Employment Report Needs a Closer Look

Today’s Employment Report from the BLS is worth a closer look.

The BLS reports:

The unemployment rate fell from 10.0 to 9.7 percent in January, and nonfarm payroll employment was essentially unchanged (-20,000), the U.S. Bureau of Labor Statistics reported today. Employment fell in construction and in transportation and warehousing, while temporary help services and retail trade added jobs.

Here is a chart that shows both U3 and U6 data:

So, why did unemployment go down if we lost 20,000 jobs?

Calculated Risk explains:

A common question is: how could there be fewer payroll jobs, but the unemployment rate declined? This is because the data comes from two separate surveys. The unemployment Rate comes from the Current Population Survey (CPS: commonly called the household survey), a monthly survey of about 60,000 households.

The jobs number comes from Current Employment Statistics (CES: payroll survey), a sample of approximately 400,000 business establishments nationwide.

The establishment survey showed a loss of 20,000 payroll jobs in January, but the household survey showed an increase in the employment level of 541,000. The number to use for jobs is the establishment survey, but the unemployment number is based on the household survey and the surveys can diverge over the short period, but over time this will work out.

Mish adds:

In the continuing theater of BLS absurdities, the unemployment rate fell to 9.7% in spite of a 25th consecutive month of job losses. Some stopped counting at 22 months in November. However, I find November questionable.

This month professional services contributed 44,00 jobs to the plus side, but 52,000 of them were part-time jobs. Amazingly a table below shows the number of part-time workers decreased by 849,000 from last month. Go figure.

Moreover, the so-called 64,000 rise in November can be attributed to the seasonally adjusted hiring of 94,000 temporary workers. Here is a look at revisions ….