February 2019 BLS Jobs Situation - Extremely Poor Employment Growth

The headline seasonally adjusted BLS job growth was disappointing, to say the least. Last month's employment was revised upward.

Analyst Opinion of the BLS Employment Situation

Pretty ugly report and well under expectations. The way I look at this is that last month was outrageously high and this month was outrageously low. The year-to-date employment growth is about average seen this century - but worse than last year. The establishment and household surveys seem to have come from different dimensions. The household survey shrunk the workforce causing lower unemployment. Most use employment data to validate the strength of the economy - and if you do, you might think the economy hit a wall. I would not get excited about this poor data - but if it happens again next month .....

  • The year-over-year rate of growth for employment significantly decelerated this month (red line on the graph below). This is a year-over-year analysis which has no seasonality issues.

(Click on image to enlarge)

  • Economic intuitive sectors of employment were positive.
  • This month's report internals (comparing household to establishment data sets) did not correlate with the household survey showing seasonally adjusted employment adding 255,000 vs the headline establishment number expanding 20,000. The point here is that part of the headlines are from the household survey (such as the unemployment rate) and part is from the establishment survey (job growth). From a survey control point of view - the common element is jobs growth - and if they do not match, your confidence in either survey is diminished. [note that the household survey includes ALL jobs growth, not just non-farm).
  • The household survey removed 45,000 people from the labor force - and this is the primary cause of the lower unemployment number.
  • The National Federation of Independent Business (NFIB)'s monthly Jobs Report is at the end of this post.

A summary of the employment situation:

  • BLS reported: 20K (non-farm) and 25K (non-farm private). Headline unemployment rate improved from 4.0 % to 3.8 %.
  • ADP reported: 183K (non-farm private)
  • In Econintersect's February 2019 economic forecast released in late January, we estimated non-farm private payroll growth at 190,000 (based on economic potential) and 210,000 (fudged based on current overrun / under-run of economic potential).
  • The market expected (from Econoday):

(Click on image to enlarge)

The BLS reports seasonally adjusted data - manipulated with multiple seasonal adjustment factors, and Econintersect believes the unadjusted data gives a clearer picture of the jobs situation.

Non-seasonally adjusted non-farm payrolls improved 418,000 - lower than last year but about average for the last 10 years. The following chart compares the jobs gains this month with the same month historically:

(Click on image to enlarge)

Year-to-date unadjusted employment growth is 183,000 people below the pace of last year.

(Click on image to enlarge)

The last month's headline employment gains were revised upward. Generally speaking, the INITIAL employment gain estimate is overstated when the economy is slowing and understated when the economy is accelerating.

(Click on image to enlarge)

Most of the analysis below uses unadjusted data and presents an alternative view of the headline data.

Unemployment

The BLS reported U-3 (headline) unemployment was 3.8 % with the U-6 "all in" unemployment rate (including those working part-time who want a full-time job) was improved from 8.1 % to 7.3 %. These numbers are volatile as they are created from the household survey.

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