Unemployment Rate Jumps, Jobs Rise Only 114,000 With More Negative Revisions -

Unemployment Rate Jumps, Jobs Rise Only 114,000 With More Negative Revisions

Aug 02, 2024Jeremy ParkinsonFinance, No picture0

Image Source: UnsplashThe headline jobs number was much weaker than the consensus estimate of 180,000 and the unemployment rate rose 0.2 percentage points.Data from the BLS, chart by MishJobs vs EmploymentFrom September 2020 through early 2022, nonfarm payroll job gains and full time employment changes tracked together.Starting around March of 2022, a divergence between employment and jobs became very noticeable, and I have been discussing the divergence since then.This month, employment rose by 67,000 vs payrolls up by 114,000.Job Stats vs One Year Ago

Nonfarm Payrolls: +2,512,000

Employment: +57,000

Full Time Employment (Green): -508,000

Job Stats vs Two Years Ago

Nonfarm Payrolls: +5,685,000

Employment: +2,984,000

Full Time Employment: +1,199,000

In the last year, nonfarm payrolls are up by 2.515 million while employment is only up by 57,000 and full-time employment is down by 508,000.Jobs Overview vs Econoday Consensus

Nonfarm payrolls rose by 114,000 vs the consensus 180,000. But the BLS revised June from 206,000 to 179,000. Ignoring revisions, jobs only rose by 87,000.

Private payroll rose by 97,000 vs the consensus 155,000.

Manufacturing payrolls rose by 1,000 vs the consensus -2,000 but a 1,000 negative revision effectively tool away the rise.

Job Report Details

Nonfarm Payroll: +114,000 to 158,723,000 – Establishment Survey

Civilian Non-institutional Population: +206,000 to 268,644,000

Civilian Labor Force: +420,000 to 168,429,000 – Household Survey

Participation Rate: +0.1 to 62.7% – Household Survey

Employment: +67,000 to 161,266,000 – Household Survey

Unemployment: +352,000 to 7,163,000- Household Survey

Baseline Unemployment Rate: +0.2 to 4.3% – Household Survey

Not in Labor Force: -214,000 to 100,215 – Household Survey

U-6 unemployment: +0.4 to 7.8% – Household Survey

Nonfarm Payroll Change by SectorGovernment and Health Services are related to the surge of illegal immigrants and the need to address them.Monthly Change in Nonfarm PayrollsMonthly Revisions

The change in total nonfarm payroll employment for May was revised down by 2,000, from +218,000 to +216,000.

The change for June was revised down by 27,000, from +206,000 to +179,000.

With these revisions, employment in May and June combined is 29,000 lower than previously reported.

Nearly every month there are negative revisions.Part-Time Jobs

Involuntary Part-Time Work: +346,000 to 4,566,000

Voluntary Part-Time Work: -305,000 to 22,036,000

Total Full-Time Work: +448,000 to 133,684,000

Total Part-Time Work: -325,000 to 27,729,000

The above numbers never total correctly due to the way the BLS makes seasonal adjustments. I list them as reported.Hours and WagesThis data is frequently revised.

Average weekly hours of all private employees fell 0.1 hour to 34.2 hours.

Average weekly hours of all private service-providing employees was flat at 33.2 hours.

Average weekly hours of manufacturers fell 0.2 hours to 39.9 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 EarningsThis data is also frequently revised. Here are the numbers as reported this month.Average Hourly Earnings of All Nonfarm Workers rose $0.08 to $35.07. A year ago the average wage was $33.84. That’s a gain of 3.6%.Average hourly earnings of Production and Nonsupervisory Workers rose $0.09 to $30.14. A year ago the average wage was $29.03. That’s a gain of 3.8%.Year-over-year wages are keeping up with year-over-year inflation after underperforming for many months. However, year-over-year gains are falling fast.Unemployment RateBLS unemployment data, chart by MishThe unemployment rate hit a 50-year low in January and April of 2023 at 3.4 percent. It’s now 4.1 percent.“The unemployment rate has bottomed this cycle and will generally head higher.”I first made that comment many months ago. If there was any doubt, it’s now erased.Alternative Measures of UnemploymentTable A-15 Alternative Measures of Labor, chart from BLSTable A-15 is where one can find a better approximation of what the unemployment rate really is.

The official unemployment rate is 4.3 percent up from 4.1 percent last month.

U-6 is much higher at 7.8 percent, up a sizable 0.4 percentage points from last month.

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 ModelStarting 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 ExplainedI 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.However, it appears likely the BLS is too optimistic about the number of jobs they believe are being created that they don’t otherwise know about.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.Can the Jobs and Employment Numbers Both Be Reasonably Correct?Theoretically, the answer is yes because they measure different things. A person working three part time jobs counts for three jobs but only a single person employed.I have repeatedly asked ADP to account for duplicate social security numbers but they won’t. Amusingly, the BLS wants to, but the employees tell me they can’t because “they don’t have access to the data for security reasons.”In practice, the answer is no. The BLS Birth-Death model has flaws. I now have a handle on how big those flaws are.Expect the BLS to Revise Job Growth Down by 730,000 in 2023On July 26, I commented Expect the BLS to Revise Job Growth Down by 730,000 in 2023, More This Year

At the heart of these revisions is a horribly flawed birth-death model used by the BLS. My calculation closely matches an estimate by Bloomberg’s chief economist.

The Payroll Surveys

Nonfarm Payrolls are are from the Establishment Survey (CES). The sample survey was 666,000 individual worksites in 2023.

QCEW (Quarterly Census of Employment and Wages) is a count of Unemployment Insurance (UI) administrative records submitted by 11.9 million establishments.

BED (Business Employment Dynamics) is large subset (11.2 million) from QCEW. It provides a much better number than the flawed Birth-Death model.

On the basis of QCEW I estimate jobs are overstated by about 900,000.Nonfarm Payrolls NSA Minus QCEWThe BLS does not revise the previously reported numbers in its annual benchmark adjustments making the historical charts, including my lead chart, wrong. Jobs are overstated on all the charts.QCEW data is not in a friendly format to download. I manually plugged in the above quarterly numbers from a QCEW download into a better formatted CES download from the St. Louis Fed.For discussion of the difference between QCEW and the monthly jobs report please see How Much Does the BLS Overstate Monthly Jobs?In normal times, neither heading into or out of recessions, the differences seem to vary randomly in a tight range.Recent Economic DataJuly 8: Weak Data Says a Recession Has Already Started, Let’s Now Discuss When

I’ve seen enough. A recession has started. Let’s discuss starting with a very good indicator that has few false positives and no false negatives.

July 31: Small Business Employment Growth Is Now Negative (and What It Means)

ADP data shows year-over-year payroll growth is negative 88,000 for small corporations sized 20-49. Trends are negative in all but very large corporations.

August 1: Commercial Construction Spending Is Down 9 Consecutive Months

It’s not office related. And the Census Department has heavy negative revisions to spending. Let’s investigate.

Closing ThoughtsThe rising trend in payrolls vs QCEW corresponds to the rising discrepancy between jobs and payrolls.The BED report makes a mockery of the Birth-Death model.It’s now August, but the most recent QCEW data is for 2023 Q4 a lag of 10 months vs the start of Q4 in October of 2023.Jobs are much weaker than reported. More negative revisions are coming. A recession has started.More By This Author:Intel Announces 15,000 Job Cuts, 15 Percent Of Its Workforce Commercial Construction Spending Is Down 9 Consecutive MonthsThe Manufacturing ISM Index Is Lower Than Every Economist’s Estimate