The headline seasonally adjusted BLS job growth was again significantly below expectations. This month's data is so chaotic – I would not look too deeply at the internals.
Analyst Opinion of the BLS Employment Situation
The household and establishment surveys were not in sync – which means if you believe the establishment's survey's employment growth, then it is hard to believe the unemployment rate. The year-to-date employment is running slightly below the pace of last year.
The year-over-year rate of growth for employment marginally decelerated this month (blue bars on graph below). This is a year-over-year analysis which has no seasonality issues.
Economic intuitive sectors of employment were mixed with truck transport contracting.
This month's report internals (comparing household to establishment data sets) was inconsistent with the household survey showing seasonally adjusted employment expanding only 3,000 vs the headline establishment number expanding 164,000. 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 removed 236,000 people to the labor force.
The National Federation of Independent business (NFIB)'s monthly Jobs Report is at the end of this post.
A summary of the employment situation:
BLS reported: 164K (non-farm) and 168K (non-farm private). Unemployment rate fell from 4.1 % to 3.9 % (removing 236,000 people from the workforce was a big number).
ADP reported: 204K (non-farm private)
In Econintersect‘s April 2018 economic forecast released in late March, we estimated non-farm private payroll growth at 170,000 (based on economic potential) and 205,000 (fudged based on current overrun / under-run of economic potential).
The market expected (from Bloomberg / Econoday):
| Seasonally Adjusted Data |
Consensus Range |
Consensus |
Actual |
| Nonfarm Payrolls – M/M change |
152,000 to 255,000 |
190,000 |
164,000 |
| Unemployment Rate – Level |
3.9 % to 4.1 % |
4.0 % |
3.9 % |
| Private Payrolls – M/M change |
150,000 to 250,000 |
190,000 |
168,000 |
| Manufacturing Payrolls – M/M change |
11,000 to 25,000 |
19,000 |
24,000 |
| Participation Rate – level |
62.8 % to 63.0 % |
62.9 % |
62.8 % |
| Average Hourly Earnings – M/M change |
0.2 % to 0.3 % |
0.2 % |
+0.1 % |
| Average Hourly Earnings – Y/Y change |
2.6 % to 2.8 % |
2.7 % |
+2.6 % |
| Av Workweek – All Employees |
|
34.5 hrs |
34.5 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 expanded 998,000 – worse than last year. The following chart compares the jobs gains this month with the same month historically:
Year-to-date unadjusted employment growth is 21,000 people below the pace of last year.
Last month's headline employment gains were revised upward. Generally speaking, employment is overstated when the economy is slowing and understated when the economy is accelerating.
