Reclaiming Common Sense

The ADP Payroll Report Forecast was for all Sector to Fire on All Cylinders.

The Current Employment Statistics Data is In Agreement with ADP.

The monthly employment situation report, or Jobs Report, is created using two different data sets: the Current Population Survey (CPS) Jobs and Unemployment Data and the Current Employment Statistics (CES) Worker and Wages data. The two data sets have seasonally adjusted and non-seasonally adjusted components. The seasonal factors change by data set, category, month and year. The seasonally adjusted (SA) and non-seasonally adjusted (NSA)  CES data point to growth in all sectors. The CPS data has some differences between the NSA and SA data.

The Non-seasonally Adjusted CES worker data has been growing by at least 1.88% since April of 2018. This is an important number because the annual growth rate during April 2017 was 1.69% and the April 2018 rate was 1.78%. Worker Expansion should continue. Remember that we grew at 2.07% during 2016. The Growth rate of 1.91% could generate a low value of 141,000 and the 2.00% growth rate would project 254,000 private sector workers added, seasonally adjusted.

The Non-seasonally adjusted  Month to Month Growth is expected to surge up to 1.00%. We have seen month to month growth of 0.95% as recently as April 2015 and April 2016. We have see month to month. If we even grow between 0.88% and 0.98% month to month, non-seasonally adjusted, then the range of seasonally adjusted worker growth could come in between 268,000 and 396,000 private sector workers.  This is significantly higher than what is projected by the annual growth rate. Will the annual growth rate spike to 2.11%? If the month to month is 0.98% then yes, very possibly.

The Non-Seasonally Adjusted data is projecting growth in all sectors from March to April and from April 2018 to April 2019. The largest percentage growth month to month is expected in Construction, Leisure and Hospitality (LAH,) Mining and Logging (M/L,) Professional Business Services (PBS,)  and Other Services (OS.) The weakest growth could be seen in the Financial Activity (FIRE) sector. The best April to April growth is expected in M/L, Construction, PBS, Education and Health Services (EHS,) and FIRE.  The annual growth in M/L, Construction, and PBS could pull up the average weekly wage data while the increase in EHS and LAH could pull down the average weekly wage growth.

The Seasonal Factor used to convert the non-seasonally adjusted data to the seasonally adjusted data could rise or fall. This statement seems obvious until you realize that the general trend was lower from year to year through 2016. It is important to remember that the May 2016 seasonally adjusted Private Sector number was reported as a negative 7,000 workers with the release of the June 2016 Jobs Report. This was reported on the sister site to this column, "Reclaiming Common Sense,"  at that time. There have been subsequent revisions to the data during January 2017, January 2018, and January 2019 that have elevated that level. Lowering the seasonal factor during April reduces the seasonally adjusted data. Lowering the April month can produce a "bounce" in May, especially if the May Seasonal Factor is on the high side of expectations. If we were to grow month to month at 0.93%, and the seasonal factor from 2013 was used then the SA CES value would be reported at 272,000. If the seasonal factor from 2018 was used then the SA CES would be reported at 318,000.

The Seasonally Adjusted month to month data is projecting growth in all sectors month to month and April to April. The month to month data is projected the most growth, by percentage, in M/L, Construction, PBS, OS, and Manufacturing (MFG.) Manufacturing has been growing considerably under the current President.  April t April the largest growth is expected in M/L, LAH, EHS, FIRE, and PBS.

Watch the revisions. We have seen upward revisions to the prior months data for fifteen of the past 26 months. There are advance numbers, the headline numbers, and the preliminary data, released the following month, and "final" number released two months after the advance value is released.  If the March data is revised up by 30,000 workers, from 196,000 non-farm payroll workers (which includes government workers) to 226,000 workers that would reduce a 272,000 value to 242,000. The same could be said if the February data is revised higher from 33,000 to 63,000. The 226,000 workers could remain the same and the boost to the February data would borrow 30,000 workers from April.

  • Data could be 33,000 February, 196,000 March, and 247,000 April (476,000 total.)
  • Data could be 63,000 February, 226,000 March, and 187,000 April (476,000 total.)

It is possible that a big beat on the mainstream medias "standard" 180,000 non-farm payroll jobs added at 247,000 could be a ho-hum 187,000 and a "substantial drop" from the level "reported" last month. Up could be reported as down. If the month to month data spikes, as anticipated, then the rolling year data will spike as well. Expect a low seasonal factor and expect revisions to reduce a 272,000 value (0.90% and 1.0334145 seasonal factor) to 242,000 or 212,000.

We could see one million full-time jobs added to the economy during April. We have seen huge spikes in full-time Current Population Survey (CPS) jobs during April 2000, April 2005, and April 2010 of 1.5 million jobs. We have seen more modest gains of roughly 1 million full-time jobs during April 2014, April 2017, and April 2018. Note that this also means that we could see a drop of 250,000 to 500,000 part-time jobs. Net Job gains could be in the 500,000 to 750,000 range is we add 1 million full-time jobs, and could be even better if we approach the 1.5 million level, possibly as high as 1 million net jobs.

The Net Seasonally Adjusted CPS data could be slight gain or a slight loss.  We "reported" seasonally adjusted job losses during April 2012, 2014, and 2016. Job Streak? What Jobs streak? The "Jobs Streak" was really the seasonally adjusted Private Sector CES worker streak. We could see a spike in the SA CPS data if we grow as we did during 2000, 2005, and 2010. We were coming out of a recession during 2010 and kicking into overdrive before the recessions of 2001 and 2008 the other two times.

Non-seasonally Adjusted Unemployment "will" fall and seasonally adjusted unemployment may fall.  Last week we received the mid-April continuing unemployment claims data. We saw a drop from mid-March to mid-April. It is perilous to compare two surveys that measure different things. The weekly claims data is the number of unemployed workers who have recently lost work, are seeking work, and receiving benefits. The U-3 unemployment level is those who say that they are out of work and looking for work. Big Difference. We should see a drop in NSA U-3 unemployment of more than 750,000 workers. The SA U-3 could fall 250,000 to 500,000 workers.

Participation Matters. If we "only" add 1 million FT jobs and trim 250,000 part-time jobs then the gains in full-time participants will be washed away with the loss of part-time participants and unemployed participants. The question is whether or not our NSA U-3 unemployment rate will fall below the April 2000 rate of 3.67%. We will not achieve the April 2000 participation rate of 67.04%. Will we match the April 1983 participation rate of 63.22%? We will smash the U-3 level of 10.04% from April 1983.

What is the Effective Unemployment rate? April 1983 is important because it was former President Ronald Reagan's third April in office, the same as President Trump this April. April 2000 is important because it was the peak (low) unemployment and peak (high) level of April Participation under former President Clinton. The effective unemployment rate, when participation is factored into the equations, was 15.17% under President Reagan, 3.67% under former President Clinton, and 9.93% under President Trump during April 2018.  Participation is improving using same month data. The effective unemployment rate is falling under President Trump. There is still a long way to go to get an effective unemployment rate under 8% nonetheless under 5%.

Up and Down May be Reported simultaneously. The CPS data is important because the creation, or loss, of seasonally adjusted jobs, combined with the drop in unemployment may report a drop in seasonally adjusted participation even as the seasonally adjusted CES worker data reports huge improvement from the March 2019 level. This will confuse some prognosticators.

Expect Wages to Jump. There are many more ways to examine the data. We may set another round of April Wage records, by CES sector, as people are lured back into the workforce, or into the workforce for the first time, by higher wages. Hours may improve as the weather improves. The combination of hourly wage improvement and hours worked will boost the average weekly wages. When average weekly wage growth is multiplied by annual worker growth than total earnings will soar.

Expect Multiple Job Workers to drop from March 2019 level and increase from April 2018 Level. Multiple job workers tend to drop from March to April and have been increasing April to April. We could see total multiple job holders increase from the 7.667 million level last April and drop from the March 2019 level of 7.853 million. The  number of people working a FT primary job and a secondary PT job could follow a similar pattern, dropping from the 4.473 million level last month and increasing from the 4.237 million level from April 2018. The level of dual PT workers should fall month to month, and possibly April to April, as the total number of part-time jobs are trimmed this month. Dual FT jobs could swing big in either direction as one full-time job may replace two lower paying full-time jobs or two part-time jobs. The expected spike in full-time jobs means that some may decide to work two full-time jobs and "make hay while the sun is shining."

This column will also examine data regarding multiple job workers and how men an women are doing in the Jobs The jump in mining and logging jobs, construction jobs and professional business sector jobs may boost male full-time job levels, and may help women, too.  The jump that is expected in Education and Health Services and Leisure and Hospitality should boost the number of women working in the workforce and may boost men a little, too.

Sooner or later the CES worker data and the CPS jobs data will get into sync. Expect a strong headline CES "jobs number" as workers jump into the market. Expect the seasonal surge to be seasonally adjusted lower so that participation does not spike, according the the CPS data. Expect the unemployment rate to challenge the 3.67% low of April 2000.

It's the Economy.