What Is the Real Employment Situation?

The monthly jobs report from the Bureau of Labor Statistics was issued today, covering through the end of November.  Let us start by acknowledging the methodological infirmity of the report.  It is based on a survey of businesses and a second survey of households.  The response rate to each of those surveys is atrocious and at such a low level that attempting to identify differences between responders and non-responders is likely impossible.  The range for the central estimate is extremely wide, indicating high uncertainty.  So both the number of jobs and employed persons and the characteristics of those jobs and employed people is highly uncertain.  If the errors stayed consistent at least you might have some confidence in a broad trend, but things tend to hop around and be adjusted in subsequent months.  (BLS Report)

The numbers reported from the business survey say that 227,000 jobs were added in November, and October was revised up by 24,000 and September by 32,000.  Most of the gains were in government, health care, social assistance, travel and leisure.  Lot of impact of government spending.  The household survey, on the other hand, said 355,000 fewer people were employed and the unemployment rate rose slightly to 4.1%, but over the course of the last year the number of unemployed persons has risen from 6.3 million to 7.1 million and the unemployment rate has grown from 3.7%. The differences between the household survey and the business survey in terms of number of jobs and employed persons continues to grow, suggesting worsening methodological issues.

Here are some big picture observations.  Foreign-born workers account for almost all job growth in recent months, but declined this month, suggesting that the illegal sub-category shrunk this month.  Assuming, which he should, Trump follows through on his promise to stop illegal immigration, there will be an impact on jobs and employment.  Wages could rise due to a shortage of labor.  Productivity could improve if labor shortages force employers to use automation or other productivity-increasing methods.  Rising wages generally are good, particularly for low-income people, but large wage increases influence inflation.  Wages rose .4% month-over-month, suggesting that pay growth remains good at this time.

Full-time jobs aren’t growing, nor are part-time ones now.  There has been a trend of more people having multiple part-time jobs, likely indicating income stress.  Employers may be avoiding benefit costs by using more part-time workers.  Hard to know what to believe.  If government spending really gets reduced, it will have an economic impact, as it has propped up a lot of jobs and businesses.  Be nice if we had a much better source of data on the employment situation, as it is fundamental to understanding the economy and what is affecting consumers.