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Friday, January 08, 2016 10:29 AM

Third Strong Payroll Number +292,000; Unemployment Unchanged at 5.0%

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Initial Reaction

For the third consecutive month we see a strong headline payroll number. The Bloomberg Consensus estimate was 200,000 jobs and the headline total was 292,000. The unemployment rate was steady to 5.0%, the lowest since April 2008.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +292,000 - Establishment Survey
  • Employment: +485,000 - Household Survey
  • Unemployment: -20,000 - Household Survey
  • Involuntary Part-Time Work: -63,000 - Household Survey
  • Voluntary Part-Time Work: +72,000 - Household Survey
  • Baseline Unemployment Rate: +0.0 at 5.0% - Household Survey
  • U-6 unemployment: +0.0 at 9.9% - Household Survey
  • Civilian Non-institutional Population: +189,000
  • Civilian Labor Force: +466,000 - Household Survey
  • Not in Labor Force: -277,000 - Household Survey
  • Participation Rate: +0.1 at 62.6 - Household Survey

Employment Report

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

Total nonfarm payroll employment rose by 292,000 in December, and the unemployment rate was unchanged at 5.0 percent, the U.S. Bureau of Labor Statistics reported today. Employment gains occurred in several industries, led by professional and business services, construction, health care, and food services and drinking places. Mining employment continued to decline.

Unemployment Rate - Seasonally Adjusted

Nonfarm Employment Change from Previous Month by Job Type

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

Nonfarm Employment From Previous Year by Job Type

Hours and Wages

Average weekly hours of all private employees was unchanged at 34.5 hours. Average weekly hours of all private service-providing employees was unchanged at 33.4 hours.

Average hourly earnings of private workers rose $0.02 to $21.22. Average hourly earnings of private service-providing employees rose $0.02 to $21.02.

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

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 5.0%. 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 9.9%. 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 strength of some of 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 and 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.

In December 2015, the ECRI reported year-over-year (yoy) growth in multiple jobholders rose to an 11-month high, while yoy growth in single jobholders eased to a three-month low.

For further discussion, please see Multiple Jobholders Artificially Boost "Full-Time" Employment: Does the Sum of the Parts Equal the Whole?

Mike "Mish" Shedlock

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