Reclaiming Common Sense

This is Jobs Week.

This Wednesday we receive the ADP Payroll Report, Thursday we receive the Weekly Unemployment Claims Report, and Friday we receive the Jobs Report, also known as the the Employment Situation Report.  The ADP report measures private sector payroll and produces only a seasonally adjusted data set. The headline "Jobs" number is the Current Employment Survey (CES) worker data. The CES data is reported in two forms: the non-farm payroll (NFP) data, which includes government sector workers, and the total private sector worker number, which excludes the government sector jobs, local, state, and federal. There were substantial  revisions to the NSA CES data this past January. The revisions shifted worker growth from 2018 back to 2016 and 2017.  There are a number of ways to project the growth for this month. What should we expect?

We almost always see a drop in non-seasonally adjusted Private Sector CES workers during September.The last time that we saw non-seasonally adjusted (NSA) private sector worker growth was 1997. The "Jobs Streak" that former President Obama touted was the seasonally adjusted (SA) CES Private sector worker growth streak. The question is not so much if there will be a drop, it is how much will it drop. The NSA CES worker growth us trending between 2005 and 2014. We could see 2.4 million to 2.9 million NSA CES Workers added by the end of this year. Remember that nearly half a million workers were shifted from 2018 to 2016 and 2017. We are trending ahead of both of those years.

The seasonal factor has been drifting higher year over year, boosting "jobs" creation.  The question is will we see the seasonal factor continue to climb, and give the economy a serious boost to the SA CES worker data? The "Private Sector ADP Payroll" projection for September

Is a 300,000 value possible?  If we see the same worker "growth" as we saw during September 2010, 2013 or 2016 we could see over 300,000 seasonally adjusted workers added this month. This has been a stronger hiring year than 2016 and 2017. We should not see as much a drop as we saw during those two years. If we really are tending with 2005 and 2014 then 300,000 SA CES private Sector workers is a distinct possibility.  If we are discussing non-farm payroll, it will depend upon the seasonal factors.

The Rolling Year data is trending even better than that.  The NSA Rolling year growth has been 1.93% during May and June, 1.89% during July, and 1.90% during August. This 1.87% value is significantly higher than the 1.61% during September of 2017. This data would be higher if the revisions to the 2016 and 2017 hadn't absorbed over 200,000 NSA CES workers each between the December 2017 and January 2018 employment situation reports. We have seen the rolling year growth rate increase five of the past seven Septembers. If the growth rate comes in over 2.00%, which it has except during 2011 and 2017, then we should see a number over 250,000 SA CES private sector workers added this month.

The Month to Month data indicates seasonally adjusted improvement in all categories except Information Technology and Leisure/Hospitality. The largest growth, in percentage terms, should be the Construction sector, Trade, Transportation, Utility sector, and Professional Business Services. sector.

The September to September data indicates a significant spike in non-farm payroll, due to a spike in Government sector workers. There will be substantial upward movement in Mining/Logging, Construction, Professional Business Services, Education/Health Services, and Leisure/Hospitality. The main question is will IT rise of fall year over year?

Watch the revisions to the data. If last month's data is revised higher by 20,000 workers it will "borrow" 20,000 from this month. If we were going to add 250,000 to 300,000 workers then will will "only" add 230,000 to 280,000 SA CES private sector workers.

There will be a substantial difference between the non-farm payroll data and the private sector data. The NSA Government data could spike by 4.65% to 5.25% The SA Government data will be adjusted to a growth rate between 0.5% and 2.0%. This means that, as with last month, the non-farm payroll and the private sector data will be substantially different.

We are growing faster than we were during 2005, 2013, and 2015. We should see a drop in the month to month CES data, unadjusted, and a gain year to year. The seasonal factors will make a difference  If the trend continues higher the difference could be 20,000 workers or more The seasonal factor should be 0.9978 or 0.9979.

We had peak employment during July. The total number of jobs will dip, non-seasonally adjusted, through January.Participation matters. The participation rate is calculated by combining the number of Full-time jobs, part-time jobs and unemployed workers and diving that total number of workers by the total workforce population.

The Unemployment Level should drop. The Unemployment level should continue dropping through October or November. The Participation rate has been stabilizing and rising since 2016 while the unemployment rate has continued to fall. The weekly continuing claims data has been dropping for years. The continuing claims data is entirely different from the U-3 unemployment data. U-3 unemployment measures those out of work looking for work. The weekly claims data measures those who had work, with unemployment benefits, who have lost work and are looking for work. The Weekly continuing claims data for the collection date closest to the Employment situation collection date was 1.688 million during the week of August 11, 2018.   The continuing claims data for the week of September 15, 2018 was 1.408 million workers. The NSA U-3 unemployment level was 6.370 million during August.  If we only drop 288,000 unemployed workers that would bring us to a level just over 6 million. We would have fewer unemployed workers this September than we had during October of last year, fewer than October 2006 and fewer than October 1989, with another month of dropping unemployment, or two months, to follow.

We should see a drop in non-seasonally adjusted full-time jobs and a spike part-time jobs this month. We could see an increase in jobs, non-seasonally adjusted. Last year we recorded a non-seasonally adjusted bump in part-time (PT) jobs of over 1 million jobs that more than offset the decline in NSA Full-time (FT) jobs. 

The combined drop in unemployed workers and the drop in jobs means that the number of participants will drop as the population grows. This means that the participation rate will drop. This column used to invest time energy and effort into projecting the potential seasonal factors used to convert the NSA FT jobs, NSA PT, jobs, and NSA U-3 unemployment level to their SA counterparts. The variations often offset each other. The data is the data. ion

There are a number of other ways to examine the data. The item that will be interesting during the next few months is the level of multiple job workers. We should see peak multiple jobs during October, November, or December. We will most likely see increases in FT PT jobs, as well as PT PT jobs. A question is will this change in multiple jobs impact men or women more. Men work more dual FT jobs than women. Women work more dual PT jobs than men. Women have seen a spike in full-time jobs during the recovery and expansion greater than what men have experienced. We are seeing a rise in Manufacturing, Construction, and Mining/Logging jobs, sectors and jobs that favor men adding jobs/workers.  This column will write articles on these subjects and more after the September data is released.

There will be false comparisons made. There will be some who will compare the unemployment rate with prior unemployment rates, seasonally adjusted. The problem is that participation matters. 3.93% U-3 with a participation rate of 62.74% is very different from 3.61% at 66.86%. This column has produced numerous articles regarding the U-7 Effective unemployment rate. The U-7 last month was in excess of 7.9% last month. We have also been hearing that teen unemployment is at an all-time low. So is teen participation. Teen participation during July was nearly half of what it was during July 1978. Job Openings will be compared with unemployed workers when the JOLTS report is released later this month. The JOLTS report will be for August. The job opening data is comparable to the CES worker data, not the CPS jobs data, and not the CPS unemployment data. Why not compare the 6 million or so job openings with the 1.4 million people on continuing unemployment. Wage growth will also be discussed. The problem here is that they are comparing seasonally adjusted wages with seasonally adjusted wages with, most likely, differing seasonal factors. It is important to compare NSA worker growth by sector, NSA wage growth by sector, and to calculate total wages for this September and compare it to last September. Wage growth times worker growth means earning growth and revenue growth.

We should have more jobs and more workers than we had last September. We should have fewer unemployed workers this September than last September. Soon we will see a return to pre-recession levels of workers in all sectors. Some sectors have outperformed others, especially Professional Business Services, Education Health Services, Leisure and Hospitality, and Trade, Transportation and Utilities. Three of these four sectors have the three lowest hourly wages. They should still have three of the four lowest hourly wages this month. Three of these four sectors have the largest number of Job openings and the highest level of quits. There is the possibility that we could see an increase in NSA CPS workers. There is a possibility that we can see an increases in NSA CES private sector workers. We should see a drop in workers and could see an increase in NSA Jobs.  Seasonally Adjusted Jobs should jump. Seasonally Adjusted Unemployment Should Jump. Participation Should Jump.  Down is Up. Up may be really up.

It's the economy.