The Tale of Two Data Sets May Come to and End this May
Expecting Strong Worker Growth and Strong Jobs Growth.
This year has been the Tale of two data sets, the Current Population Survey (CPS) jobs and unemployment data and the Current Employment Statistics (CES) Wages and Worker Data.
This month it appears that the CPS and CES data should be in agreement. Both look to be strong.
What Normally happens during May? We have seen weakness in the May SA CES data when we have a weak economy. It is important to remember that the May 2016 SA CES private sector worker data went negative during the June and July Job Reports (Summary Table B for each report.) This was covered during 2016 by this author. The annual revisions that happen with the release of the January Jobs Report pushed the May 2016 positive - it now stands at 8,000 workers added during May 2016.
Last year we saw over 1 million non-seasonally adjusted workers join the workforce. The last time that we had seen over 1 million NSA CES private sector workers join the workforce during the month of May was May 1995 and May 1996. If you compare the NSA CES data histogram with the NSA CES histogram you will see that when the SA CES number went negative that there were fewer than 670,000 NSA CES workers added to the economy.
The Annual CES Growth rate was been plus or minus 2.00% since September of last year. We had a January NSA Annual growth rate of 2.22%. Last Month we were at 1.97%. This value has been bouncing around between 1.94% and 2.22% since January. Last year we were growing between 1.63% and 2.05%. The May annual growth rate has been between 1.80 and 1.88 percent since May 2016, rising each May.
The seasonal factor impacts the final SA CES private sector worker number. The seasonal factor has been drifting higher since May 2012. The higher the seasonal factor the higher the SA CES data is reported. It is possible that the season factor will drift even higher this year. It is also possible that the seasonal factor may be reduced in order to "trim" some of the real, NSA gains.
The month to month growth is expected in the 0.80% to 0.85% range, possibly 0.87%. The month to month data indicates growth in all sectors except government, which could fall 0.20% to 0.25%. This is normal during May. This also means that the Non-Farm payroll (NFP) number will most certainly differ from the ADP Private Sector Payroll number. The largest growth in percentage terms is expected in Construction, Mining and Logging (M/L,) Leisure and Hospitality (LAH,) Other Services, and Professional Business Services (PBS.) IT will show the weakest growth and Education and Health Services (EHS) should drop non-seasonally adjusted. It is expected that we will add 249,000 to 300,000 SA CES private sector workers based on normal month to month growth.
The seasonally adjusted data is projecting month to month growth in all sectors. The strongest SA CES growth is expected in M/L, Construction, PBS, and LAH. The weakest growth is expected in Trade, Transportation, and Utilities (TTU) and Information (IT.) Both should be positive.
The May to May Growth rate is expected between 1.91% and 2.04%. All sectors are expected to add workers compared to last May, even Information. The largest growth is expected in M/L, Construction, Manufacturing, PBS, EHS, and LAH. It is expected that we will add 157,000 to 321,000 SA CES private sector workers this month based upon the annual growth, and using the 2016 seasonal factor. Annual growth should be over 2,00%. If we fall short at 1.95% then we will see 207,000 SA CES added. If that edges towards 2.00% then that number reaches 270,000.
Seasonally Adjusted May to May growth is expected in all sectors. The best sectors are PBS, Manufacturing, EHS, LAH, and Financial Activities.
Watch the revisions. Watch the seasonal factors. If the data from last month is revised higher by 30,000 workers then that "borrows" 30,000 from this month. a Number of 249,000 private sector workers becomes 219,000 workers. Remember that if we grow at just 0.80% month to month then we will add over 1 million NSA CES workers. If we grow at 1.91% NSA CES workers annually, may to May, then we will add 970,000 NSA Private Sector Workers. Expect a headline number between 210,000 and 270,000 workers or roughly 240,000 SA private sector CES workers.
The Current Population Survey Data indicates a strong spike in full-time jobs. The CPS data measures jobs and unemployment. We almost always see an increase of NSA CPS full-time jobs and a cut in NSA CPS part-time jobs during the month of May. Will beat last year's record 1.674 million NSA FT jobs created? Will we trim up to 1.0 million part-time jobs?
Could the Seasonally Adjusted CPS data report a contraction even if it is a record month? How did last year's record level of NSA FT job gains get seasonally adjusted to one of the worst SA CPS FT Mays on record? How did one of the worst drops in NSA CPS PT jobs get reported as one of the best SA CPS PT jobs Mays on record? While the NSA CPS data makes sense, the SA CPS data for the month of May looks random.
Continuing Claims data fell Mid-April to Mid- May - could U-3 Unemployment rise? The official unemployment level is the number of people out of work who are looking for work. The continuing claims data from the weekly unemployment report counts those who had been working, lost their one and only job, were eligible for benefits, and who are claiming benefits. The continuing claims data mid-May dropped from Mid-April. The continuing claims data is different from the U-3 unemployment data just as the CES data for workers is different from the CPS data for jobs and unemployment. It is possible that the NSA and SA U-3 data could rise this month, even as continuing claims data fell, because more people are looking for work and are "unemployed." It is also possible that the NSA and SA U-3 levels could fall as they did during May 2016 and May 2018.
What does all this data mean to the worker and wages situation? We are anticipating seeing strong month to month and May to May growth in Construction, Mining/Logging, and Professional Business services, non-seasonally adjusted. These are some of the highest paying sectors. We are anticipating Strong May to May and April to May seasonally adjusted worker growth in Education and Health Services and the Leisure and Hospitality sectors, two of the lowest paying sectors. We could see a spike in Non-seasonally adjusted workers and wages masked by weaker seasonally adjusted worker and wage increases and a heavier bias on the seasonally adjusted EHS and LAH data.
What does the data men to men and women? This column addresses the changes in FT and PT jobs for men and women. Men work more FT jobs than women. Women work more PT jobs than men work. This means that as we see FT jobs spike and PT jobs fall that Men may be finding work while women are shedding jobs. It also means that the CES data regarding construction, manufacturing, and Mining/Logging may funnel more jobs to men than towards women.
What does the data mean regarding participation? The non-seasonally adjusted CPS jobs and unemployment jobs point toward a spike in jobs greater than the drop in unemployment, so NSA participation and U-3 unemployment rates should fall. The SA CPS data points toward a net gain or net loss of seasonally adjusted combined jobs and a net gain or loss of unemployed workers. The seasonally adjusted data is a crap shoot. We could see the participation rate reported as stagnating while it is actually growing.
The data has been all over the place. We have had the best full-time job creation during the first 27 months of President trump's term than what was measured under former Presidents Reagan, Clinton, George W Bush and Obama combined. President Trump and former President Clinton were the only two Presidents to reduce unemployment and increase full-time jobs during their first 27 months in office. This is month 28. If we see a spike in FT jobs, as expected, we will be climbing the jobs mountain through July and possibly August.
If wage increase and workers increase, as expected, net wages will grow by a multiple of the worker growth and the wage growth. If net wages increase dramatically then spending should increase and retail sales should increase. If retail sales increase then more retail workers will be hired. It takes a full-time permanent job to obtain a mortgage. If we have record full-time May workers this month then we can see new and existing home sales improve over the next few months, and over the next couple of years. This could also spur more construction and more construction jobs.
The ADP data is pointing towards 240,000 private sector workers added, with over 2% growth. The CES data is pointing toward Private Sector growth and government sector decline with annual growth near, or slightly under 2.00%. This will confuse some people, especially those who perpetually project 180,000 ADP Payroll positions and 180,000 NFP jobs added each month. Different data sets. Different groups of workers.
If employment increases, full-time jobs increase, and unemployment falls, then Gross Domestic Product should improve quarter to quarter and from 2018Q2 to 2019Q2. If GDP is reported higher than first quarter, and if it equals or exceeds 2018Q2, the headlines will be "Trump's Teflon Economy." Success will beget success. Jobs will continue to grow in real, non-seasonally adjusted, terms. The seasonally adjusted data may continue to grow for years, depending upon the seasonal factors used.
A Tale of Multiple Data Sets. This article started with the discussion of the "Tale of Two data sets." This month it may be the tale of the seasonal factors. The headline data is "always" seasonally adjusted. Would people believe that 1 million workers joined the workforce during May, or that 1.5 million full-time jobs were created during May? Remember, The CES worker and wage data is different from the CPS job and unemployment data. Remember that the JOLTS job opening data trails the Jobs report data by a month, and that it resembles the CES worker data as a fraternal twin resembles its twin. The JOLTS data is more like a cousin to the CPS data, part of the family tree, different parents. The CPS unemployment data is even further removed on the family tree from the CPS unemployment data.
The month to month growth is projecting stronger growth than the annual growth. This should mean that the month to month boosts the annual growth over 2.00% and that, prior to the revisions to the prior data, we are looking at least at 240,000 SA private sector workers being added to the economy. The other who comment on jobs data appear to cut and paste their "180,000" projection from March to April to May. We are climbing a jobs mountain, a full-time jobs mountain. Full-time jobs are replacing part-time jobs. We had more full-time jobs this April than last April and are expecting more full-time jobs this May than we had last May, and more total jobs. Participation matters. We are missing millions of participants. The sectors that are expected to grow the most in real numbers, Professional Business Services, Education and Health Services, Leisure and Hospitality, and Trade, Transportation and Utilities have had the most job openings, the most quits, the most separations, the most hires, and except for PBS, the lowest wages. Wages will rise if employers want to retain workers.
It's the Economy.
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