revisions.

Job Revisions

The change in total nonfarm payroll employment for July was revised up from +147,000 to +165,000, and the change for August was revised up from +201,000 to +270,000.

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: +134,000 – Establishment Survey
  • Employment: +420,000 – Household Survey
  • Unemployment: -270,000 – Household Survey
  • Involuntary Part-Time Work: +263,000 – Household Survey
  • Voluntary Part-Time Work: -317,000 – Household Survey
  • Baseline Unemployment Rate: -0.2 to 3.7% – Household Survey
  • U-6 unemployment: +0.1 to 7.5% – Household Survey
  • Civilian Non-institutional Population: +224,000
  • Civilian Labor Force: +150,000 – Household Survey
  • Not in Labor Force: +70,000 – Household Survey
  • Participation Rate: flat at 62.7– Household Survey

Divergences

Last month employment as measured by the household survey fell by 423,000. This month it rose by 420,000. The two-month total is still negative.

Employment Report Statement

The unemployment rate declined to 3.7 percent in September, and total nonfarm payroll employment increased by 134,000, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, in health care, and in transportation and warehousing.

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 by Job Type

Nonfarm Employment Change from Previous Month

Hours and Wages

Average weekly hours of all private employees was flat at 34.5 hours. Average weekly hours of all private service-providing employees was flat at 33.3 hours. Average weekly hours of manufacturers fell 0.1 hour at 38.9 hours.

Average Hourly Earnings of All Nonfarm Workers rose .08 to $27.24. That a 0.29% gain. Average hourly earnings of private service-providing employees rose $0.08 to $26.97, a gain of 0.37%. Average hourly earnings of manufacturers was flat at $27.07, a gain of 0.00%.

Average hourly earnings of Production and Supervisory Workers rose $0.06 to $22.81. That's a 0.26% gain. Average hourly earnings of private service-providing employees rose $0.06 to $22.54, a gain of 0.27%. Average hourly earnings of manufacturers rose $0.04 to $21.57, a gain of 0.19%

Year-Over-Year Wage Growth

  • All Private Nonfarm from $26.51 to $27.24, a gain of 2.8%
  • All production and supervisory from $22.20 to $22.81, a gain of 2.7%.

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 3.7%. 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 7.5%. 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 anemic. 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 (5)
No. 1-3
Realist
Realist

A continuation of the modest economic and employment growth that has been occurring for close to ten years now. The slight stimulus from tax cuts and deregulation will begin to fade as the economy bumps up against the constraints of: lack of skilled labour, rising interest rates, tariffs, and trade uncertainty.

Casual_Observer
Casual_Observer

I'm part of the 3.7%. And soon to fall off the rolls. This is a joke of a labor market compared to the 80s or 90s. The labor market still has more that have fallen off the rolls and looking. The UE rate is probably closer to 15%. Remember each president has manipulated UE stats to their benefit. So comparisons with history are not valid.

Casual_Observer
Casual_Observer

This economy has been FIRE, health care and education driven since 2002 - primarily debt based and unrproductive as a whole. Prior to that it was manufacturing driven which is why living standards were rising before then. It is the same story despite a President that claims otherwise. I see a double dip recession ahead with the first one starting by 2020. The Fed will lower rates low growth will resume but the bottom will fall out once the debt crises ensue in the early 2020s.