January 2017 BLS Jobs Situation Improves?

The headline seasonally adjusted BLS job growth was strong. There were issues with the headlines.

Analyst Opinion of the BLS Employment Situation

The headlines were at odds with the household survey (which showed employment declining) – and also at odds with the unadjusted data (which showed average employment decline for Januarys).

This month the data was re-benchmarked:

Establishment survey data have been revised as a result of the annual benchmarking process and the updating of seasonal adjustment factors using an improved methodology to select models. Also, household survey data for January 2017 reflect updated population estimates.

The rate of growth for employment significantly improved this month (red line on graph below). This is a year-over-year analysis which has no seasonality issues.

The unadjusted jobs decrease month-over-month was around average for times of economic expansion.

Economic intuitive sectors of employment were mixed.

This month’s report internals (comparing household to establishment data sets) was fairly inconsistent with the household survey showing seasonally adjusted employment declining 30,000 vs the headline establishment number of growing 237,000. 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 added 76,000 people from the workforce – this is one of the reasons the unemployment rate worsened.

The NFIB statement on jobs growth this month is at the end of this post.

A summary of the employment situation:

BLS reported: 227K (non-farm) and 237K (non-farm private). Unemployment rate was up 0.1 % to 4.8 %.

ADP reported: — 246K (non-farm private)

In Econintersect‘s January 2017 economic forecast released in late December, we estimated non-farm private payroll growth at 100,000 (based on economic potential) and 150,000 (fudged based on current overrun of economic potential);

The market expected (from Bloomberg / Econoday):

Seasonally Adjusted Data Consensus Range Consensus Actual Nonfarm Payrolls – M/M change 155,000 to 195,000 175,000 227,000 Unemployment Rate – Level 4.6 % to 4.7 % 4.7 % 4.8 % Private Payrolls – M/M change 154,000 to 185,000 170,000 237,000 Average Hourly Earnings – M/M change 0.2 % to 0.4 % 0.3 % +0.1 % Av Workweek – All Employees

34.3 hrs to 34.4 hrs

34.3 hrs 34.4 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 declined 2,407,000 – around average for times of economic expansion – and marginally better than last year.

Last month’s headline employment gains were revised up. Generally speaking, employment is overstated when the economy is slowing and understated when the economy is accelerating.