An anomaly in the labor market is starting to correct itself


Today’s jobs report made it clear that despite rising interest rates and relentless talk of the recession, American businesses are still hiring. This was reflected primarily in the overall increase of 315,000 jobs in non-farm payroll employment, but also in the less closely watched employment estimate from the household survey used to determine the unemployment rate. , which showed a gain of 442,000 in August. Adjust the household survey number to measure something more or less equivalent to non-farm payrolls, and the increase was 599,000.

For a time this spring, the household survey appeared to show virtually no job growth, even as nonfarm payrolls continued to rise at a healthy pace. Now, if you make the appropriate adjustments, both measures show solid employment growth. Here’s another way to look at the data:

The current employment survey that generates the nonfarm payroll count is a mostly online check by the Bureau of Labor Statistics with “131,000 businesses and government agencies, representing approximately 670,000 individual job sites.” For the Current Population Survey, the Census Bureau surveys “a selected random sample of approximately 60,000 employed households” by telephone and in person about their employment status and other issues.

As noted on the box, the number of non-farm employees excludes farmers and farm workers and those who are not on someone’s payroll, i.e. the self-employed. The CES also counts jobs rather than people, meaning those with more than one job may appear multiple times in payroll data while still being counted as one employed person in the household survey. . Since March, agricultural employment and self-employment are down, while multiple jobholding is up.

The BLS incorporates these three measures into the “CPS Employment Adjusted for CES Concepts” data series shown in the first two charts, and they appear to account for about two-thirds of the difference since March between this and the employment numbers. Unadjusted CPS. I realize you have to squint to see the changes since March on the graph above, but I thought showing the numbers since the start of 2021 would give some idea of ​​both how modest those changes are and the frequency of these ups and downs in the household data. Other contributors to the disparity include workers in private households such as nannies and cleaners, unpaid family workers in family businesses, and salaried workers with unpaid absences, for which the data I have could find are not seasonally adjusted and so loud that putting them on a chart seemed pointless.

Non-farm payroll figures tend to be less noisy but are subject to revision; first when more information from employers arrives in the two months following the initial report, then once a year in January when the numbers are adjusted with state and federal unemployment insurance data for more than 10 million workplaces. The BLS gave a preliminary indication a few weeks ago of the magnitude of next January’s revision, indicating that non-farm payroll employment in March 2022 was 462,000, or 0.3% higher than the current number. noted.

This provides no information on what has happened since March and there is a long history of economy watchers claiming to see omens in the household survey that the establishment survey does not yet reflect. . This is partly because it takes time for the BLS to get in touch with newly created businesses and to determine when non-reporting businesses have closed. To account for these comings and goings, the agency uses the ominous-sounding “net birth-death model,” which generally does a good job but can be less reliable at economic turning points. However, with the numbers from both surveys again pointing in the same direction, we do not appear to be at either of these turning points.

More other writers at Bloomberg Opinion:

Wall Street is in ‘real’ economy denial: Gary Shilling

The Fed is about to go full throttle on QT. Fear Not: Kevin Muir

Powell can’t count on a labor market miracle: Jonathan Levin

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Justin Fox is a Bloomberg Opinion columnist covering business. Former editorial director of Harvard Business Review, he has written for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market”.

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