Jack Dunn - Reclaiming Common Sense

Last week this column published an article titled "Will March Jobs Report be in Like a Lion?" That article projected that unemployment would fall, possibly below 7 million workers, possibly to the lowest March seen since  1998. It also projected a sharp boost in Jobs and workers. The   jobs report is created using two data sets, the Current Population Survey (CPS0 and the Current Employment Statistics (CES.)   The CPS data measures the number of full-time jobs, part-time jobs, and unemployed workers, as well as an estimate of the workforce population. From this data the unemployment rate and workforce participation rate is calculated. The CES data measures the number of workers. From this data President Obama's "Job Streak" was created. Each data set have non-seasonally adjusted (NSA) data and Seasonally Adjusted (SA) data. The Streak was created using the SA CES private sector data. The "headline number" is the non-farm payroll (NFP) number that includes government workers.The "Jobs Streak" is an economic urban legend. It did not start when they said it did and it ended either during January 2015 or May 2016.  It was projected that we could see a SA CES worker growth around 260,000 to 280,000 jobs depending on the seasonal factors and the revisions to the February data.

The ADP payroll report was released on Wednesday. It reported that payrolls increased in every sector between February and march. This was not expected, as was noted in the forecast article  "March ADP Expectations: Up over 215,000." The number marched forward by 245,000, which is over 215,000. What happened?

The Headline Number was up 103,000 for the Non-Farm Payroll. This seasonally adjusted data was a disappointment. The Total private sectors was up 102,000 SA CES workers. The real number, the NSA Private Sector CES was up 603,000 workers. This was an improvement from March of 2017 when only 580,000 NSA CES workers joined the workforce. The problem here is that the seasonal factor dropped,. as was anticipated. A slower than expected growth and a historically low seasonal factor skewed the data lower than it could have been reported. The growth rate was faster that 2002 and 2017. If we had used the seasonal factor from March 2017 then 123,000 workers would have been reported as entering the private sector. Another thing is the the NSA CES data from last month was increased from the advance value which depressed this month's data.Interestingly, the SA CES data was revised downward.

The March Unemployment Level was the lowest since March 2002. The Values for March 1999, March 2000, and March 2001 were all lower than this March.  The workforce population, full-time jobs level, and part-time jobs level were also all lower than this March. We have more people in the workforce population and a lower level of unemployment. 

The worker growth is up over March of 2017. This column has discussed the growth rate and the revisions to the NSA CES data and the SA CES data. It was thought that the 2.0% value was a tipping point for a potential recession. The revised March 2017 growth rate was down from March 2016 and down from March 2015 We are not in a recession.

The Real Jobs Number Confounds. Normally we see a spike in full-time jobs during March, as employers bring in seasonal  workers. This year barely any full-time jobs were created and nearly a half million part-time jobs were created. The seasonal adjustments to the data meant that there was s net loss of 1,000 jobs. This is not the data the creators of the streak use to create the streak so the streak is still running. We had weaker March CPS data during 2003 and 2004, as well as  2009 and 2013.  The number also confounds us because the ADP number was basically twice as good as the CES data.

The Participation Rate is virtually flat compared to 2016 and 2017. This is because of the massive upward revisions to the 2016 and 2017 data. The shift of growth from 2018 to 2017 and 2016 has "cheated" the economy out of good news. It could have been reported that we added 452,000 seasonally adjusted workers during January of this year, instead it was originally reported at just under 200,000 private sector workers. We were cheated out of a month of growth.

We are not at Full-Employment. The participation rate is well below the pre-recession highs. There was a meme that all was rosy while President Clinton was in office and that the participation rate slid under President Bush. It really slid under President Obama. If we had the same participation rate that we had prior to the Great Recession, say 65.81% as we did during March 2006, then we would have 7.6 million more participants. These are the missing participants who are neither employed nor unemployed. There are more missing participants than U-3 unemployed workers.

Can we get to 65% participation? President Trump started with a lower participation rate than President Regan.  President Reagan started with a participation rate of 63.22%. He saw participation break through 64% a couple of times before dropping back under 64%. It wasn't until the Summer of 1984 that the participation stayed at or above 63.99%. President Trump inherited a participation rate of 62.45%. It now stands, non-seasonally adjusted, at 62.83%. President Reagan broke through 65% during July 1981 and July 1982 but unemployment was over 7% during 1981 and over 9% during 1982.  Do we want higher unemployment rates to boost participation? Not really.

We have the most non-seasonally adjusted jobs ... Ever. The important point here is that we normally hit peak jobs during either July or August of any given year.  There are 4.2 million more part-time jobs and 3.2 million more full-time jobs than during July 2007. There are 391,000 more part-time jobs and 1.858 million more full-time jobs than during March of 2017. There was a Jobs Iceberg, fewer full-time jobs during January 2017 than during July 2007, and more Part-time jobs January 2017 than July 2007. Now both are up. We now have a Jobs Mountain.

There is a considerable amount of data to decipher. The best way to see what is going to be published is to check my Twitter feed. The March Jobs Report was a bit of a disappointment. It was better than March 2017. It showed a record level of jobs. Participation is stable and improving. Unemployment is seriously low, and heading lower. The market is going through some job replacement. We will have a really good idea just how strong this economy truly is by the July Jobs report this August. Right now we are seeing same month growth year to year.  "All" recessions are jobs recessions. If, or when, we see same month declines in jobs from one year to the next, and if that is maintained for 4-6 months, then we will probably here the prognosticators say that we are in a GDP recession. We are not there. 

This column will publish articles on the Five Presidents at 14 months, the multiple job holder article, the sector data, the "Red, Gray and Blue" series, and the "War on Men" series next week.

It's the economy.