Diving Into the Payroll Report: Wages Rebound (But Don't Get Too Excited), Revisions, Huge Jump in Labor Force

Initial Reaction

Wages rebounded from the dip last month (but don't get too excited as per details below). Also, there were big upward revisions to many prior numbers.

The unemployment rate rose this month because of a huge increase in the labor force. The civilian institutional population also leaped this month, and apparently these newly-found people are all looking for work.

In yet another anomaly, unemployment rose by 291,000, but that was tempered by a rise in employment of 759,000.

This was certainly a strange report. Revisions are at the heart of it.

This is just one month, and the household data has been exceptionally volatile lately.

Revisions

• November nonfarm payroll employment was revised from +353,000 to +423,000
• December nonfarm payroll employment was revised from +252,000 to +329,000
• With these revisions, employment gains in November and December were 147,000 higher than previously reported. 
• Monthly revisions result from additional reports received from businesses since the last published estimates and the monthly recalculation of seasonal factors. 
• The annual benchmark process also contributed to these revisions.

BLS Jobs Statistics at a Glance

• Nonfarm Payroll: +257,000 - Establishment Survey
• Employment: +759,000 - Household Survey
• Unemployment: +291,000 - Household Survey
• Involuntary Part-Time Work: +20,000 - Household Survey
• Voluntary Part-Time Work: +92,000 - Household Survey
• Baseline Unemployment Rate: +0.1 at 5.7% - Household Survey
• U-6 unemployment: +0.1 to 11.3% - Household Survey
• Civilian Non-institutional Population: +705,000
• Civilian Labor Force: +1,051,000 - Household Survey
• Not in Labor Force: -354,000 - Household Survey
• Participation Rate: +0.2 at 62.9 - Household Survey

January 2015 Employment Report

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

Total nonfarm payroll employment rose by 257,000 in January, and the unemployment rate was little changed at 5.7 percent. Job gains occurred in retail trade, construction, health care, financial activities, and manufacturing.

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Unemployment Rate - Seasonally Adjusted



Nonfarm Employment January 2011 - January 2015



Nonfarm Employment Change from Previous Month by Job Type



Hours and Wages

Average weekly hours of all private employees was stationary at 34.6 hours. Average weekly hours of all private service-providing employees was flat at 33.4 hours.

Average hourly earnings of production and non-supervisory private workers rose $0.07 to $20.80. Average hourly earnings of production and non-supervisory private service-providing employees rose $0.08 to $20.61.

Last month we reported wages of both categories declined by $0.06. In effect, this month wiped out last month's losses and a bit more.

Let's look at this another way. Since November, Average hourly earnings of production and non-supervisory private workers rose $0.03, from $20.77 to $20.80 (a penny and a half a month).

Since November, average hourly earnings of production and non-supervisory private service-providing employees rose $0.04 from $20.57 to $20.61 (2 cents a month).

From this perspective, wages are rising about 1% a year.

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



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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 5.7%. 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 11.3%. 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.

For further discussion of a more accurate measure of the unemployment rate, please see Gallup CEO Calls 5.6% Unemployment Rate "The Big Lie": What's a Realistic Unemployment Rate?

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