Payrolls “Unexpectedly” Weak, Negative Revisions, Earning Poor: What Happened?

via Mish:

Initial Reaction

Today’s establishment survey was a much weaker than expected at 138,000 jobs.

The establishment survey was 47,000 under the Econodsay consensus and 115,000 below the ADP projection. ADP was also wildly off the mark in March, estimating 263,000.

March is now revised at 50,000. BLS revisions took away a net 66,000 jobs in March and April.

The household survey was even worse. Employment fell by 233,000.

What Happened?

The roots of this weakness go back to the April report, for March.

I discussed today’s setup on April 7, in Wild Miss in Expected Jobs: Economists Blame the Weather. Here is the pertinent snip.

Today’s employment report shows a wild miss in the expected number of jobs. The Econoday consensus estimate was 175,000 and ADP expected 263,000.

Instead, the BLS reported an increase of 98,000. Economists did what they usually do in such situations: blame the weather.

“Throw ADP out, it was the weather in March! Or at least the Category 3 storm that swept the Northeast may explain a much weaker-than-expected 98,000 increase in March nonfarm payrolls. This compares with Econoday’s consensus for 175,000 and a low estimate of 125,000” says Econoday.

On May 5, (for April Jobs), I reported April Payrolls Bounce, Revisions Take March Lower: Hiring Increasingly Volatile

Today’s establishment employment report shows a huge, 211,000 jump in reported jobs vs a downward revised March. The BLS revised March even lower, to 79,000 from 98,000. Revisions also took February up to 232,000 from 219,000.

Last month, economists blamed the weather. If so, the correct thing to do is average both months as employees not hired in March due to weather would have been hired in April instead.

The two-month average is 145,000 per month. That’s not a disaster, but it’s not particularly strong either.

Revisions

The change in total nonfarm payroll employment for March was revised down from +79,000 to +50,000, and the change for April was revised down from +211,000 to +174,000. With these revisions, employment gains in March and April combined were 66,000 less than previously reported.

Lesson Probably Not Learned

Economists did not average March and April, as I suggested. Perhaps they learned their lesson, but I doubt it.

With revisions this month, March, April, And May now sit at 50,000 jobs, 174,000 jobs, and 138,000 jobs, respectively. That an average of 120,667 jobs a month.

Let’s dive into the details in the BLS Employment Situation Summary, unofficially called the Jobs Report.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +138,000 – Establishment Survey
  • Employment: -233,000 – Household Survey
  • Unemployment: -195,000 – Household Survey
  • Involuntary Part-Time Work: -53,000 – Household Survey
  • Voluntary Part-Time Work: +320,000 – Household Survey
  • Baseline Unemployment Rate: -0.1 to 4.3% – Household Survey
  • U-6 unemployment: -0.2 to 8.4% – Household Survey
  • Civilian Noninstitutional Population: +179,000
  • Civilian Labor Force: -429,000 – Household Survey
  • Not in Labor Force: +608,000 – Household Survey
  • Participation Rate: -0.2 to 62.7 – Household Survey

Employment Report Statement

Total nonfarm payroll employment increased by 138,000 in May, and the unemployment rate was little changed at 4.3 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care and mining.

Unemployment Rate – Seasonally Adjusted

The above Unemployment Rate Chart is from the BLS. Click on the link for an interactive chart.

Nonfarm Employment Change from Previous Month

Nonfarm Employment Change from Previous Month by Job Type

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