BLS Jobs Situation Was Disappointing In January 2016

The BLS job situation headlines were disappointing. Jobs growth decelerated this month, some economic internals were weak, continued inconsistency between the household and establishment surveys – all while the establishment survey was re-benchmarked and the household survey reflected updated population estimates.

The rate of growth for employment decelerated this month (red line on graph below).

Unadjusted Non-Farm Private Employment – Year-over-Year Change (blue bars – left axis) and Year-over-Year Growth Acceleration / Deceleration From Previous Month (red line – right axis)

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The unadjusted jobs decrease month-over-month was above normal for times of economic expansion.

Economic intuitive sectors of employment were mixed.

This month’s report internals (comparing household to establishment data sets) was inconsistent with the household survey showing seasonally adjusted employment growing 615,000 vs the headline establishment number of growing 151,000. The point here is that part of the headlines are from the household survey (such as the unemployment rate) and part is from the establishment survey (job growth). From a survey control point of view – the common element is jobs growth – and if they do not match, your confidence in either survey is diminished. [note that the household survey includes ALL jobs growth, not just non-farm).

The household survey added 502,000 people to the workforce.

A summary of the employment situation:

BLS reported: 151K (non-farm) and 158K (non-farm private). Unemployment rate declined from 5.0% to 4.9%.

ADP reported: 205K (non-farm private)

In Econintersect‘s January 2016 economic forecast released in late December, we estimated non-farm private payroll growth at 110,000 (based on economic potential) and 170,000 (fudged based on current overrun of economic potential);

NFIB comments on this Jobs Report is towards the end of this post.

The market expected (from Bloomberg):

Seasonally Adjusted Data Consensus Range Consensus Actual Nonfarm Payrolls – M/M change 170,000 to 215,000 188,000 151,000 Unemployment Rate – Level 4.9 % to 5.0 % 5.0 % 4.9 % Private Payrolls – M/M change 160,000 to 206,000 180,000 158,000 Average Hourly Earnings – M/M change 0.2 % to 0.4 % 0.3 % +0.5 % Av Workweek – All Employees

34.4 hrs to 34.5 hrs

34.5 hrs 34.6 hrs

The BLS reports seasonally adjusted data – manipulated with multiple seasonal adjustment factors, and Econintersect believes the unadjusted data gives a clearer picture of the jobs situation.

Non-seasonally adjusted non-farm payrolls declined 2,475,000 – the worst decline for January since 2009.

Historical Unadjusted Private Non-Farm Jobs Growth Between Decembers and Januarys (Table B-1, data in thousands) – unadjusted (blue line) vs seasonally adjusted (red line)

bls non-adjusted change.PNG

Last month’s employment gains were revised upward.

Change in Seasonally Adjusted Non-Farm Payrolls Between Originally Reported (blue bars) and Current Estimates (red bars)

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Most of the analysis below uses unadjusted data, and presents an alternative view to the headline data.

Unemployment

The BLS reported U-3 (headline) unemployment was 4.9% with the U-6 “all in” unemployment rate (including those working part time who want a full time job) unchanged at 9.9%. These numbers are volatile as they are created from the household survey.

BLS U-3 Headline Unemployment (red line, left axis), U-6 All In Unemployment (blue line, left axis), and Median Duration of Unemployment (green line, right axis)

Econintersect has an interpretation of employment supply slack using the BLS employment-population ratio, demonstrated by the graph below. The employment-population ratio improved 0.1 to 59.6.