Unemployment Rate Plunges as BLS Reports 2.2 Million People Find Work

Mish

Did 2.2 million people find jobs in October? That's what the BLS says.

BLS Jobs Statistics at a Glance

Details from the monthly BLS Employment Report.

  • Nonfarm Payroll: +638,000 to 141,720,000 - Establishment Survey
  • Employment: +2,243,000 to 149,806,000- Household Survey
  • Unemployment: -1,519,000 to 11,061,000- Household Survey
  • Baseline Unemployment Rate: -1.0 to 6.9% - Household Survey
  • U-6 unemployment: -0.7 to 12.1% - Household Survey
  • Civilian Non-institutional Population: +183,000 to 260,925,000
  • Civilian Labor Force: +724,000 to 160,867,000 - Household Survey
  • Not in Labor Force: -541,000 to 100,058,000 - Household Survey
  • Participation Rate: +0.3 to 61.7% - Household Survey

Initial Reaction

Wow. That's a lot of employment. The discrepancy between employment and jobs is 2,243,000 - 638,000 = 1,605,000.

The Bloomberg Econoday unemployment rate consensus was 7.7%.

BLS Error Rate

For March through September, BLS published an estimate of what the unemployment rate would have been had misclassified workers been included among the unemployed. Repeating this same approach, the overall October unemployment rate would have been 0.3 percentage point higher than reported. However, this represents the upper bound of our estimate of misclassification and probably overstates the size of the misclassification error. 

According to usual practice, the data from the household survey are accepted as recorded. To maintain data integrity, no ad hoc actions are taken to reclassify | survey responses.

I strongly question the accuracy of the BLS assertion that 0.3% is the high end of their error rate.

Job Revisions

  • The change in total nonfarm payroll employment for August was revised up by 4,000 from +1,489,000 to +1,493,000
  • The change for September was revised up by 11,000 from +661,000 to +672,000. 

Part-Time Jobs

Employment Reporting Silliness

  • Voluntary plus involuntary part-time work rose by 886,000.
  • Total part-time work rose by 1,002,000
  • Total full-time work rose by 1,170,000
  • Total employment rose by 2,243,000

Don't try to make sense of those numbers as they never add up. I list them as reported.

Unemployment Rate – Seasonally Adjusted - Long Term

Unemployment Rate Seasonally Adjusted for 2020-10A

Unemployment Details

  • Unemployment: -1,519,000 to 11,061,000
  • Survey Baseline Unemployment Rate: -1.0 to 1.9%

Nonfarm Payrolls Month-Over-Month 

Employment in Total Nonfarm

That chart is from the BLS. The title is inaccurate. 

The chart represents jobs, from the Establishment Survey. Employment comes from the Household Survey. 

Nonfarm Payrolls

Nonfarm Payrolls 2020-10

That chart puts a much needed perspective on the recovery.

Hours and Wages

Average weekly hours of all private employees was flat at 34.8 hours. Average weekly hours of all private service-providing employees rose 0.1 hours to 33.8 hours. Average weekly hours of manufacturers rose 0.3 hours to at 40.5 hours.

Average Hourly Earnings of All Nonfarm Workers rose $0.04 to $29.50.

Year-over-year, wages rose from $28.24 to $29.50. That's a gain of 4.5%.

The month-to-month and especially year-over-year gains are very distorted because more higher-paid workers kept their jobs than lower-paid employees.

Average hourly earnings of Production and Supervisory Workers rose $0.05 to $24.82.

In August, I reported "Average hourly earnings of Production and Supervisory Workers rose $0.18 to $24.81."  We are now a penny ahead of August.

Year-over-year, wages rose from $23.76 to $24.82. That's a gain of 4.5%.

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.

BLS Covid-19 Statement on the Birth-Death Model

The widespread disruption to labor markets due to the COVID-19 pandemic and the potential impact to the birth-death model have prompted BLS to both revisit research conducted in the aftermath of the Great Recession (2008-2009) and incorporate new ideas to account for changes in the number of business openings and closings. Two areas of research have been implemented to improve the accuracy of our birth-death model in the CES estimates. These adjustments will better reflect the net effect of the contribution of business births and deaths to the estimates. These two methodological changes are the following:

1: A portion of both reported zeros and returns from zero in the current month from the sample were used in estimation to better account for the fact that business births and deaths will not offset.

2: Current sample growth rates were included in the net birth-death forecasting model to better account for the changing relationships between business openings and closings.

BLS will determine on a monthly basis if the adjusted birth-death model described here continues to be necessary. We will disclose these changes each month in the Employment Situation news release. All months in the tables of net birth-death forecasts on this page include footnotes for any month in which a regressor was used to supplement the forecasts.

The Birth-Death model is essentially garbage but we likely will not find how distorted this is until the annual revisions next year.

Table 15 BLS Alternative Measures of Unemployment

nonfarm 2020-10A

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

The official unemployment rate is 6.9%. 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 12.1%. 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.

Recovery Will Take Years

The improvements are welcome but huge headwinds remain.

The economy has added 12.1 million jobs since the April lows.

However, jobs remain 10.1 million jobs below the February 2020 peak. Millions of those jobs will not return.

Those that do return will take many months.

Meanwhile, as deficits balloon along with Fed stimulus, so do the stock market bubbles.

Payback time of some sort for these distortions is on deck.

Mish

Comments (42)
No. 1-20
njbr
njbr

32% of unemployed have been unemployed for 26 weeks or longer.

Mr. Purple
Mr. Purple

Super nice of the a-hole to leave Biden a roaring economy!

Rogue_Onesie
Rogue_Onesie

great work Mish ... get some sleep !

Eddie_T
Eddie_T

What’s “Really” Behind Gross Inequalities In Income Distribution?

The solution is sound money, elimination of the Fed, the end of public unions, and minimal government interference in the free markets, not income rules, not misguided regulation of banks, and not more debates about how to measure something that cannot be measured.

Here we are 12 years down the road from 2008 (when I started reading you, more or less).....and the Fed is still here. the banks and Wall Street still get unlimited cheap credit, and unions have bankrupted cities and states, but they're getting bailed out, and probably will continue to keep the union retirement Ponzi going for a while.

You say people who took big gambles and won are the explanation for wealth inequality. My response would be that it isn't that big a gamble if you in advance how the game is going to play out. And failure to gamble, to date, has not been a great strategy.

Gold, to now, has only been insurance...it will only ever be insurance....and like life insurance, you only collect it when something really bad happens.

We can surely see that the game of fiat money and fractional reserve banking has to end in tears......but in the mean time old people have to be able to live on some kind investment. So forgive me for taking some small gambles.....it seemed like the best alternative at the time.

Louis Winthorpe III
Louis Winthorpe III

Just want to say near the top, if anyone else runs an adblocker, like I do, then whitelist Mish's site. He deserves it.

Roger_Ramjet
Roger_Ramjet

Can't believe that the BLS is still using phone surveys to derive this mess of a number.

I say that because I myself am unsurveyable. With my nifty smart phone, if you aren't in my contact list, you automatically get bumped to voicemail. If you happen to get though, I hang up once someone starts speaking and I realize its a marketing/survey call.

I have to believe that it is much more difficult to accomplish surveys days, and I wonder if they aren't just calling the same tried and true people who happen to have answered previous survey calls. Who knows, but there needs to be a much better approach.

And one more thing, please don't call me and ask me how much I could rent my house for, because I have no fr#@*king clue!

Zardoz
Zardoz

Drove up the freeway to my workplace for the first time in months, to pick some stuff up, and it was full as ever. Everything seems fairly normal. Working in the office is actually really nice now that it's quiet.

numike
numike

kudos to Trump? the fed? Or is it just nice weather out? Or something else?

KidHorn
KidHorn

Amazing how so many people find work just when their unemployment benefits are about to expire.

Dr. Manhattan23
Dr. Manhattan23

Without another stimulus, with the current one ending at the end of the year, Im sure the unemployment numbers will improve as a result of so many people dropping out of the workforce. Correcting this mess will take years, but, one positive to this, volatility in interest rates should be minimal and easier for investors to account for that component of risk

Mish
Mish

Editor

Illusion of a Horse Race

njbr
njbr

Economy? Jobs?

I read this comment from a doctor yesterday...

....I don't think people are grasping what it means that yesterday there were 100,000 new cases of something that GROWS EXPONENTIALLY....

I wish it had all been a hoax that disappeared after election day.

What do you think will happen with the economy and jobs in the next few months?

Much of Europe is heading into, or is in shut-down.

Herkie
Herkie

Employment UNemployment stats are now just about as trustworthy as CPI data, as in I have no faith in it at all.

Eddie_T
Eddie_T

They’ve been shamelessly manipulated for what seems like forever now.....at least since 2008-2009. At least it seemed to get much worse after the bank bailout.

Always the happy headline....but with a certain stench detectable to anyone with a nose.

It’s economic management by Happy Talk. If enough people read the good news and believe, it....then consumers will spend money again and everybody can make a buck. Fake it till you make it.

Sometimes it works, more or less. Unless you personally are someone who drops out of the workforce and becomes one of the forgotten ones.

Eddie_T
Eddie_T

I wonder if Mike Bloomberg will be as influential in selecting Biden’s cabinet as Charlie Koch was in picking Trump’s......I actually hope so.

I think Bloomberg’s aim was to get Trump out at all costs, no matter how much it cost or however he could accomplish that. And I admire him for doing everything he could....even if he sucked in the debate and his own campaign was weak..

He gave so much more than anybody else to fund Biden. I expect his voice will matter.

I spent some time today looking at the Biden donors list.....seeing who runs and funds the big PAC’s....it’s what you’d expect. The Clinton/Obama machine was at the core, of course.

But Bloomberg is not Biden’s only billionaire backer.

James Simons, big Wall Street hedgie.

Dustin Moskovitz, Facebook founder.

They both gave a ton of money.

Lots of trial lawyers. Lots.....

Six000mileyear
Six000mileyear

My company supplies parts and subsystems for Boeing and Airbus planes, and sent out an email this week that "furloughs" and salary cuts would continue into 2021. The company added that executives would be offered buyout packages. This year the furloughs were one day every two weeks for 6 months. That way the company wouldn't have to pay for unemployment claims that employees could make for a continuous 2+ week furlough.

So, I would expect the unemployment rate to bottom well above that of the last cycle.

Realist
Realist

The US economy is not going to continue to create large numbers of jobs while the pandemic is surging like it currently is. Fortunately, the US may have elected a new President who actually cares enough about his citizens, and has a plan to deal with the pandemic, in order to heal the economy.

Here are the US cases:deaths from worldometer:

Nov 1 S 71,321:399

Nov 2 M 88,905:522

Nov 3 T 94,463:1199

Nov 4 W 108,352:1200

Nov 5 T 118,204:1125

Nov 6 F 97,084:921 (so far today)

Anda
Anda

Spain unemployment is at 16%, and 40 % for under 25s .... plus they are shutting down the economy again now... plus including government subsidised furloughs would push the unemployment rate to somewhere over 40 % I think

Courtesy Matthew Bennett

Have to look up some Beatles for you...

Denver1
Denver1

Oh how soon we forget the hourly vitriol brought down on the Thump and repugs for not giving trillions from our grandchildren to officially unemployed, keeping their incomes according to University of Chicago Study way above their previous incomes and the payoff to Sanctuary cities and states who can't get enough taxes because people like Mish left Illinois and others because of high taxes.
Now, that Biden wins, feds go back and increase employment numbers for past two reports and report way above Wall Street the past month.
It sure helps to be a drunken sailor without a memory.


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