The stock and bond markets are salivating today because nonfarm payrolls are only up 175,000 vs a Bloomberg Econoday expectation of 243,000. Whether that lasts all day remains to be seen.
Bond yields are down across the board as I type, with the 10-year yield down 7 basis points and the 5-year yield down 10 basis points as of 10 AM Eastern. The Nasdaq is up 325 points, about 2.0 percent,
Curiously, this is one of the stronger reports recent from the perspective of full-time employment, up a whopping 949,000.
Total employment was only up 25,000 so perhaps full-time is an outlier. Perhaps it’s just one extra hour worked, moving a person from part-time to full-time status.
Jobs vs Employment
From September 2020 through early 2022, nonfarm payroll job gains and full time employment changes tracked together.
Starting around March of 2022, a divergence between employment and jobs became very noticeable, and I have been discussing the divergence since then.
For all the faith put in the monthly establishment CES Nonfarm Payrolls, the household survey provided a much more believable set of numbers (red and yellow lines).
Payrolls vs Employment Gains Since March 2023
- Nonfarm Payrolls: 3,080,000
- Employment Level: +667,000
- Full Time Employment: -398,000
Payrolls vs Employment Gains Since May 2022
- Nonfarm Payrolls: 6,356,000
- Employment Level: +3,177,000
- Full Time Employment:+1,213,000
Payrolls are up by 6.4 million since May of 2022, but full time employment up only 1.2 million (949,000 of them, this month).
No amount of BLS smoothing can hide this, but hardly anyone discusses it.
Q: What’s going on?
A: People are working multiple part time jobs and or semi-retired boomers are working part time.
Job Report Details
- Nonfarm Payroll: +175,000 to 158,286,000 – Establishment Survey
- Civilian Non-institutional Population: +182,000 to 268,066,000
- Civilian Labor Force: +87,000 to 167,982,000 – Household Survey
- Participation Rate: +0.0 to 62.7% – Household Survey
- Employment: +25,000 to 161,491,000 – Household Survey
- Unemployment: -29,000 to 6,429,000- Household Survey
- Baseline Unemployment Rate: +0.1 to 3.9% – Household Survey
- Not in Labor Force: +94,000 to 100,083 – Household Survey
- U-6 unemployment: +0.1 to 7.4% – Household Survey
Nonfarm Payroll Change by Sector
Government and Health Services are related to the surge of illegal immigrants and the need to address them.
Social assistance jobs, a subcategory of private education and health services, rose by 12,000 in January; 25,000 in February; 12,000 in March; and 31,000 in April.
Government jobs rose by 60,000 in January; 55,000 in February; and 45,000 in March. In April, government jobs only rose by 8,000.
Change in Nonfarm Payrolls January 2022 to February 2024
Monthly Revisions
- The change in total nonfarm payroll employment for February was revised down by 34,000, from +270,000 to +236,000.
- The change for March was revised up by 12,000, from +303,000 to +315,000.
- With these revisions, employment in February and March combined is 22,000 lower than previously reported.
Part-Time Jobs
- Involuntary Part-Time Work: +161,000 to 4,469,000
- Voluntary Part-Time Work: -649,000 to 22,253,000
- Total Full-Time Work: +949,000 to 133,889,000
- Total Part-Time Work: -914,000 to 27,718,000
The above numbers never total correctly due to the way the BLS makes seasonal adjustments. I list them as reported.
Hours and Wages
This data is frequently revised.
- Average weekly hours of all private employees fell 0.1 hours to 34.3 hours.
- Average weekly hours of all private service-providing employees was flat at 33.3 hours.
- Average weekly hours of manufacturers was flat at 40.0 hours.
An overall decline or rise of a tenth of an hour does not sound line much, but with employment over 160 million, it’s more significant than it appears at first glance.
Hourly Earnings
This data is also frequently revised. Here are the numbers as reported this month.
Average Hourly Earnings of All Nonfarm Workers rose $0.07 to $34.75. A year ago the average wage was $33.44. That’s a gain of 3.9%.
Average hourly earnings of Production and Nonsupervisory Workers rose $0.06 to $29.83. A year ago the average wage was $28.68. That’s a gain of 4.01%.
Year-over-year wages are keeping up with year-over-year inflation after underperforming for many months.
Unemployment Rate
The unemployment rate hit a 50-year low in January and April of 2023 at 3.4 percent. It’s now 3.9 percent.
The unemployment rate has bottomed this cycle and will generally head higher.
Alternative Measures of Unemployment
Table A-15 is where one can find a better approximation of what the unemployment rate really is.
The official unemployment rate is 3.9%.
U-6 is much higher at 7.4%. 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. Some dropped out over Covid fears and never returned. Still others took advantage of a strong stock market and retired early.
The rest is disability fraud, forced retirement (need for Social Security income), and discouraged workers.
Birth Death Model
Starting January 2014, I dropped the Birth/Death Model charts from this report.
The birth-death model pertains to the birth and death of corporations not individuals except by implication.
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.
The model is wrong at economic turning points and is also heavily revised and thus essentially useless.
Birth-Death Methodology Explained
Every month this subject comes up. I gave a detailed explanation of the model and why the hype is wrong in my December 8, 2023 post How Much Did the Huge 412,000 Birth-Death Adjustment Impact October’s Job Report?
The month does not matter. If you think the model has a big impact, please click on the above link for why it doesn’t.
Household Survey vs. Payroll Survey
- The payroll survey (sometimes called the establishment survey) is the headline jobs number. It is based on employer reporting.
- The household survey is a phone survey conducted by the BLS. It measures employment, unemployment and 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 job openings on Jooble or Monster or in the want ads 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.
Can the Jobs and Employment Numbers Both Be Reasonably Correct?
The answer is yes (discounting measurement error) because they measure different things. A person working three part time jobs counts for three jobs but only a single person employed.
I have repeatedly asked ADP to account for duplicate social security numbers but they won’t. Amusingly, the BLS wants to, but the employees tell me they can’t because “they don’t have access to the data for security reasons.”
This is a simple sort-merge program but alas, we depend on a phone survey for employment numbers.
Notably, discrepancies like these don’t last for years unless there is some truth to the employment numbers because measurement errors are random.
Closing Thoughts on the April Jobs Report
Last month I noted Employment jumped even though it was all part time.
This month, the opposite happened. Full-time employment rose by nearly a million while total employment was up only by 25,000.
As little as 1 extra hour of work can change full vs part-time. But the overall trends are pretty clear. The establishment survey (jobs) and the household survey (employment), have been wildly divergent for years.
Expect Big Negative Revisions to BLS Monthly Jobs in 2023, GDP Too
On April 24, the BLS released a little-read jobs report that shows reported jobs in 2023 may be wildly overstated. In turn, that means GDP is likely overstated as well.
On April 25, I commented Expect Big Negative Revisions to BLS Monthly Jobs in 2023, GDP Too
CES Overstatement
- 2023 Q2 CES Overstatement: 489,000 Jobs
- 2023 Q3 CES Overstatement: 832,000 Jobs
- Q2+Q3 Overstatement: 1.321 Million Jobs
CES stands for Current Employment Statistics (the monthly establishment job numbers).
Thus, the BLS says that the BLS monthly job reports for 2023 Q2 and Q3 are overstated by a total of 1.321 million jobs.
The BLS does not revise the previously reported numbers making the historical charts, including my lead chart, wrong. Jobs are overstated on all the charts.
Expect more negative revisions.
Final Note
In the time it took to write this report, about one hour, bond yields are up from the lows and stocks are down from their highs.
Recently, the direction of the bond market has provided a good indication of the direction of equities.