Today, the Bureau of Labor Statistics released its Monthly Payroll Report.
Initial Thoughts
- The discrepancy between jobs and employment continues for the eighth month.
- Lost in the unemployment and jobs headline noise are huge divergences between jobs and employment dating back to March.
Payrolls vs Employment Since March 2022
- Nonfarm Payrolls: +2,692,000
- Employment Level: +12,000
- Full Time Employment: -398,000
Employment fell by 138,000 in November.
Full time employment is down 398,000 since March and down by 480,000 since May!
Typical Headlines
- The StreetInsider headline says “U.S. job juggernaut rolled on in November; nonfarm payrolls up 263,000”
- The Wall Street Journal headline says “U.S. Economy Added 263,000 Jobs in November”
Both reports and mainstream in general miss the big picture captured in my lead chart.
The internal details have been weak for 8 month and I have been talking about the discrepancy for six of them.
Job Report Details
- Nonfarm Payroll: +263,000 to 153,548,000 – Establishment Survey
- Civilian Non-institutional Population: +173,000 to 264,708,000
- Civilian Labor Force: -186,000 to 164,481,000 – Household Survey
- Participation Rate: -0.1 to 62.1% – Household Survey
- Employment: -138,000 to 158,470,000– Household Survey
- Unemployment: -48,000 to 6,011,000- Household Survey
- Baseline Unemployment Rate: +0.0 to 3.7% – Household Survey
- Not in Labor Force: +359,000 to 100,227,000 – Household Survey
- U-6 unemployment: 10.1 to 6.7% – Household Survey
Revision Details
- The change in total nonfarm payroll employment for September was revised down by 46,000, from +315,000 to +269,000
- The change for October was revised up by 23,000, from +261,000 to +284,000.
- With these revisions, employment gains in September and October combined were 23,000 lower than previously reported.
Labor Force
Another 186,000 people dropped out of the labor force in November. That’s why the decline in employment of 138,000 did not cause the unemployment rate to rise.
The number of working-age persons people not in the labor force rose by 359,000 in November and is back over 100 million.
If you are not in the labor force, you are not unemployed.
Change in Nonfarm Payrolls
Manufacturing jobs are still strong, at least as reported. That is unlikely to last given miserable ISM statistics.
For discussion, please see Manufacturing Has Peaked This Cycle, 8 of 11 ISM Components in Contraction
Part-Time Jobs
- Involuntary Part-Time Work: +25,000 to 3,685,000
- Voluntary Part-Time Work: -77,000 to 21,197,000
- Total Full-Time Work: +92,000 to 132,320,000
- Total Part-Time Work: -302,000 to 26,092,000
The above numbers never total correctly due to the way the BLS makes adjustments. I list them as reported.
In March, the BLS said full-time employment was 132,718,000. Today it says 132,320,00.
This discrepancy has hasted 8 straight months. Everything points to part time jobs to fueling the job gains.
Hours and Wages
- Average weekly hours of all private employees fell 0.1 hour to 34.4 hours.
- Average weekly hours of all private service-providing was flat at 33.4 hours.
- Average weekly hours of manufacturers fell 0.2 hour to 40.2 hours.
I expected that decline in manufacturing hours and expect still more coming up.
Hourly Earnings
Average Hourly Earnings of All Nonfarm Workers rose $0.18 to $32.82. A year ago the average wage was $31.23. That’s a gain of 4.8%.
Average hourly earnings of Production and Supervisory Workers rose $0.19 to $28.10. A year ago the average wage was $26.55. That’s a gain of 5.5%.
Despite the gains, wages have not kept up with inflation. However, Fed Chair Jerome Powell will not be pleased with these strong wage gains.
Birth Death Model
Starting January 2014, I dropped the Birth/Death Model charts from this report.
The birth-death model pertains to the birth and death of corporations not individuals except by implication.
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.
The model is wrong at economic turning points and is also heavily revised and thus essentially useless.
Alternative Measures of Unemployment
Table A-15 is where one can find a better approximation of what the unemployment rate really is.
The official unemployment rate is 3.7%.
U-6 is much higher at 6.7%. 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. Some dropped out over Covid fears and never returned. Still others took advantage of a strong stock market and retired early.
The rest is disability fraud, forced retirement (need for Social Security income), and discouraged workers.
Unemployment Rate
In September, the unemployment rate was a record low 3.5 percent. Today it’s 3.7 percent.
However, there are 100,227,000 people of working age who are not working that seemingly don’t matter.
Changing Employment Dynamics
Covid-19 had an enormous impact on the labor force. Some job losses are permanent, millions of other other people now work from home.
Stimulus provided incentives to not work and some of those workers are returning to the labor markets now.
As of January 2022, there were 22 million workers age 60 and over. Millions will retire soon which will put upward pressure on hiring.
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 job openings on Jooble or Monster or in the want ads 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.
Increasing Divergence
Nonfarm payrolls are a subset of all jobs, but generally the numbers move in the same direction over time.
The Employment (Household Survey) is noisy. However, 8 months is a reasonable time frame for discrepancies to resolve.
Since March of 2022, payrolls are up about 2.7 million but full time employment is down by 398,000.
All of the employment rise (and then some) since March is part-time employment.
Q&A What’s Going On?
Q: Hey Mish, What’s Going On?
A: People are taking on second part time jobs to make ends meet. But overall employment (the total number of people working is stagnant.
As I have been saying for many months, don’t watch the unemployment rate, watch employment levels.
But hooray! The media reports of a “strong jobs juggernaut” continue unabated.
Expect a Long But Shallow Recession With Minimal Rise in Unemployment
Given hiring pressures and boomer retirements, Expect a Long But Shallow Recession With Minimal Unemployment Rise
The stock market is another issue. For discussion, please see Artificial Wealth vs GDP: Why Earnings and the Stock Market Will Get Crushed
While I expect the unemployment rate will not rise much in this recession, at least compared to the average recession impact, employment is another matter.
This post originated at MishTalk.Com
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Mish
There is no such thing as the “wage-price spiral”; the “price-wage spiral”; or the “cost-push spiral”; in the sense that increases in wages, prices, or costs are causes of inflation.
Unless effective demands (money times transactions’ velocity) are adequate to prevent a cutback in sales, or a diversion of purchasing power to the price raisers, any administered increase in prices will result in less sales, smaller outputs, less employment, lower payrolls and less demand for products—in other words, depression and deflation in due course.
My bad, somewhat off topic. So you can now secure a government backed mortgage in high prices areas for $1M with only 3% ($30K).
Oh, NO! No worries here! This is definitely, absolutely, for sure nothing like the subprime mortgages of the 2000’s that lead to the GR.
There’s NO WAY this can go sideways or cause issues.
weren’t exceeded for 4 years. That is the most contractive money policy since
the Great Depression. That turned safe assets into impaired assets (with securitized assets the first to go).
You are just looking at the US supply data. Now add in the demand data. Net result is inventories. Inventories have been dropping all year in spite of SPR releases. Meaning demand continues to exceed supply.
Also, don’t forget that the US produces 12 Mbpd and consumes 20 Mbpd.
I’d love to know the answer to those questions.
Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Persons who were not working and were waiting to be recalled to a job from which they had been temporarily laid off are also included as unemployed. Receiving benefits from the Unemployment Insurance (UI) program has no bearing on whether a person is classified as unemployed.
The unemployment rate represents the number unemployed as a percent of the labor force.