The headline seasonally adjusted BLS job growth was at expectations. The internals generally look good, and the pace of year-to-date growth exceeds last year. Still, there were troubling aspects of this month’s data.
Analyst Opinion of the BLS Employment Situation
The household and establishment surveys were not in sync (understatement). The year-to-date employment is running above the pace of last year. Last month’s data was revised downward taking some of the luster off this month’s gains.
The year-over-year rate of growth for employment insignificantly accelerated this month (blue bars on graph below). This is a year-over-year analysis which has no seasonality issues.
Economic intuitive sectors of employment were positive.
This month’s report internals (comparing household to establishment datasets) was inconsistent with the household survey showing seasonally adjusted employment contracting 423,000 vs the headline establishment number expanding 201,000. 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 469,000 people to the labor force.
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: 201K (non-farm) and 204K (non-farm private). Unemployment rate was unchanged at 3.9 %.
ADP reported: 163K (non-farm private)
In Econintersect‘s August 2018 economic forecast released in late July, we estimated non-farm private payroll growth at 210,000 (based on economic potential) and 235,000 (fudged based on current overrun / under-run of economic potential).
The market expected (from Nasdaq / Econoday):
| Seasonally Adjusted Data |
Consensus Range |
Consensus |
Actual |
| Nonfarm Payrolls – M/M change |
150,000 to 237,000 |
198,000 |
201,000 |
| Unemployment Rate – Level |
3.8 % to 3.9 % |
3.8 % |
3.9 % |
| Private Payrolls – M/M change |
160,000 to 237,000 |
190,000 |
204,000 |
| Manufacturing Payrolls – M/M change |
12,000 to 29,000 |
21,000 |
-3,000 |
| Participation Rate – level |
62.7 % to 62.9 % |
62.8 % |
62.7 % |
| Average Hourly Earnings – M/M change |
0.2 % to 0.3 % |
0.3 % |
+0.4 % |
| Average Hourly Earnings – Y/Y change |
2.7 % to 2.8 % |
2.8 % |
+2.9 % |
| Av Workweek – All Employees |
|
34.5 hrs |
34.5 hrs |
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 expanded 99,000 – more than last year. The following chart compares the jobs gains this month with the same month historically:
Year-to-date unadjusted employment growth is 130,000 people above the pace of last year.
Last month’s headline employment gains were revised downward. Generally speaking, the INITIAL employment gain estimate is overstated when the economy is slowing and understated when the economy is accelerating.
