Jobs +287,000 Employment +67,000 (Third Anemic Household Report)

By: Mike Shedlock | Fri, Jul 8, 2016
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Initial Reaction

Today's employment report shows an amazing increase of 287,000 jobs. The BLS revised last month from 38,000 down to 11,000.

The household survey shows June employment rose by 67,000. In May, employment rose by a mere 26,000 and in April, employment declined by a whopping 316,000.

The unemployment rate rose 0.2 percentage points to 4.9% because the labor force rose by 414,000.

We have seen divergences between the household survey and the establishment survey before, but not three consecutive months, recently.

Let's dive into the details in the BLS Employment Situation Summary, unofficially called the Jobs Report.


BLS Jobs Statistics at a Glance


Employment Report Statement

Total nonfarm payroll employment increased by 287,000 in June, and the unemployment rate rose to 4.9 percent, the U.S. Bureau of Labor Statistics reported today. Job growth occurred in leisure and hospitality, health care and social assistance, and financial activities. Employment also increased in information, mostly reflecting the return of workers from a strike.


Unemployment Rate - Seasonally Adjusted

Unemployment Rate, Seasonally Adjusted June 2014 - June 2016


Nonfarm Employment Change from Previous Month

Nonfarm Employment Change from Previous Month


Nonfarm Employment Change from Previous Month by Job Type

Nonfarm Employment Change from Previous Month by Job Type


Hours and Wages

Average weekly hours of all private employees was flat at 34.4 hours. Average weekly hours of all private service-providing employees was flat at 33.3 hours. Average weekly hours of manufacturers was flat at 40.7 hours.

Average hourly earnings of private workers rose $0.04 to $21.51. Average hourly earnings of private service-providing employees rose $0.03 to $21.29. Average hourly earnings of manufacturers fell $0.02 to $20.39.

For discussion of income distribution, please see What's "Really" Behind Gross Inequalities In Income Distribution?


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. Should anything interesting arise in the Birth/Death numbers, I will add the charts back.


Table 15 BLS Alternate Measures of Unemployment

Table 15 BLS Alternate Measures of Unemployment

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

Notice I said "better" approximation not to be confused with "good" approximation.

The official unemployment rate is 4.9%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 9.6%. 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. The rest is disability fraud, forced retirement, discouraged workers, and kids moving back home because they cannot find a job.


Strength is Relative

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

  1. In the household survey, if you work as little as 1 hour a week, even selling trinkets on EBay, you are considered employed.
  2. In the household survey, if you work three part-time jobs, 12 hours each, the BLS considers you a full-time employee.
  3. 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 jobs on Monster 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.


Final Thoughts

Two months ago I stated "One of these times, out of the blue, we will see sustained weakness."

Although the establishment survey rebounded sharply, for the third month the household survey was weak.

The three month change in household survey employment is -223,000. Which numbers are more believable?

 


 

Mike Shedlock

Author: Mike Shedlock

Mike Shedlock / Mish
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Mike Shedlock

Michael "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Visit http://www.sitkapacific.com/ to learn more about wealth management for investors seeking strong performance with low volatility.

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