BLS Jobs Situation Above Expectations In February 2014

 

The February 2014 BLS jobs report headlines were better than expected. But the unadjusted data says this report is mediocre. As I am a trend person, the growth trend lines are decelerating.

 

• The trend growth lines on the establishment unadjusted employment numbers are decelerating.

Unadjusted Non-Farm Private Employment – Year-over-Year Change (blue bars) and Year-over-Year Growth Acceleration / Deceleration (red line)

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• The unadjusted growth this month was the worst February since 2010 (year-over-year comparisons).
• economic intuitive sectors of employment were mixed.
• This month’s report internals (comparing household to establishment data sets) were consistent with the household survey showing seasonally adjusted employment growth of 170,000 vs the headline establishment number of 175,000.
• The National Federation of Independent Business (NFIB) statement on the Jobs report is below.

A summary of the employment situation:

• BLS reported: 175K (non-farm) and 162K (non-farm private). Unemployment is up 0.1% to 6.7%
• ADP reported: 139K (non-farm private)
• Market expected: 80K to 203K (non-farm with consensus at 150K), 100K to 200K (non-farm private with consensus at 165K), 6.4% to 6.7% unemployment (consensus 6.6%)
• In Econintersect’s February 2014 economic forecast released in late January, we estimated non-farm payroll growth at 115,000 (unadjusted based on economic potential) and 144,000 (fudged based on current overrun of economic potential).

The BLS reports seasonally adjusted data. This data is highly manipulated, andEconintersect believes the unadjusted data gives a clearer picture of the jobs situation.

Non-seasonally adjusted non-farm payrolls rose 300,000 – the worst growth since 2010.

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

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Last month’s seasonally adjusted employment was not revised.

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 up 0.1% at 6.7% with the U-6 “all in” unemployment rate (including those working part time who want a full time job) down 0.1% at 12.6%. 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.

Employment-Population Ratio

The jobs picture when you view the population as a whole.  This ratio is determined by household survey.

• Econintersect uses employment-populations ratios to monitor the jobless situation. The headline unemployment number requires the BLS to guess at the size of the workforce, then guess again who is employed or not employed. In employment – population ratios, the population is a given and the guess is who is employed.
• In the latest BLS report employment-population ratio was unchanged at 58.8 – this ratio is above its short term trend between 58.5 and 58.6. The employment-population ratio tells you the percent of the population with a job. Each 0.1% increment represents approximately 300,000 jobs. [Note: these are seasonally adjusted numbers – and we are relying on the BLS to get this seasonal adjustment factor correct]. An unchanged ratio would be telling you that jobs growth was around 150,000 – as this is approximately the new entries to the labor market caused by population growth.