Jack Dunn - Reclaiming Common Sense

We normally hit peak employment, non-seasonally adjusted, during July. We normally see non-seasonally adjusted workers drop at the end of Summer. The period of time between July and November or December we see a rise in multiple job workers. We also often see non-seasonally adjusted unemployment levels fall through the October Jobs Report. The distinction between the non-seasonally adjusted (NSA) data and the seasonally adjusted (SA) data is important this month. The distinction between non-farm payroll and total private sector Current Employment Statistic (CES) workers is also important as there should have been a huge spike in Government jobs. This column produces a Jobs Report forecast article. This month the article "September Jobs Forecast: Down is Up" had the following projections:

  • If we saw  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. It was thought hat we would see NSA CES workers contract between 0.30% to 0.34%
  • Month to month we should have seen growth in all sectors except the Leisure and Hospitality Sector and the Information Technology Sector.
  • If we saw September to September growth in excess of 2.00%, something that normally happens during September, that we could anticipate an SA CES number over 190,000 up to 310,000 private sector workers added. We could see substantial upward movement in Mining/Logging, Construction, Professional Business Services, Education/Health Services, and Leisure/Hospitality. The main question was if would IT rise of fall year over year?
  • We are currently trending with the growth that we had during 2013 and 2015. This means that the NSA contraction would be slight and the SA CES data could pop as high as 300,000 private sector workers.
  • 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
  • Unemployment and Participation was supposed to fall. It was thought that unemployment, non-seasonally adjusted, would drop below 6 million NSA U-3 workers.
  • A question was would we see non-seasonally adjusted net job growth, based upon the Current Population Survey (CPS) full-time (FT) and part-time (PT) jobs data? We normally see NSA FT jobs drop and PT jobs spike during September. The amount that they drop have been lessening. The thing to remember is that the drop in unemployment will overwhelm whatever NSA gains there are in CPS jobs and that as the workforce population grows the participation rate, NSA, "had to" fall.

The September ADP Payroll report showed a strong spike in month to month growth and a strong bump in September to September growth. The details were within the article "September ADP Strikingly Good."

The Headline Number was disappointing - the data was very good. The headline number was that we "only added" 121,000 SA CES private sector workers. Hidden in the data was the fact that the data from July and August were revised. The net revisions to the August data mean the August NSA CES was revised up by 69,000 private sector workers and the SA CES workers were revised up 34,000 workers. This upward revision means that another 34,000 were actually added to the payrolls, net-net, this month so that number could have been 155,000. This is still not very strong. It is still better than last year. It also could have been reported at 189,000 workers based on the 0.43% growth rate from August to September, pre-revisions.

The Rolling Year growth, the growth during the past 12 months, even after the January revisions, is 1.97%. Remember that we had a upward revisions to the 2016 and 2017 data that "borrowed" over 400,000 workers from the January data. These revisions meant that the growth in the economy was reported slowing when it was really growing.  We have  been over 2.00% many times since 2003. We have been under 2.00%, roughly, since September 2014. This growth rate compares well with the ADP payroll growth recorded/reported this Wednesday.

We recorded a massive spike in Part-time Jobs - Bigger than September 2017. We even saw a drop uptick in NSA FT jobs. This drop in unadjusted FT jobs was more than 2017 and fewer than 2015 and 2016. There were over 506,000 NSA CES workers lost and 1.162 million NSA PT jobs added this month.

The Unemployment level dropped from 6.37 million to 5.766 million. This drop in U-3 unemployed means that we have fewer unemployed worker this month than October of last year, and fewer unemployed workers than October 2006, This is important to understand. The October U-3 unemployment level is usually the lowest U-3 level for a given year. We still have one more month to see U-3 unemployment drop. We are approaching the U-3 level of October 2000.

The Unemployment rate fell to 3.56% - Lower than September 2000 when it was 3.77%. The media is spinning this as an historic achievement. The problem is that they are ignoring the difference in the participation rates. The Participation rate during September of 2000 was 66.69%, NSA. The participation rate this month is 62.70%. The difference in the participation rates mean that there are 10.3 million more "non-participants" right now than we should have if we had the same participation rate as September 2000. These people are effectively unemployed. The real unemployment rate is not 5.766 million, it is closer to 16,000,000 workers. The effective unemployment rate is 9.32%. This sounds terrible. We exceeded 12% effective unemployment during September 2010 and September 2011.

Non-farm payroll jumped by 344,000 workers. The total private sector data dropped by 618,000 workers. This means that the government sector added 962,000 workers. This jump in data will be explored in more detail in the "Workers and Wages" article.

We saw a jump of 130,000 multiple job workers during September. The seasonally adjusted data dropped by 237,000 multiple job workers. This data will be explored in more detail in the multiple job workers article.

We have the highest level ever of combined full-time and part-time jobs for the month of September. How is President Trump doing with regard to prior Presidents after 20 months in office?  President Trump has added millions of jobs and dropped unemployment, something only President Clinton did after 20 months. President Trump has added over 3 million participants. President Obama had only added half a million. This will be covered in more detail in the "Five Presidents at 20 months" article.

The September Jobs Report was really quite good. We saw a huge spike in part-time jobs. We saw a drop in non-seasonally adjusted workers. This is the difference between the two surveys. Unemployment is down, participation is improving. The drop in 1.13 million FT jobs and unemployed workers was offset by the increase of 1.16 million part-time jobs. The workforce population popped by 224,000 workers. Not as much job growth as population growth means that the NSA participation rate ticked down slightly. We added 459,000 combined SA CPS jobs for 224,000 workers and dropped 270,000 SA U-3, so we only added 189,000 participants for 224,000 workers. There is more to the report than the headline number.

It's the economy.