Jobs Rise 225,000 But Employment Fell by 89,000

Mish

The BLS reports jobs rose by 225,000 in January but the manufacturing recession continues.

Initial Reaction

The headline jobs number came in better than expected. The Econoday forecast was 160,000 jobs.

The big winners were education and construction. The latter was no doubt heavily influenced by unseasonably warm weather.

Seasonal adjustments make this report more than a bit suspect.

Manufacturing

The GM strike which ended in October led to a huge surge in manufacturing and auto parts jobs in November. For December, manufacturing unexpectedly fell by 12,000 jobs. The one-hit wonder viewpoint was confirmed today as manufacturing shed another 12,000 jobs.

Job Revisions

The change in total nonfarm payroll employment for November was revised up by 5,000 from +256,000 to +261,000, and the change for December was revised up by 2,000 from +145,000 to +147,000. With these revisions, employment gains in November and December combined were 7,000 higher than previously reported.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +225,000 - Establishment Survey
  • Private Nonfarm Payroll: +206,000 - Establishment Survey
  • Employment: -89,000 - Household Survey
  • Unemployment: +157,000 - Household Survey
  • Involuntary Part-Time Work: +34,000 - Household Survey
  • Voluntary Part-Time Work: +568,000 - Household Survey
  • Baseline Unemployment Rate: +0.1 to 3.6% - Household Survey
  • U-6 unemployment: +0.2 to 6.9% - Household Survey
  • Civilian Non-institutional Population: -679,0000 (quite unusual)
  • Civilian Labor Force: +50,000 - Household Survey
  • Not in Labor Force: -729,000 - Household Survey
  • Participation Rate: +0.1 to 63.4% - Household Survey

BLS Employment Report Statement

"Total nonfarm payroll employment rose by 225,000 in January, and the unemployment rate was little changed at 3.6 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in construction, in health care, and in transportation and warehousing. "

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 were steady at 34.3 hours. Average weekly hours of all private service-providing were steady at 33.2 hours. Average weekly hours of manufacturers was steady at 40.4 hours.

Average Hourly Earnings of All Nonfarm Workers rose $0.07 to $28.44 . That's a gain of 0.25%.

Average hourly earnings of Production and Supervisory Workers rose $0.03 to $23.87. That's a 0.13% gain.

Oops. It looks like we had a little revision here. Two months ago I reported wages rose $0.07 to $23.83.

Year-Over-Year Wage Growth

  • All Private Nonfarm rose from $27.53 to $28.44, a gain of 3.0%.
  • Production and supervisory rose from $23.09 to $23.79, a gain of 3.3%.

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 3.6%. 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 6.9%. 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

Manufacturing woes will continue thanks to Boeing.

Wage growth was another huge disappointment. There was no minimum wage jump in January. Declining population is more than a bit unusual.

Job revisions were quite messy. I will cover the revisions separately.

Mike “Mish” Shedlock

Comments (12)
No. 1-4
Tony Bennett
Tony Bennett

"Seasonal adjustments make this report more than a bit suspect."

...

Yes, seasonal adjustments most certainly play a role during the winter. Hhmm, wonder how weather fared in January?

NOAA:

"During January, the average contiguous U.S. temperature was 35.5°F, 5.4°F above the 20th century average, ranking fifth warmest in the 126-year record."

SHOfan
SHOfan

"Declining population is more than a bit unusual."

Get used to declining population. All advanced economies are, on the verge, or in declining population. Only Africa has significant population growth.

A growing economy needs more workers making more money.
Population growth and productivity growth.
Both of those are disappearing.
Productivity growth has been crushed by job outsourcing and company buybacks.
Buying back stock means companies are not investing in their business, just buying back stock.

LB412
LB412

Did California's AB5 law implementation have any impact? We converted a 1099 to a full time W2. Other former 1099s are being advised by CPAs that they must create a corporation if they wish to remain independent/non W2. This is for those who do not pass the ABC requirement as stated in the law. A person who is not essential to the core function of our business e.g. the person who waters the plants remains a 1099.

We will not issue an individual a 1099 if their skill is considered a "core" function of our business. 100% of these folks are not happy with the law.

Six000mileyear
Six000mileyear

The job market feels sluggish compared to the opportunities leading up to the 2001 and 2009 recessions. Large corporations with ties to the government have the most open positions. There are very few start-ups outside of California.


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