Bond Yields Plunge as Coronavirus Outweighs Strong Jobs

Mish

The BLS reports jobs rose by 273,000 in February but interest rate yields and the stock market are down big.

Initial Reaction

The headline jobs number came in a much better than expected 273,000. The Econoday forecast was 177,000 jobs and there were huge upward revisions in December and January.

Seasonal adjustments on top of good weather for construction and temporary jobs make this report more than a bit suspect. The household survey says employment only rose by 45,000. That's a more believable number.

But the big spotlight is on treasury yields. the 10-year note yield is down a massive 20 basis points to 0.739% having touched a new record low of 0.688%.

Government Workers

In February, government employment increased by 45,000, led by a gain in state government education (+16,000). Federal employment increased by 8,000, reflecting the hiring of 7,000 temporary workers for the 2020 Census.

Job Revisions

The change in total nonfarm payroll employment for December was revised up by 37,000 from +147,000 to +184,000, and the change for January was revised up by 48,000 from +225,000 to +273,000. With these revisions, employment gains in December and January combined were 85,000 higher than previously reported.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +273,000 - Establishment Survey
  • Private Nonfarm Payroll: +228,000 - Establishment Survey
  • Employment: +45,000 - Household Survey
  • Unemployment: -105,000 - Household Survey
  • Involuntary Part-Time Work: +136,000 - Household Survey
  • Voluntary Part-Time Work: +21,000 - Household Survey
  • Baseline Unemployment Rate: -0.1 to 3.5% - Household Survey
  • U-6 unemployment: +0.1 to 7.0% - Household Survey
  • Civilian Non-institutional Population: +126,0000
  • Civilian Labor Force: -60,000 - Household Survey
  • Not in Labor Force: +186,000 - Household Survey
  • Participation Rate: +0.0 to 63.4% - Household Survey

BLS Employment Report Statement

"Total nonfarm payroll employment rose by 273,000 in February, and the unemployment rate was little changed at 3.5 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in health care and social assistance, food services and drinking places, government, construction, professional and technical services, and financial activities."

Unemployment Rate – Seasonally Adjusted

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The above Unemployment Rate Chart is from the BLS. Click on the link for an interactive chart.

Nonfarm Employment Change from Previous Month Trends

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Hours and Wages

Average weekly hours of all private employees was up 0.1 hour to 34.4 hours. Average weekly hours of all private service-providing employees was up 0.1 hour to at 33.3 hours. Average weekly hours of manufacturers up 0.2 hours to at 40.7 hours.

Average Hourly Earnings of All Nonfarm Workers rose $0.09 to $28.52 . That's a gain of 0.32%.

Average hourly earnings of Production and Supervisory Workers rose $0.08 to $23.96. That's a 0.34% gain.

Year-Over-Year Wage Growth

  • All Private Nonfarm rose from $27.69 to $28.52 a gain of 3.0%.
  • Production and supervisory rose from $23.19 to $23.96, a gain of 3.2%.

For a discussion of income distribution, please see What’s “Really” Behind Gross Inequalities In Income Distribution?

Birth Death Model

Starting January 2014, I dropped the Birth/Death Model charts from this report. For those who follow the numbers, I retain this caution: Do not subtract the reported Birth-Death number from the reported headline number. That approach is statistically invalid. Should anything interesting arise in the Birth/Death numbers, I will comment further.

Table 15 BLS Alternative Measures of Unemployment

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Table A-15 is where one can find a better approximation of what the unemployment rate really is.

Notice I said “better” approximation not to be confused with “good” approximation.

The official unemployment rate is 3.5%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 7.0%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Some of those dropping out of the labor force retired because they wanted to retire. The rest is disability fraud, forced retirement, discouraged workers, and kids moving back home because they cannot find a job.

Strength is Relative

It’s important to put the jobs numbers into proper perspective.

In the household survey, if you work as little as 1 hour a week, even selling trinkets on eBay, you are considered employed.

In the household survey, if you work three part-time jobs, 12 hours each, the BLS considers you a full-time employee.

In the payroll survey, three part-time jobs count as three jobs. The BLS attempts to factor this in, but they do not weed out duplicate Social Security numbers. The potential for double-counting jobs in the payroll survey is large.

Household Survey vs. Payroll Survey

The payroll survey (sometimes called the establishment survey) is the headline jobs number, generally released the first Friday of every month. It is based on employer reporting.

The household survey is a phone survey conducted by the BLS. It measures unemployment and many other factors.

If you work one hour, you are employed. If you don’t have a job and fail to look for one, you are not considered unemployed, rather, you drop out of the labor force.

Looking for jobs on Monster does not count as “looking for a job”. You need an actual interview or send out a resume.

These distortions artificially lower the unemployment rate, artificially boost full-time employment, and artificially increase the payroll jobs report every month.

Final Thoughts

The variance between jobs and employment is dramatic. I will cover that in another report shortly.

Meanwhile the big news is the market reaction to the coronavirus.

Mike “Mish” Shedlock

Comments (7)
No. 1-4
KidHorn
KidHorn

Remember when Lehman collapsed? All the banks stopped lending because they feared others were over leveraged. Would have caused a cascade of defaults if the FED hand't forced $25b on everyone. Now, we have a collapse in oil prices which may lead to massive defaults among drillers. Sales in everything but food, 3M masks, and antibacterial soap are about to collapse. We are about to see a repeat. The FED is going to have to take drastic action and soon.

Carl_R
Carl_R

I see that employment in leisure and hospitality was up 51,000 in February. Anyone want to guess the March numbers?

Tony Bennett
Tony Bennett

Jobs survey typically taken the week including the 12th ... like way back when you could still find face masks on the shelf.

Zardoz
Zardoz

Given that they count gig jobs, a guy driving uber, Lyft, DoorDash and Instacart for an hour a week each counts as 4 jobs. The number is meaningless in the modern economy.


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