posted on 03 April 2015
Written by Steven Hansen
The BLS jobs report headlines from the establishment survey was weak and well below expectations. The unadjusted data shows relatively weak jobs growth. The real story this month is the ALL the establishment survey jobs growth for 2015 was re-estimated lower. This is such a soft jobs report that the Federal Reserve will be reluctant to raise their interest rates.
Unadjusted Non-Farm Private Employment - Year-over-Year Change (blue bars - left axis) and Year-over-Year Growth Acceleration / Deceleration (red line - right axis)
A summary of the employment situation:
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 improved 720,000 - the worst job growth since 2010.
Historical Unadjusted Private Non-Farm Jobs Growth Between Februarys and Marchs (Table B-1, data in thousands) - unadjusted (blue line) vs seasonally adjusted (red line)
bls non-adjusted change.PNG
All employment numbers in 2015 were revised downward.
Change in Seasonally Adjusted Non-Farm Payrolls Between Originally Reported (blue bars) and Current Estimates (red bars)
Most of the analysis below uses unadjusted data, and presents an alternative view to the headline data.
The BLS reported U-3 (headline) unemployment was unchanged at 5.5% with the U-6 "all in" unemployment rate (including those working part time who want a full time job) improved 0.1 % to 10.9%. 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 unadjusted data base, demonstrated by the graph below. The employment-population ratio was unchanged at 59.3.
The jobs picture - when the employment / population as a whole - has been on an uptrend since mid-2011. This ratio is determined by household survey.
The 3 month rolling average growth trend in the establishment survey's non-farm payroll declined, but was been trending up since the beginning of 2014.
Unadjusted Non-Farm Payrolls Year-over-Year Growth
Another way to view employment is to watch the total hours worked which has been within a narrow range for the last 4 years is now showing some growth.
Percent Change Year-over-Year Non-Farm Private Weekly Hours Worked
The bullets below use seasonally adjusted data from the establishment survey except where indicated:
Private Employment: Average Hourly Earnings
Economic markers used to benchmark economic growth (all from the establishment survey) were positive and well away from recessionary levels.
The truck employment was down 6.8K. Year-over-year improvement is well into expansion territory.
Truck Transport Employment - Year-over-Year Change
Temporary help improved (11.4K). Note that many believe, that Obamacare is creating a shift from permanent to temporary jobs. If this is the case, this metric would be inoperative.
Temporary Help Employment - Year-over-Year Change
Econintersect believes the transport sector is a forward indicator. Others look at temporary help as a forward indicator.
Food for Thought
Who are the victims in this mediocre employment situation? It is not people over 55.
Index of Employment Levels - 55 and up (dark grey line), 45 to 54 (purple line), 35 to 44 (orange line), 25 to 34 (green line), 20 to 24 (red line), and 16 to 19 (blue line)
Women are doing better than men.
Index of Employment Levels - Men (blue line) vs Women (red line)
Mom and Pop employment is below recessionary levels.
The less education one has, the less chance of finding a job.
Index of Employment Levels - University graduate (blue line), Some college or AA degree (orange line), high school graduates (green line), and high school dropouts (red line)
And being white is not helpful for employment. FRED does not have data series for Asians, but the BLS does - and indexed Asian employment levels are similar to Hispanic.
Index of Employment Levels (from the BLS Establishment Survey) - Hispanic (blue line), African American (red line), and White (green line)
However, keep in mind that population growth is different for each group. Here is a look at employment to population ratios which clearly shows NO group has recovered from the Great Recession:
Employment / Population Ratios (from the BLS Household Survey) - Hispanic (blue line), African American (red line), and White (green line)
According William C. Dunkelberg, Chief economist for the National Federation of Independent Business (NFIB), small business hiring was strong in February:
Caveat on the use of BLS Jobs Data
The monthly headline data ends up being significantly revised for months after the initial release - and is subject also to annual revisions. The question remains how seriously can you take the data when first released.
The above graphic (updated through October 2011) is the month-over-month change in employment based on the original headline non-farm employment level and the current stated employment levels at month end. You will note some pretty drastic backward revision for a major economic release the market reacts to in real time.
Econintersect Contributor Jeff Miller has the following description of BLS methodology:
Econintersect has repeatedly pointed out questions about how the seasonal adjustment algorithms and data gathering methodology used by the BLS introduce uncertainty into interpretation of month to month changes in employment.
ADP (blue line) versus BLS (red line) - Monthly Jobs Growth Comparison
However, there is some discussion that neither the ADP nor BLS numbers are correct - as both are derived by a sampling methodology. The answer could be that there is no correct answer in real time - and that it is best to look at the trends. As has been noted, all eventually end up correlating.
The BLS uses seasonal adjusted data for its headline numbers. The seasonally adjusted employment data is produced by an algorithm. The following graph which shows unadjusted job growth - seasonal adjustments spread employment growth over the entire year. Employment does not really grow in the second half of the year and always falls significantly in January.
Non-Seasonally Adjusted Employment - Private Sector
There is the proverbial question on what is minimal jobs growth each month required to allow for new entrants to the market. Depending on mindset, this answer varies. According to Investopdia, the number is between 100,000 and 150,000. The Wall Street Journal is citing 125K. Mark Zandi said 150K. Econintersect is going with Mark Zandi's number:
Employment to Population Ratio
Note: The ratio could be fine tuned by adjusting to the ratio of employment to working age population rather than the total population. However, this would not change the big picture that an increase of somewhere around 150,000 (+/-) is needed for the growing population numbers. We have estimated 140k - 160k. The number might possibly be within the range 125k - 175k. Econintersect cannot find reason to support the estimates below 125k.
The question of how changing demographics impact the employment numbers is at the margins of analysis. Econintersect will publish more on this fine tuning going forward, both in-house research and the work of others.
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