Reclaiming Common Sense

The Economy is Roaring to Life

The monthly jobs report, or employment situation report, is "the most anticipated report" pf the month. The report is created by the use of two data sets. the Current Population Survey (CPS) data, or Household data, and the Current Employment Statistics (CES) data, or Establishment data. The CES data is used for the "Jobs" Number. The headline number is the seasonally adjusted CES non-farm payroll number. The number that was used in President Obama's "Job Streak data" was the SA Private Sector worker number. The real jobs number is the CPS data. The CPS data measures full-time jobs, part-time jobs, workforce population, and unemployed workers. It is from the CPS data that the unemployment rate and the participation are calculated.  The data that is recorded is the non-seasonally adjusted (NSA) data. The data that is reported is the seasonally adjusted (SA) data. The seasonal factors that are used to convert the NSA data top the SA data change by data set, category, month and year. President Obama's "job streak" was an "Economic Urban Legend." We are in the midst of thebest start to any Presidency since 1981. Unemployment is falling, according to the weekly unemployment claims data that was released this week that showed the continuing claims level down from mid-February. Jobs, workers, and participation are all improving.

March is a Worker Growth Month. We have added workers every March since 1980 except March 2009.  January we should have seen our best worker and jobs month ever, except the data for 2015, 2016, and 2017 were revised, "stealing" worker growth from January.  The February data was the best February since 1979. Can this trend continue? It is anticipated that we will see a larger increase in workers than we saw during February 2017. The question is how much will the multiple job holder worker, a CPS measure, hold back the CES worker growth. Fewer workers have been working more jobs for an extended period of time.

March could see a record low seasonal factor  - Lowering the potential seasonally adjusted worker number. The seasonal factor was higher during March 2009 than March 2010, March 2010 was higher than March 2011, and so on until March 2016 was higher than March 2017. What difference does it make? If we grow as we did during 2016 and we use the 2016 seasonal factor then we should see 288,000 jobs added If we experience the same growth as 2016 but use the 2017 seasonal factor then that number drops to 284,000. If it drops again then we could see the same growth yield a 281,000 "jobs" number. If we grow at a rate similar to 2015 we should still see a 200,000 number. If we grow at a rate as we did during 2014 then we could add over 400,000 workers.

Are we growing faster than last year? Yes. The problem here is that the worker growth rates were impacted by the NSA CES revisions.  If we grow as we did during last March  or even this past February we could expect between 124.486 million and 124.596 million workers this month. We had 124.021 million NSA CES private sector workers last month, before revisions. Could we really add over 575,000 NSA workers? Let's hope so.  We grew at an annual rate of 1.83% during 2013, 2.06% during 2014, 2.13% during 2016. 2.43% during 2015, and 2.52% during 2012. If we grow at these rates:

  • 2.06% (2014) yields 124,767 million or a 745,000 workers
  • 2.13% (2016) yields 124,816 or 795,000
  • 2.43 (2015) yields 125,219 or 1.198 million workers
  • 2.52% yields 125.329 or 1.308 million

We added

  • 756,000 NSA workers during 2016
  • 816,000 NSA workers during 2011
  • 827,000 during 2012
  • 842,000 during 2014
  • 868,00 during 2000.

Does any of this make sense? Remember that the Pre-revisions data was pointing to an improving economy. Remember that the ADP Payroll data saw the most glaring revisions to the growth trajectory, after they revised their data. Also remember that the CES data is only one component, one data set, that is used to create the "Jobs" report. If jobs are created then workers are needed. It appears that we could see a very strong SA CES worker number published. The NSA CES data was over 730,000 last month. We normally see more workers, and more jobs, added during March than during February.  Anything on the chart of combinations and permutations is possible. Something between the 2004 and 2006 level is a distinct possibility.  Expect a number between 240,000 and 320,000 or roughly 280,000. Watch the data revisions. If last month's data is revised up by 40,000 that borrows 40,000 from this month's data. a 320,000 number this month would be knocked down to 280,000.

How many jobs, full-time and part-time, will be added this month? The CPS data indicates that we will add a huge number of full-time jobs and that we could see an addition of some part-time Jobs. The worker (CES) data indicates that 800,000 to over a million NSA private sectors workers could be added during March. Our best March ever was March 1997 when we added nearly 1.0 million full-time jobs and another quarter million part-time jobs. We saw over 1 million total jobs created during 1985. Most recently we saw 958,000 total jobs added during 2014. Note that this past March, march 2017 that nearly one million full-time jobs were created. Often when we see full-time jobs are created we see part-time jobs trimmed. This is the nature of a seasonal economy. Also note that the number of full-time jobs created has increased year over year since 2013.

What is going to happen with the level of unemployed workers? We are seeing remarkable first-time and continuing unemployment claims data. The continuing claims data gives us an insight as to which way the U-3 unemployment claims data could be heading. The continuing claims data has dropped roughly 150,000 between mid-February and mid-March. The data points for February and March straddle the 12th of the month, the collection date for the CES and CPS data. There were collection dates on the 10th and 17th of each month. Roughly one in three employed person who is covered by unemployment insurance is unemployed. If the covered insured rate is any indicator then a drop in claims of 150,000 people could equate to a drop of 450,000 U-3 unemployed. We have seen drops greater than 400,000 during March 2011, 2012, 2013, and 2017, so this is feasible.

How low can the Unemployment Level Fall?  We had roughly 7.1 million unemployed workers last month, non-seasonally adjusted. Unemployment should drop. This means that we are already below the level of unemployment that we recorded during March 1997 when there were 7.4 million unemployed workers. We should drop below the unemployment level of March 1998 when we had 6.8 million unemployed workers. We are heading towards breaking through the 6 million unemployed worker level. This is a huge accomplishment when you consider that during 1999 there were 135.5 million people in the workforce, employed and unemployed, and there were 202 million in the workforce population. There were 162 million in the workforce and 257 million in the workforce population last month.

What will happen with the Participation Rate?  We should see a record spike in jobs and a record drop in unemployment. If we add 1.0 million in jobs and see a drop of 500,000 unemployed workers then the net growth in participation will be just half a million workers. Right now we have had the best first thirteen months of a Presidency since, and including, President Reagan. The unemployment rate has been falling while the participation rate has been improving. We saw the Participation rate rise and the unemployment rise during President Obama's time in office before both the unemployment rate and the participation rate fell under President Obama. The answer for the slide in participation was the retiring Baby Boomers. This column, through the "Red, Gray, and Blue: Aging Workforce" series has shown that our older workers have been working longer into their retirement years. 

Unemployment bottoms out in April and November, Participation Peaks during July and December. The participation curve, non-seasonally adjusted, has been bending upward. The unemployment curve has been declining. We have a long way to go to return to pre-recession participation rates.

How will multiple job workers impact the Participation rate? A cursory look at he multiple job holder (MJH) data indicates that we should see a spike in the number of people working multiple jobs, especially those who work a full-time job and a secondary part-time job. In theory if some people are participating more than others then the participation rate should be held down. The reality is that the participation rate counts jobs, full-time and part-time, and unemployed workers. The participation rate doesn't factor multiple job workers into the equation. The growth in the workforce population, the growth in jobs, and the decline in unemployed workers is all that matters. We are past the peak unemployment month of January and heading toward the trough of October, November, and December, Those three months tend to have the highest level of Multiple Job workers. Multiple job workers, when they lose one job, do not qualify as unemployed. The multiple job level is not impacting the top-line participation rate because fewer people are working more jobs. An elevated MJH workforce is impacting the bottom line by reducing the number of U-3 unemployed workers. When MJH workers lose one job they are less employed, not unemployed.

Last month there were over 8.1 million people working multiple jobs, a record for February. Last month there were 4.4 million people working a primary full-time job and a secondary part-time job, just 100,000 off the all-time February record. We had 8.137 million MJH worker March of 2017, a record, and 4.56 Million FT PT workers, the second highest level. If the total MJH level increases by 2% and the FT PT level increases by 3% from last month's level, as anticipated, both of those records could drop.

There is more to the jobs report than the headline seasonally adjusted private sector worker number. We have to watch population growth. Will it exceed that of last month? Normally the rate of growth is maintained for an entire year until the January revision. How many "best months" in a row are possible? Sooner or later supply may wane, even from the non-participant pool, those who are neither employed nor unemployed. Watch the sector data. It is possible that manufacturing, mining/logging, and construction will surge, boosting male jobs numbers, as they are predominantly male jobs. Expect growth in the Trade, Transportation and Utilities sector, the Education and Health sector and Especially the leisure and hospitality sectors as people started hiring more people for Spring Break, then Memorial Day weekend, then the Fourth of July. Unemployment will fall, participation will improve. Multiple job workers should increase unless they are exchanging multiple jobs for a single full-time job. Watch the seasonally adjusted data and the revisions.

It's the economy.