Little Wage Inflation But February Jobs Jump 313,000
- Today’s establishment survey shows jobs rose by 313,000 topping the consensus estimate of 205,000 and even the top estimate of 230,000 by a wide margin.
- The household survey (Table A) shows the baseline unemployment rate was steady at 4.1% for the fifth consecutive month.
- U-6 unemployment, which counts involuntary part-time jobs was steady at 8.2%.
- The average workweek rose by 0.1 hours. Year-over-year the workweek is up 0.1 hours. so ignore any mainstream comments about strength of the workweek.
- Those expecting wages to jump based on Phillips Curve nonsense were disappointed again. Average hourly earnings rose 0.15%. Year-over-year wages are up 2.6%.
- The labor force rose by 806,000. More people are looking for jobs.
Let’s dive into the details in the BLS Employment Situation Summary, unofficially called the Jobs Report.
BLS Jobs Statistics at a Glance
- Nonfarm Payroll: +313,000 – Establishment Survey
- Employment: +785,000 – Household Survey
- Unemployment: +22,000 – Household Survey
- Involuntary Part-Time Work: +171,000 – Household Survey
- Voluntary Part-Time Work: +194,000 – Household Survey
- Baseline Unemployment Rate: flat at 4.1% – Household Survey
- U-6 unemployment: +0.0 to 8.2% – Household Survey
- Civilian Noninstitutional Population: +154,000
- Civilian Labor Force: +806,000 – Household Survey
- Not in Labor Force: -653,000 – Household Survey
- Participation Rate: +0.3 to 63.0 – Household Survey
Employment Report Statement
Total nonfarm payroll employment increased by 313,000 in February, and the unemployment rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in construction, retail trade, professional and business services, manufacturing, financial activities, and mining.
The change in total nonfarm payroll employment for December was revised up from +160,000 to +175,000, and the change for January was revised up from +200,000 to +239,000. With these revisions, employment gains in December and January combined were 54,000 more than previously reported.
Unemployment Rate – Seasonally Adjusted
The above Unemployment Rate Chart is from the BLS. Click on the link for an interactive chart.
Nonfarm Job Change from Previous Month
The above chart and the following chart from the BLS show establishment survey jobs, not household survey employment.
Nonfarm Jobs Change from Previous Month by Job Type
Hours and Wages
The Average Weekly Hours of all private employees rose by 0.1 hours to 34.5 hours. The average weekly hours of all private service-providing employees rose by 0.1 hours to 33.3 hours. Average weekly hours of manufacturers was rose by 0.2 hour to 40.8 hours.
The Average Hourly Earnings of private workers rose $0.06 to $22.40. Average hourly earnings of private service-providing employees rose $0.04 to to $22.12. Average hourly earnings of manufacturers rose $0.06 at $21.34.
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 Alternate Measures of Unemployment
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 4.1%. 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 8.2%. 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.
Year-over-year wages are only up 2.6%, on average.
The median worker is doing much worse but that data will not be available for over a year.
The latest median wage data is from May of 2016. It shows real median wages decline in seven out of the last 11 years.
For details, please see How the Fed's Inflation Policies Crucify Workers in Pictures.
Weak wage growth has not kept up with inflation, despite the BLS purporting otherwise.
Mike “Mish” Shedlock