The headline seasonally adjusted BLS job growth was well below expectations. The internals generally look good, and the pace of year-to-date growth exceeds last year. There continues to be 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 significantly upward. The growth this month was significantly under expectations. Just considering this month’s data – it was worse than last month.
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 growing 420,000 vs the headline establishment number expanding 134,000. 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 added 150,000 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: 134K (non-farm) and 121K (non-farm private). Unemployment rate was declined from 3.9 % to 3.7 %.
ADP reported: 230K (non-farm private)
In Econintersect‘s September 2018 economic forecast released in late August, we estimated non-farm private payroll growth at 220,000 (based on economic potential) and 235,000 (fudged based on current overrun / under-run of economic potential).
The market expected (from Econoday):
| Seasonally Adjusted Data |
Consensus Range |
Consensus |
Actual |
| Nonfarm Payrolls – M/M change |
150,000 to 195,000 |
180,000 |
134,000 |
| Unemployment Rate – Level |
3.8 % to 3.9 % |
3.8 % |
3.7 % |
| Private Payrolls – M/M change |
145,000 to 190,000 |
171,000 |
121,000 |
| Manufacturing Payrolls – M/M change |
6,000 to 15,000 |
10,000 |
+18,000 |
| Participation Rate – level |
62.6 % to 62.8 % |
62.7 % |
62.7 % |
| Average Hourly Earnings – M/M change |
0.2 % to 0.4 % |
0.3 % |
+0.3 % |
| Average Hourly Earnings – Y/Y change |
2.8 % to 3.0 % |
2.9 % |
+2.8 % |
| 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 contracted 618,000 – better than last year but worse than any month this century except last year and 2008. The following chart compares the jobs gains this month with the same month historically:
Year-to-date unadjusted employment growth is 205,000 people above the pace of last year.
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.
Most of the analysis below uses unadjusted data, and presents an alternative view to the headline data.
