January Jobs Data is One of the Reasons Why We Have Seasonally Adjusted data
The Monthly Jobs Report, or Employment Situation Report, is the "most important" report on the economy that we receive during any given month. The report is created using seasonally adjusted and non-seasonally adjusted data from two data sets. The Current Employment Statistics (CES) worker data and the Current Population Survey (CPS) jobs data. The CPS data measures the level of full-time jobs, part-time jobs, and unemployed workers, as well as the workforce population. The CES data measures workers and wages, among other things. What can we expect to be recorded, non-seasonally adjusted (NSA,) and what can we expect to be reported, seasonally adjusted (SA?)
Watch the revisions. The first thing to understand is that the Current Employment Statistics data is going to be revised from last year. The March Benchmark is going to revised up 48,000 workers.If that 48,000 revision is pushed through the entire year then the final December value will be revised up a net 48,000, borrowing 48,000 from January 2019. Each month could be revised higher by 4000 to 5000 workers. It is especially important to watch the revisions because we received a January Surprise last January when 452,000 workers were spread out over 2016 and 2017. What could have been reported as "only" a drop of 1.86% was reported as a drop of 2.06%
We tend to see the non-seasonally adjusted worker level drop by 2% between December and January. This is why we have seasonally adjusted data. There are months where we see spikes in workers and others where the data "dives." Last year we had a January where the NSA Non-farm Payroll (NFP) number fell by 2.885 million workers. We also lost 1.039 million workers during July. You didn't hear about that from the government. You also did not hear how we added 998,000 workers during October, 1.008 million during April, or 1.010 million during February. That data is available in the Non-farm revisions table. The NFP data includes government workers. This will be important this month with regard to the Government Shutdown and 880,000 furloughed government workers.
The January to January Data indicate that All Sectors should add workers from last year's level, non-seasonally adjusted. The question marks are Information Technology, Government and Mining/Logging. Seasonally adjusted only mining and logging and government.
The Seasonal Factor Chart looks like a shotgun approach to choosing seasonal factors. There are some months, and some categories of workers, where the seasonal factors appear to creep methodically higher or lower. A Higher Seasonal factor boosts the SA CES value. A lower seasonal factor lowers the SA CES value. (SA = SF*NSA.)
If we have a year like we had last year we could see the addition of 414,000 private sector workers during January reported. Down is up. The NSA data will drop and the SA data will rise. If we used last year's growth rate and seasonal factor then we would see 462,000 workers added. Subtract 48,000 and we are at 414,000 workers added.
Expect the Month to Month Data to drop by 1.96%. If we see the seasonal factor come in between the value for 2014 and 2017 and we have a growth comparable to 2015 then we should have seen 223,000 SA Private Sector Workers added to the economy this past January.It could be reported under 223,000 by the same 48,000, or a "disappointing" number of 175,000.
All Sectors will record a drop of non-seasonally adjusted workers. The largest month to month drops will be Construction, Trade, Transportation, and Utilities (TTU,) and the Leisure and Hospitality (LAH) sectors.
Seasonally adjusted, all sectors except IT and the Government Sectors should grow month to month. Construction, Mining and Logging, and the Education and Health Services (EHS) sectors should see the largest seasonally adjusted growth.
The Annual Rate of Growth broke 2% during December. The revisions to the NSA CES data last year turned a faster growing economy into a slower growing economy. We had growth over 1.90% during July, 1.91% during November, 1.93% during May and June, 1.96% during August, 1.97% during September, 1.98% during October, and 2.02% during December. If we use the same "1.0172" seasonal factor we could add between 158,000 and 358,000 SA CES private sector workers. Saw we grow at 258,000 and subtract 48,000 then we hit 210,000 private sector workers "added" to the economy.
What about the Government workers? The Government workers are included in the non-farm payroll data, they are not included in the Private Sector data. The Private Sector data was what was used for the "Obama Job Streak" economic urban legend. That streak ended during May 2016 before the January 2017 revisions. There have been 880,000 federal workers furloughed. They are part of an "employer dispute" and may not be counted as unemployed. They also "aren't at their desks" to fill out the CES survey, so the data may catch them by their absence. There will be some note regarding the furloughed workers in the report. They have only just started to show up in the weekly unemployment claims data. The continuing claims data was 198,000 claims lower for the same week this year as compared to last year. There were only 25,419 First-time Unemployment Claims from federal workers this year. It is important to note that this is up from "just" 1,658 the same week last year.
Will we see Government Workers added or subtracted this January? This is even more of a crap shoot this year. Snake-eyes, sevens, or eleven?If we apply the same process to the month to month data for government workers as was applied to the private sector workers the number of workers could drop by 1.44% or increase by 1.14% if this was a normally year. The article "Government Shutdown may not show up in Government Data" details how the 880,000 furloughed workers are just a sliver of the 22.8 million government workers and a smaller sliver of the 151.1 million NFP workers. This would be a 3.86 decline in government workers. WE normally see a drop of 1.95% to 2.19% drop in government workers. Last January we had 22.168 million government workers. This past December we had 22.759 million government workers. This is a gain of 591,000 workers. Will all 880,00 be reported in the jobs report?
Watch the seasonal factors, again. The Seasonal Factor for Government workers has been rising for many years. Up could be reported as down, Down will be reported as down. Will hiring in other "essential" jobs offset the declines in "non-essential" workers? Expect the "subtraction" of roughly 111,000 government workers from the NFP data. Growth in the "Private Sector" data should offset the losses in the government worker component of the NFP data.
The Net-Net is that we are in an expanding economy. The growth has been improving since last January, using the data from January 2018, and since January 2017 using the data from December 2017.There will be teeth gnashing as to why the furloughed workers are not factored into the "jobs" number.
What About the Jobs and Unemployment Situation? It is anticipated that both non-seasonally adjusted Full-time and Part-time jobs will have dropped during January. There is a possibility that either NSA FT jobs or NSA PT jobs could rise. It is highly unlikely that both will rise. It is virtually "guaranteed" that we will see a decline in FT and PT jobs recorded. The level of seasonally adjusted FT and PT jobs should both rise.
Unemployment should both record and report an increase from December's levels. The continuing claims data jumped from 1.765 million mid-December to 2.089 million mid-January. The problem is that this is comparing an apple to a red Anjou Pear. Both are red. Both are fruits. The U-3 level is people who say they are out of work and looking for work. The continuing claim data is people who were working who are out of work and claiming unemployment benefits. We are at a January low for continuing claims not seen since January 10, 1970. The Insured Unemployment Rate (IUR) was just 1.46% during the second week of January. It was just 1.24% during the second week of December.
Unemployment normally spikes between December and January. We saw a jump of 979,000 during January 2017 and a spike of only 911,000 during January 2018. If we see a comparable jump we should remain under 7 million unemployed workers, lower than January 1998 and slightly higher than January 1999 and January 2000. Remember that we had 204 million in the workforce population during January 1998, 206.7 million January 1999, 211.4 million January 2000 and 258.9 million last month. We could have 400,000 to 700,000 more unemployed workers than 1999 or 2000 while having 50 million more in the workforce population. Everything is relative.
Workforce Participation should record a drop and report an increase in the participation rate. It really depends on the seasonal factors used to convert the NSA U3 unemployment data, the NSA FT data, and the NSA PT date to their seasonally adjusted counterparts. Watch the changes in the workforce population. A larger than expected jump in the workforce population, over 0.09%, will reduce the participation rate.
What can we expect from the Multiple Job Worker? The data is fairly clear that month to month the total number of multiple jobholders (MJH) should fall to between 7-.8 million and 8.0 million. The number of FT PT workers should drop month to month and rise year to year to between 4.2 million and 4.3 million workers. The PT PT value should come in between 2.0 and 2.2 million. The question is how high will the dual FT job worker number rise? It is supposed to jump month to month and January to January. That means we should have over 350,000 FT FT workers recorded during January.
What can we expect from wages? All sectors should see month to month and January to January increases in wages except Mining and Logging. Mining and logging could see an increase month to month and a drop January to January:
The Wage situation will eventually be measured in the January JOLTS report when it is released during the month of March, after the February Jobs Report is released.The sectors with the highest quits, job openings and hires are the sectors with the lowest wages (TTU, EHS, and LAH.)
Hours should remain steady in four sectors, drop month to month for four sectors. The hours should remain steady for Professional Business Services (PBS,) EHS, LAH, and OS. Hours worked should drop month to month and improve January to January for M/L, Construction, Manufacturing, and TTU. Hours worked could improve month to month and drop January to January for IT and Financial Activities.
What does this all mean? The situation where hours and wages will improve January to January, and the number of workers should improve January to January, means that we should see a spike in total earnings. If we see more people earning more money then we should see retail sales and real estate sales improve from last year's levels. Seasonally adjusted workers should rise. The rise will be muted by the revisions to the 2018 data. The rise may be muted by the furloughed government workers. The "Jobs Streak," the Private Sector Job Streak, will continue. The Non-farm payroll streak, the one that is conflated with the "Obama Jobs Streak" may "end." It may not end. The seasonal factors are all over the place for the Private Sector, and a higher government worker seasonal factor may mute the impact of the shutdown.
January is one of the months that makes seasonally adjusted data a "necessity." We will record job losses, full-time and part-time. We should have seasonally adjusted full-time and part-time job gains reported. We will have non-seasonally adjusted workers decline. We should report a fairly strong workforce population gain. Population matters. Wages should rise. Get ready for people talking about "wage inflation." We are not at full-employment because the participation rate is lower than any other President since Reagan after 24 months in office. President Trump started with the lowest participation rate since Reagan. Things are improving.
It's the Economy.
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