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Contrary to what the mainstream media is saying, the Department of Labor’s November jobs report is not a blast, but a disappointment. The headline figure of 263,000 additional nonfarm payrolls looks like robust growth, but that’s not how most Americans feel right now. Even a quick look under the hood of this report shows that things aren’t as rosy as this number makes them seem.
The seemingly robust headline figure of 263,000 jobs comes from the business establishment survey, while the unemployment rate comes from the household survey. But the household survey also has a measure of employment, which fell by 138,000. In fact, the household survey has been flat since March of this year, with virtually no jobs added during this period.
Over the past eight months, there has been an unprecedented gap between the two surveys of 2.7 million jobs. One reason for this is that the establishment survey allows for double counting, while the household survey does not. Over the past year, about a fifth of additional non-farm payrolls have been double counted, not additional people employed.
THE US ECONOMY CREATED 263,000 JOBS IN NOVEMBER, BETTER THAN EXPECTED AS HIRING REMAINS STRONG
Double counting can happen for different reasons, such as people working multiple jobs. Many people get a second (or third) job to keep up with inflation, but the household survey counts these people as having a job, just like when they had a job. However, the establishment survey counts each additional job a person gets as another payroll.
The economy is hemorrhaging full-time jobs, losing nearly half a million since May. This equates to an average loss of more than 2,600 full-time jobs per day.
Conversely, the unincorporated self-employed are counted in the household survey, but not in the establishment survey. But inflation has caused many small businesses to close over the past two years, and the self-employed tend to go to work for big companies. There is no change in the number of people employed, but the number of main jobs actually increases because the person simply moves from an uncounted category to one that is counted.
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In fact, the double count in November was around 454,000 jobs, significantly more than the total number of jobs. This also explains the entire monthly gap between the two surveys, which was 401,000. It turns out that the economy may not have employed new people at all in November.
But there are more cracks in the labor market armor. The activity rate remains low and deteriorated in November. The low labor force participation rate artificially lowers the unemployment rate, so even though the number of employed people fell in the household survey, the unemployment rate remained unchanged.
Meanwhile, the economy is hemorrhaging full-time jobs, losing nearly half a million since May. This equates to an average loss of more than 2,600 full-time jobs per day. This is particularly worrying as company preferences often shift from hiring full-time to hiring part-time before shifting to layoffs in times of uncertainty.
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The manufacturing sector offers further evidence of this turmoil. Average weekly hours and average overtime in the sector fell, a common precursor to layoffs, while the industry added just 14,000 jobs in November. That’s less than half the number added in October and the slowest growth in a year and a half. While employment is a lagging indicator, the manufacturing sector often moves ahead of the rest of the labor market, which is clearly running empty.
For the average working person, his salary is higher, but he is obviously poorer. In effect, nominal incomes continue to follow inflation, so that workers can buy less, despite having a higher income. People are resorting to credit cards to maintain their standard of living – an unsustainable path.
Another concern is the seasonal adjustment made by the Ministry of Labor to the monthly employment figures. Because some months have predictable seasonal variations, the Bureau of Labor Statistics adjusts the raw survey data to account for these seasonal changes, such as large increases in the number of temporary workers on vacation who are then laid off in January. . This adjustment gives an estimate of the monthly variation in jobs that was not due to any seasonal variation.
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However, this year’s adjustments have been unusually large upwards or adjusted much more than usual. But what increases must decrease, since the seasonal adjustments for a year essentially cancel each other out; if one month is revised up by 1 million jobs, another month must be revised down by approximately that amount. The December downgrade will need to be 30% above normal to account for unusually large upside revisions earlier in the year. In other words, this year’s employment figures have been preloaded.
The devil is really in the details of this employment report. The labor market is clearly moving from growth to contraction. Considering that employment is a lagging indicator, the economy could be closer to recession than many experts think.
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