Payroll and Employment data from BLS, chart by Mish

Initial Thoughts

• The unemployment rate ticked down in September as more people dropped out of the labor force and employment rose
• The discrepancy between jobs and employment continues for the seventh month.

I have been commenting on the jobs-employment discrepancy for five months but it's now in the seventh month.

The two surveys measure different things. A person is either employed or not, but someone can have multiple jobs.

Generally, the numbers move in the same direction over time. The Employment (Household Survey) is noisy, but 7 months is a reasonable time frame for discrepancies to resolve.

If you assume both surveys are correct, then the interpretation is that the strength in jobs since March is due to about 1.7 million people taking extra part-time jobs.

The only other explanation is that one of the surveys is flat-out wrong.

BLS Jobs Statistics at a Glance

Total nonfarm payroll employment increased by 263,000 in September, and the unemployment rate edged down to 3.5 percent, the U.S. Bureau of Labor Statistics reported today. Notablejob gains occurred in leisure and hospitality and in health care.

Here are the details from the monthly BLS Employment Report.

• Nonfarm Payroll: +315,000 to 153,018,000 - Establishment Survey
• Civilian Non-institutional Population: +172,000 to 264,689,000
• Civilian Labor Force: -57,000 to 164,689,000 - Household Survey
• Participation Rate: -0.1 to 62.3% - Household Survey
• Employment: +204,000 to 158,936,000- Household Survey
• Unemployment: -261,000 to 5,753,000- Household Survey
• Baseline Unemployment Rate: -0.2 to 3.5% - Household Survey
• Not in Labor Force: +229,000 to 99,667,000 - Household Survey
• U-6 unemployment: -0.3 to6.7% - Household Survey

Revision Details

• The change in total nonfarm payroll employment for July was revised up by 11,000, from +526,000 to +537,000.
• The change for August remained at +315,000. 
• After revision, employment gains in July and August combined were 11,000 higher than previously reported.

Economists' Estimates

• Nonfarm Payrolls: 250,000 expected vs 263,000 actual
• Unemployment Rate: 3.7% expected vs 3.5% actual
• Manufacturing Payrolls: 20,000 expected vs 22,000 actual
• Hourly Earnings: +0.3% expected vs 0.3% actual

The above estimates from Bloomberg Econoday.

Change in Nonfarm Payrolls

Change in Nonfarm Payrolls Since February 2020

Despite recent gains, Leisure and hospitality employment is 1.1 million lower than in February 2020.

The biggest gains are in professional and business services, up over a million, and transportation and warehousing up 734,000.  

Part-Time Jobs

• Involuntary Part-Time Work: -306,000 to 3,843,000
• Voluntary Part-Time Work: +189,000 to 21,233,000
• Total Full-Time Work: +326,000 to 132,661,000
• Total Part-Time Work: -7,000 to 26,230,000

The above numbers never total correctly. I list them as reported.

In March, the BLS said full-time employment was 132,718,000. Today it says 132,661,00. Since March there has been a decline in full time jobs of 57,000.

Everything points to part time jobs to fueling the job gains.

Unemployment Rate – Seasonally Adjusted

Unemployment data from BLS, chart by Mish

Nonfarm Payrolls and Employment Levels

Recovery Synopsis

• In September, employment recovered all losses in the Covid recession for the first time.
• The numbers do not reflect increasing population or the type of job recovered.
• The red and blue dotted lines show the still significant impact Covid has on the economy.
• The yellow highlight shows where employment would be had the previous trends continued.

The impact of demographics and Covid are both in play. Neither jobs nor employment will return to the pre-Covid trendline any time soon.

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 rose 0.1 hours to 33.5 hours. Average weekly hours of manufacturers was flat at 40.3 hours.

Average Hourly Earnings of All Nonfarm Workers rose $0.12 to $32.46. Year-over-year, wages rose from $30.92 to $32.46. That's a gain of 5.0%.

Average hourly earnings of Production and Supervisory Workers rose $0.10 to $27.77. Year-over-year, wages rose from $26.26 to $27.77. That's a gain of 5.8%.

Despite the gains, wages have not kept up with inflation.

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.

The model is wildly wrong at turning points but otherwise means little. It is also heavily revised and thus useless.

Alternative Measures of Unemployment

(Click on image to enlarge)

Table A-15 from BLS

Table A-15 is where one can find a better approximation of what the unemployment rate really is.

The official unemployment rate is 3.5%. 

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 SS income), and discouraged workers.

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.

Strength is Relative

It’s important to put the jobs numbers into proper perspective.

In the household survey, if you work as little as 1 hour a week, even selling trinkets on eBay, you are considered employed.

In the household survey, if you work three part-time jobs, 12 hours each, the BLS considers you a full-time employee.

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 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.

Divergences

Once again we see a divergence between jobs and employment. Past divergences have resolved in the direction of jobs. One of these sets likely won't.

Synopsis Since March

• Employment +478,000
• Jobs +2,162,000
• Difference1,684,000

The household numbers are admittedly noisy, but a seven-month divergence now stands out.

In expanding economies, discrepancies tend to resolve higher. At turns, discrepancies tend to resolver lower.

I suspect labor turnover and retirements have seriously distorted payrolls and at least some of this strength will be taken away.

Expect a Long But Shallow Recession With Minimal Job Losses

Given hiring pressures and boomer retirements, Expect a Long But Shallow Recession With Minimal Job Losses

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, it's another thing for the unemployment rate to decline and jobs to rise by millions.

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