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Friday, February 07, 2014 9:07 AM


Nonfarm Payrolls +113,000, Median Bloomberg Estimate 180,000; Huge March 2013 Employment Revision


Initial Reaction

Big Miss: Nonfarm Payrolls rose by 113,000. The Median Bloomberg estimate was +180,000. December was revised up a tiny bit from 74,000 to 75,000. Beneath the surface, things actually look better for a change. The household survey shows a gain of employment of 638,000. That said, revisions were in play.

Huge March 2013 Revision

Nonfarm employment for March 2013 was revised up by 369,000 (347,000 on a not seasonally adjusted basis). The benchmark revision incorporates a large non-economic change that resulted from a reclassification of 466,000 jobs from private households (out of scope by CES definition) to services for the elderly and disabled (in scope for CES).

Blaming the Weather

Once again economists were caught totally unaware by bad weather.

MarketWatch reports "The latest report may have been influenced by other unusual factors that render it less reliable as a bellwether of labor-market trends: extremely cold and snowy weather and the government’s annual “benchmark” update on how many jobs were created in the past year. Economists polled by MarketWatch had forecast a gain of 190,000 jobs."

Apparently economists did not realize it has been cold and snowy. Alternatively, they predicted 180,000 to 190,000 jobs even though they knew it was cold and snowy. Which is it?

December BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +113,000 - Establishment Survey
  • Employment: +638,000 - Household Survey
  • Unemployment: -115,000 - Household Survey
  • Involuntary Part-Time Work: -514,000 - Household Survey
  • Voluntary Part-Time Work: +434,000 - Household Survey
  • Baseline Unemployment Rate: -0.1 to 6.6% - Household Survey
  • U-6 unemployment: -0.4 to 12.7% - Household Survey
  • Civilian Non-institutional Population: +170,000
  • Civilian Labor Force: +523,000 - Household Survey
  • Not in Labor Force: -355,000 - Household Survey
  • Participation Rate: -0.2 at 62.8 - Household Survey

Additional Notes About the Unemployment Rate

  • The unemployment rate varies in accordance with the Household Survey, not the reported headline jobs number, and not in accordance with the weekly claims data.
  • In the past year the population rose by 2,252,000.
  • In the last year the labor force fell by 239,000.
  • In the last year, those "not" in the labor force rose by 2,253,000
  • Over the course of the last year, the number of people employed rose by 1,840,000 (an average of 153,33 a month)

The population rose by over 2 million, but the labor force fell by over a quarter-million. People dropping out of the work force accounts for much of the declining unemployment rate.

January 2014 Employment Report

Please consider the Bureau of Labor Statistics (BLS) January 2014 Employment Report.

Total nonfarm payroll employment rose by 113,000 in January, and the unemployment rate was little changed at 6.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment grew in construction, manufacturing, wholesale trade, and mining.

Click on Any Chart in this Report to See a Sharper Image

Unemployment Rate - Seasonally Adjusted


Employment History Since January 2003



click on chart for sharper image

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 33.2 hours.

Average hourly earnings of production and non-supervisory private workers rose $0.06 to $20.39. Average hourly earnings of private service-providing employees rose $0.06 to $20.17.

Real wages have been declining. Add in increases in state taxes and the average Joe has been hammered pretty badly. For 2013, one needs to factor in the increase in payroll taxes for Social Security.

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

Birth Death Model

Starting January, I dropped the Birth/Death Model charts from this report. For those who follow the numbers, I keep 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



click on chart for sharper image

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 6.6%. 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 12.7%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Labor Force Factors

  1. Discouraged workers stop looking for jobs
  2. People retire because they cannot find jobs
  3. People go back to school hoping it will improve their chances of getting a job
  4. People stay in school longer because they cannot find a job
  5. Disability and disability fraud

Were it not for people dropping out of the labor force, the unemployment rate would be well over 9%.

Synopsis

On the surface this was a second bad jobs report. Beneath the surface, things looked much better. However, the improvement in household employment dates back to a massive upward revision from March 2013 of 369,000. That revision is not indicative of the current state of hiring patterns.

 Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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