Employment Report

What is it: Report on jobs created, unemployment rates, salaries.

Link to most recent release: The Employment Situation - July 2024 (bls.gov)

Release time: 08:30 on first Friday of the month and covers previous month

Frequency: Monthly

Source: Bureau of Labor Statistics

Revisions: Can be major. Often go back two months with each release

Why is it important

Tells the readers the story of last months employment in the US. It is very rich in details on the job market and household earnings which comes in extremely handy when trying to forecast where the economy is going. Wages and salaries from employment make up the main source of household income, money that is spend to purchase products and services which in turn is what the economy is based on. Highlight is the unemployment rate which is the % of civilian workforce(over 16 years of age - excluding military, prisons, mental hospitals and nursing homes) that is unemployed.

How is it computed

• Household Survey - Households point of view. 60 000 households are phoned/posted and and nearly 95% of them respond - 57 000 homes. It all depends on the honestly of the responders. Data is very detailed and is grouped by gender, age, ethnicity, educational achievements and marital status.

• Establishment(payroll) Survey - Company point of view. 440 000 corporate and government work sites are contacted by phone and mail. These entities employ more than 50 million workers(1/3 or total non-farm employment). Only 60-70% reply in time rest is used for revisions. Data collected include non-farm businesses, nonprofit groups, local, state and federal government offices. Farm workers, self-employed and domestic help people are excluded. More than 500 industries are covered.

  • Collection rate can be found HERE

Data from the two surveys can diverge as the two surveys focus on different parts of the labor market.

H(Household) survey takes into account age, part time and full-time, farm and non-farm

E(Establishment) purely focuses on how many jobs are created and excludes the above types.

In the long run H and E are in sync.

Highlights

Table A. Household data

• Civilian noninstitutional population - over 16 and not in prison, mental facility, nursery home

• Civilian labor force - working or applied for job in last 4 weeks

• Employed - working

• Participation rate - increases when economy is growing.

• Employment population ration - tells us if the economy is creating more new jobs to accommodate the growing population

• Unemployment rate - leading indicator for state of the economy

Economists say that roughly 150 000 people join the workforce monthly and estimate that the GDP needs to expand at 3% to 4% to support the new job market entrants.

Table B. Establishment Data

Keep an eye on the government jobs as a portion of the total nonfarm jobs as sometimes government will go in a mass layoff mode while the private sector jobs will be going up meaning we can end up in a situation where the total non-farm jobs are on the decline while private sector is growing.

Also, another important figure to keep an eye on is the Manufacturing jobs. They are a leading indicator for downturns/upswings in the economy.

Average weekly earnings and hours worked in private sector is another important figure as it is a true reflection of the labour force's financial wellbeing.

Diffusion index is another important statistic which represents  the percent of industries with employment increasing plus 1/2 of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment. Basically, above 50% means expansion and below half means contraction.

Table B-2. Average weekly hours and overtime

Changes in the hours worked is another advance indicator of where the economy is heading. Weekly manufacturing hours under 40 are at recession levels whereas 40.5 and above indicate economic expansion.

Manufacturing overtime hours are especially important in determining the public demand for goods. Historically consistent numbers below 3 indicate the employer are growing more likely to initiate layoffs and numbers above 3.3 new hires. Overtime is a crucial tool for efficiency which allows companies to save the high costs of permanently employing new people since labour is the highest cost of running a business. On the flip side, overtime can get rather costly and when goes up it makes employers reconsider new hires when economy is booming.

Table A-8 Employed Persons by Class or Worker and Part-Time Status

Forced part-time workers - when it is hard to get a suitable full time job people resort to part-time employment.

Table A-11. Unemployed Persons by Reason for Unemployment

Not on temporary layoff - many industries temporarily shot down operations and lay off workers when demand for goods and services declines. During periods of economic strength this percentage slips below 30%. However, this went up to 50% during the GFC.

Job leavers - people who are confident they will find a better paying job are happy to leave their current position before they have already secured a new job. When those numbers decline it signals a deterioration in the job market. Normally between 10% and 15%

Table A-12. Unemployed Persons by Duration of Unemployment

15 weeks and over - Without fail this number starts to climb well before the economy officially turns south. Usually bottoms out 10 months before onset of recession but can range from 5 to 13 months. Climbed for a full year before GFC

Table A-15. Alternative measures of labor underutilisation

This is a deeper dive into the unemployment rate that gives more insights into statistics of people who have giving up hope for finding a new job.

Table B-1. Employees on nonfarm payrolls by industry sector and selected industry detail 

Full of useful information but most importantly

Temporary help services - Temps are the first ones to loose their jobs before a recession and first one to get employed after a recession

Truck Transportation -sensitive to economy conditions. Lower demand for goods less truck drivers needed.

Child-care services - as we get out of recession parents go back to work and child-care service worker demand goes up

Market Impact

Bonds

Stronger economy, higher bond prices as inflation is low hence interest rates are low

Stocks

Strong jobs report means economy is booming means companies are growing means stock prices rise

Dollar

Can drive interest higher and stocks rally, hence stronger dollar as investors buy more US stocks and bonds.

Weak jobs spells trouble for US stocks and puts downward pressure on rates which both make the dollar less appealing to foreigners.