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What's Going on with Employment? BLS Data Never Adds Up

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EDITOR NOTE: The Bureau of Labor and Statistics jobs report numbers were outstanding. 850,000 new jobs were added in June--a figure that supports the economic growth narrative that the government wants you to presume. Apparently, they’re doing something right. But have you thought about the numbers themselves, looking closely at the BLS data to see what they represent? Do they represent certain sectors in the economy that may drive growth, or are they mostly low-paying jobs that are important yet not necessarily growth drivers? What are the numbers that are not being disclosed? What might the presumed narrative behind the outstanding headline figure be concealing? And why is it, as the author below shows, that the BLS numbers never seem to add up? And if they can’t add up, should we passively trust them, along with the government-spun narrative it supports? If you look more closely at what these numbers truly represent, there's no real growth story to celebrate.

The BLS says jobs increased by 850,000 but Employment fell by 18,000.

BLS Data

The BLS says nonfarm payrolls rose by a seasonally-adjusted 850,000 in June. Leisure and hospitality led the way, expanding by 343,000 jobs. Government added another 188,000 jobs. 

For more details and discussion, please see Jobs Expand by 850,000 with 188,000 of Them Government, But Employment Drops!

The above jobs numbers are from the Establishment Survey. Employment numbers are from a Household Survey.

Household Survey vs. Payroll Survey

The payroll survey (sometimes called the establishment survey) is the headline jobs number, generally released the first Friday of every month. It is based on employer reporting.

The household survey is a phone survey conducted by the BLS. It measures unemployment and many other factors.

If you work one hour, you are employed. If you don’t have a job and fail to look for one, you are not considered unemployed, rather, you drop out of the labor force.

Looking for jobs on Monster does not count as “looking for a job”. You need an actual interview or send out a resume. 

Household Survey Employment by Age Group

BLS Data

BLS Process

The BLS takes raw numbers (unadjusted) and applies seasonal adjustments. The BLS reports the seasonal adjustments for some age groups but not others. 

Typically, when comparing month-to-month totals, one uses seasonally adjusted data. To understand why, think of kids in school or employment that rises in November and December then falls in January after Christmas.

But we do not have that data. It's not as important for older age groups because school isn't as big a factor although it does affect teachers. 

Surprising Drops

Seasonally adjusted, employment in age group 16-19 fell by 228,000. It fell by 122,000 in age group 25-34. 

Add it all up it comes to -221,000 but reported as -18,000. Part of that discrepancy stems from a combination of using a mix of seasonally adjusted and unadjusted number (but I only have what the BLS provides). 

Yet I assure you, the numbers would not add up anyway. BLS data never adds up. Consider an example from this morning's job report.

Part-Time Jobs

Involuntary + Voluntary Part-Time Work = 4,627,000 + 20,337,000 = 24,964,000 

Total Part Time Work = 25,610,000

Once again, seasonal adjustments and the order they are applied came into play.  

Birth-Death Adjustments

Prior to seasonal adjustments we also have Birth-Death Adjustments, a perennially disputed number that is widely misunderstood.

Every month I add this comment to my jobs report: "For those who follow the numbers, I retain this caution: Do not subtract the reported Birth-Death number from the reported headline number. That approach is statistically invalid."

The Birth-Death adjustment is a measure of employment the BLS assumes it missed in the monthly jobs report. It measures employment in assumed new businesses (the birth or deaths of businesses, not individuals).

The reported numbers are not seasonally adjusted, but added to the total, then the whole mess is seasonally adjusted.  

This month, a rarity, the adjustment went down by 19,000. In some months, the positive adjustment is nearly as big as the total. But the point that most people miss is that 19,000 (or whatever the total for the month is), is applied to the overall total then that total is adjusted. 

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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