Inside the BLS Employment Situation Report
This is my monthly look inside the BLS Employment Situation Report. There are two BLS Surveys: the Establishment and the Household. The Establishment one surveys about 141,000 businesses and government agencies, representing approximately 486,000 individual worksites. It is taken each month during the week which includes the 12th of the month. The Household Survey is a survey of households taken each month during the week which included the 12th of the month. It is a survey of 60,000 households.
What is almost never said is that the number of people moving in and out of the labor force each month is almost 100 times the size of the net change in jobs. Rather than pose answers what I try to do each month is look at the numbers.
Each item below is suffixed with (H) if it is from the Household Survey and (E) if it is from the Establishment Survey and (B) if it combines the two.
- Headline Nonfarm jobs was +171,000.
(E). The two previous months were revised to +148,000 (September) and +192,000
(August). Those revisions plus the 171,000 mean that there are 207,000 more
Nonfarm jobs than we though there were in the last report.
- the Unemployment Rate was 7.9% up from 7.8% in September 2012 (B)
- Average hourly earnings was $23.58 down $23.59 (revised) in September 2012
(E)
- Average work week was 34.4 hours the same as a revised 34.4 hours in September
2012 (E)
- Private jobs were +184,000. Government jobs were -13,000 (E)
Reading beneath the surface:
-Good producing jobs were +21,000. The two previous months were -13,000 and -14,000. (E)
-The size of the civilian labor rose from 155,063,000 to 155,641,000 an increase of 578,000. (H) This difference is in the Household Survey which is only a report of what people say regarding whether they are in or out of the labor force. Look at these 3 numbers from the Household Survey of people reporting their status as employed: August 142,101,000 September 142,974,000, October 143,384,000. 1,283,000 more people say they are employed in the past 3 months but their employers report only a 511,000 increase in jobs. Zerohedge pointed out last month that a large part of this difference was in workers aged 20-24. There are possible explanations for this anomaly: there are more part time employees, fewer people have more that 1 job (the Establishment Report counts twice someone with 2 jobs), or the people surveyed in the Household Survey are not truthful.
-The labor participation rate (percent of adult non-institutionalized population who are part of the labor force) was 63.8% up from 63.6% in September. It was 64.1% a year ago. (H) This, not the unemployment rate, is the number which should get everyone's attention.
- the size of the civilian noninstitutional adult population increased by 211,000 in October to 243,983,000 (H). With a labor participation rate of 63.8% 134,600 more jobs were necessary to keep pace with population growth. We had 36,400 more jobs added than that. (H) The Employment/Population ratio was 58.9% and increase of 0.1% in the past month and the labor participation rate has dropped in the last year from 64.1% to 63.8%. All of the gain in jobs in the last year is attributable to population growth. The civilian noninstitutional population is 3,700,000 more that 12 months ago. With a labor participation rate of 63.8% we require 2,361,000 more jobs in the past 12 months to keep pace with population growth.
According to the 4 week moving average of Initial Jobless Claims, 1,469,000 people lost their jobs in the last 4 weeks. That normalizes to 1,591,400 lost jobs in a calendar month (there are about 13 4-week periods in a 12 month year.) This is down from the previous month's 1,625,000 lost jobs/month.
Folks always scratch their head and ask "If 1,469,000 people filed unemployment claims last month how did we gain 171,000 jobs?" The answer is that the labor market is extremely dynamic. The number of people moving in an out of it each month is almost 100 times as large as the net change in jobs. Each month we try to look here at the dynamics of this market.
In October 2012 BLS measured 4 sets of people entering or leaving the jobs market:
- Job losers and persons who completed temporary jobs was 6,575,000 up 53,000 from September's Job Losers and up down 1,349,000 from October 2011. (H)
- Job leavers was 1,010,000. This includes anyone who retired or voluntarily left working. This was up 53,000 from previous month and down 58,000 from October 2011. (H)
-Reentrants was 3,300,000. Reentrants are previously employed people who were looking for a job and found one. This was -6,000 from previous month and -87,000 from October 2011.(H)
-New entrants were 1,301,000. These are unemployed persons who never worked before and who are entering the labor force for the first time. This was +54,000 from previous month and +10,000 from October 2011.
The presentation of the total change in jobs is like looking at the final score of a game. The details tell the story:
- 171,000 more people are working
- 418,000 more people are in the civilian labor force
- 578,000 fewer people lost their jobs
- 53,000 more people left their jobs
- 6,000 fewer reentrants obtained jobs.
More people are working, the Civilian labor force was up 578,000 making up almost entirely for the sudden disappearance of approximately the same number last month. Consequently the unemployment rate went up. The unemployment rate is the number of people from the Household Survey who say they are unemployed (12,258,000) divided by the Civilian Labor Force (155,641,000) or 7.88% which was rounded up to 7.9%. Last month's unemployment rate 7.795% which was rounded up to 7.8%.
Jobs growth remains just barely ahead of what is required to keep pace with population growth. The unemployment rate is up because the Household Survey reports that the civilian labor force recovered the 500,000+ people who had disappeared from the labor force the previous month.
The frustration is that we have two reports each month taken from two sets of data. The Establishment survey comes from employers and the Household Survey comes from interviews with people. The Household Survey is suspect because it does not seem likely to me that 500,000 people exited the labor force in September to suddenly reappear in October. The establishment report is that of a jobs economy just gaining slightly more that what is required to keep pace with population growth.
For me the real frustration is that the media distills a complex picture into two numbers: jobs added and unemployment rate. If you have read this far you know that the employment market is a good bit more complex.
I want to thank all of the folks who have sent positive message about my continued look inside the Jobs Report. Like most economic topics discussed the media the picture is vastly more complex than 2 numbers.
Dick Lepre
[email protected]
Web site: www.loanmine.com
Blog: economy.typepad.com
Phone: (415) 244-9383 | Fax: (866) 488-2051
1400 Van Ness Avenue, San Francisco, CA 94109
CA DRE # 01143973 | NMLS # 302379
California Department of Real Estate - Real Estate Broker License #01818035,
NMLS #9472. Equal Housing Opportunity.
Comments