Jack Dunn - Reclaiming Common Sense

The monthly employment situation report, or Jobs report, is jam packed with data. The report is created using two different data sets: The Current Population Survey (CPS) data measures full-time jobs, part-time jobs, unemployed workers, workforce population, the number of men and women working, the number of Caucasians, African American, Latino, and Asian workers working, the number of people working multiple jobs, and employment and unemployment by age group. The Current Employment Statistics (CES) data measures private sector worker, non-farm payroll workers, and wages.  All of the data, except the workforce population, has seasonally adjusted (SA) and Non-Seasonally Adjusted components. The Seasonal Factors change by data set, category, month and year. Sometimes the data sets are in sync and sometimes they are not.st

This column produce a jobs report forecast article titled st Jobs Report Forecast ""Auspicious August Jobs Report Forecast" projected:

  • The month to month growth data is indicating a growth between 241,000 and 327,000 SA CES workers. Summer is over. Leisure and Hospitality and "Other Services should see sharp decline. We could see a down-tick in Trade, Transportation and Utility workers as well as IT worker/s. We should record a spike in Government workers, Mining/Logging workers, Construction workers, and Manufacturing workers should all show significant non-seasonally adjusted worker growth.
  • The rolling year growth data is indicating growth between 1.93% and 1.97% annually thereby adding between 219,000 and 271,000 private sector workers, SA. All Sectors, except possibly Information Technology should add workers as compared to August 2017.
  • We would see a drop in both non-seasonally adjusted full-time jobs and non-seasonally adjusted (NSA) part-time jobs.
  • We would see more seasonally adjusted (SA) part-time jobs created than SA Full-time jobs were lost.
  • Both SA and NSA Unemployment levels would fall
  • The drop in SA would be greater than the gain in SA jobs so that means that the SA participation rate would fall.
  • Men could see an increase in full-time jobs, or not as severe a drop in full-time jobs, as construction, manufacturing, and Mining/Logging jobs improve
  • Multiple job workers should drop because the overall number of full-time and part-time jobs will drop.

The ADP report was released yesterday. It revealed that all sectors except mining and logging (Natural Resources) improved month to month and all sectors except IT improved August to August. More information can be found in "August ADP Points to More of the Same." What did today's Jobs Report reveal?

Did we add 204,000 Private Sector Workers or 242,000? The headline number today was that we added 201,000 non-farm payroll workers or 204,000 private sector workers. What was not reported was that we added more non-seasonally adjusted private sector workers than we added during August 2015, August 2016 or August 2017. It is also not being reported that the seasonal factor used to convert the NSA data to the SA data was the lowest used since 2014. If we used last year's seasonal factor then we would have added 242,000 workers. The growth rate of 0.08% month to month was within expectations. The 1.90% rolling year growth rate was just below expectations. It was still better than last year's growth rate.

We are adding More Private Sector Workers than we did during 2016 and 2017. The month to month growth rates and rolling year growth rates are good ways of projecting the growth for any given month. A third way to project and assess growth is the "current year" chart. Right now we are trending ahead of 2016 and 2017. If we continue growing at 1.90% then we will add  2.297 million private sector workers by the end of the year.This means that we are within reach of the 2.380 million private sector workers added during all of 2005. Remember that over 400,000 private sector workers were split between the 2016 and 2017 private sector worker data after the Annual Revisions. The data revisions occurred between the December 2017 and January 2018 jobs reports. WE could be having one of our best years since 1996.

The projections of between 220,000 and 240,000 before revisions was fairly accurate. June saw a downward revision of 29,000 workers. This still leaves it above the advance value reported during June by 29,000 NSA CES workers. The July data was revised down 44,000. This reflects the downward revision of 29,000 plus a downward revision of 15,000. The Devil is in the data, the revisions and the seasonal factors.

The Current Population data was a mix of the good, the bad, and the ugly. The ugly number was the drop in the number of full-time and part-time jobs, non-seasonally adjusted. This was the largest drop during August since 1981.We had one of the best February Data months ever so an ugly August could have been anticipated.  The NSA U-3 Unemployment level dropped by the fourth largest amount of workers ever, falling by 795,000 people. That was good news. The bad news is not that bad. The bad news is that the workforce participation rate fell, as expected. All three components were expected to fall and they did fall. The NSA U-3 rate of 3.95% is the lowest for the month of August since 1981. The problem is that the August Participation rate is lower than it was during August 2014, 2016 and 2017. If the participation rate is held constant then we should have 6 million more workers, based on population growth. If those 6 million missing participants are added to the official unemployed workers then the Effective Unemployment rate, based on the August 2014 participation rate, is 7.47%. This is the reason that wages have not risen as fast as has been anticipated.

Other indicators that will need more analysis in future articles. The number of men and the number of women working full-time jobs and part-time jobs all dropped this month. The number of multiple job workers dropped this month, as was expected. Wages were reported as improving from last month. We will see what happened when the NSA wage data is multiplied by the NSA worker growth by each sector.

This report was better than expected, in some ways, and challenging in other ways. Overall, full-time jobs are up compared to last August and part-time jobs and unemployment are down compared to last August. The annual growth rate was better this August than last August even with the upward revisions to the 2016 and 2017 data this year. We should record a drop in private sector workers next month, non-seasonally adjusted, before adding to the workforce during October, November, and December for the Christmas push. Seasonally adjusted we should see gains through the end of the year.

It's the economy