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Government to the rescue?

Initial Thoughts

Last month ADP reported 37,000 private jobs and the BLS reporting 140,000 private jobs. This month ADP reports -33,000 jobs with the BLS at 74,000 private payrolls.

The unemployment rate declined because the labor force shrank by 130,000 after dropping by 625,000 last month.

Those not in the labor force rose by 813,000 last month and and another 329,000 this month.

Does anyone believe these reports?

Job Report Details

• Nonfarm Payroll: +147,000 to 159,724,000 – Establishment Survey
• Civilian Non-institutional Population: +200,000 to 273,585,000
• Civilian Labor Force: -625,000 to 170,380,000 – Household Survey
• Participation Rate: -0.1 to 62.3% – Household Survey
• Employment:+93,000 to 163,366,000 – Household Survey
• Unemployment: -222,000 to 7,015,000 – Household Survey
• Baseline Unemployment Rate: -0.1 to 4.1% – Household Survey
• Not in Labor Force: +329,000 to 103,204,000 – Household Survey
• U-6 unemployment: +0.1 to 7.7% – Household Survey

Nonfarm Payrolls Change by Sector

Employment in government rose by 73,000 in June. State government added 47,000 jobs, largely in education (+40,000). Employment in local government education continued to trend up (+23,000). Federal government employment continued to decline in June (-7,000) and is down by 69,000 since reaching a peak in January.

Monthly Change in Nonfarm Payrolls

Monthly Revisions

• The change in total nonfarm payroll employment for April was revised up by 11,000, from +147,000 to +158,000.
• The change for May was revised up by 5,000, from +139,000 to +144,000.
• With these revisions, employment in April and May combined is 16,000 higher than previously reported.

Part-Time Jobs

• Involuntary Part-Time Work: -159,000 to 4,465,000
• Voluntary Part-Time Work: -32,000 to 22,556,000
• Total Full-Time Work: +437,000 to 135,277,000
• Total Part-Time Work: -367,000 to 28,190,000
• Multiple Job Holders: +282,000 to 8,865,000

The above numbers never total correctly due to the way the BLS makes seasonal adjustments. I list them as reported.

Note that multiple job holders add to nonfarm payrolls but not the number of employed.

Last month multiple jobholders declined by 283,000. This month they rose by 282,000.

Hours and Wages

This data is frequently revised.

• Average weekly hours of all private employees declined by 0.1 hour to 34.2 hours.
• Average weekly hours of all private service-providing employees declined by 0.1 hours to 33.1 hours.
• Average weekly hours of manufacturers was steady at 40.1 hours.

An overall decline or rise of a tenth of an hour does not sound line much, but with employment over 160 million, it’s more significant than it appears at first glance.

Hourly Earnings

This data is also frequently revised. Here are the numbers as reported this month.

Average Hourly Earnings of All Nonfarm Workers rose $0.08to $36.30. A year ago the average wage was $35.00. That’s a gain of 3.7%.

Average hourly earnings of Production and Nonsupervisory Workers rose $0.09 to $31.24. A year ago the average wage was $30.07. That’s a gain of 3.9%.

Unemployment Rate

The Unemployment Rate has been between 4.0 percent and 4.2 percent for 14 straight months.

Do we credit Biden, Trump, the Fed, or the BLS?

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 4.1 percent.
• U-6 is much higher at 7.7 percent.

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.

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.

Birth-Death Methodology Explained

I gave a detailed explanation of the model and why the hype is wrong in my June 8, 2024 post How Much Did the BLS Birth-Death Adjustment Pad the May Jobs Report?

I repeat, do not subtract the birth-death number from the headline number. That’s flawed.

Household Survey vs. Payroll Survey

• The payroll survey (sometimes called the establishment survey) is the headline jobs number. It is based on employer reporting.
• The household survey is a phone survey conducted by the BLS. It measures employment, unemployment and 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.

The BLS payroll reports smack of oversampling large employers and undersampling small employers where jobs have been trending lower.

ADP vs BLS

Yesterday, I noted Winners and Losers by Job Type in the June ADP Payroll Report

ADP had manufacturing jobs up by 15,000. Is that believable?

I suspect not. This is what happens when extrapolating small sample sizes.

However, the overall ADP numbers do seem to make sense. I noted ADP Reports 33,000 Job Losses in June with Negative Revisions in May

Small and medium-sized businesses shed jobs in June.

QCEW Report Shows Overstatement of Jobs

On June 16, I commented QCEW Report Shows Overstatement of Jobs by the BLS is Increasing

The discrepancy between QCEW and the BLS jobs report is rising.

Final Thoughts

The BLS monthly data is total garbage. I do the best I can with BLS data.

A close look at ADP data shows its reports leave a lot to be desired as well.

The quarterly QCEW and Business Employment (BED)reports represent a 96 percent sample. But those reports lag by about 5 months.

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