As you may have read last week, I am doing a series on the various economic indicators that are released by various government agencies, NGOs, and other private groups. Some of these you may be familiar with, but I realized that not everyone may know what these indicators mean, where they come from, and why they are important. If there is an indicator that you have heard about that you would like to know more about, please feel free to call the show at 904.22.8255, or email me at firstname.lastname@example.org and I’ll move that one to the top of the list.
This week, I am going to discuss the employment reports that tell us how many jobs were created or lost during the month, as well as the unemployment rate. What people refer to as the jobs report, or the employment report, is actually called the Employment Situation Summary Report and it is brought to you by the same group that brings you the GDP number that I wrote about last week, the Bureau of Economic Analysis. The jobs report is released at 8:30 AM eastern time on the first Friday of every month. There is another report done by the payroll processing company ADP called the ADP National Employment Report, which is released on the first Wednesday of the month. These two reports make up what is generally referred to as the employment data or employment reports. The Job Openings and Labor Turnover Survey (JOLTS) is sometimes included with this as well, but I will address that when it comes out later in the month.
The data for the Employment Situation Summary Report is collected in two ways. One is the Current Populations Survey (also called the Labor Force Statistics), which surveys 60,000 private households, and the Employment Statistics Survey (also called the Nonfarm Payrolls), which surveys 160,000 businesses and government agencies spread over 400,000 work sites. Based on those surveys, the BEA estimates the number of people employed and unemployed, the number of hours people are working, what industries are hiring and firing, and movement in wages.
This report is widely studied by Wall Street firms, the FED, employers, and investors to gauge the strength of the economy. The theory is that a healthy economy is creating jobs, while a shrinking economy will show a declining number of jobs. The report can vary widely from month to month, so it is common practice to look at the trend instead of the monthly number by itself.
The report that was released on Friday showed that the total nonfarm payrolls increased by 98,000 jobs, which is considered a fairly weak number compared to where it should be in a robust economy. This was following back to back months of 200,000+ gains in January and February. However, the number of unemployed people in the United States declined by 326,000 in March, dropping the unemployment rate to 4.5%, which is a really strong number. Another interesting note about the report was that those who have been unemployed more than 27 weeks, or the long-term unemployed, has dropped by 500,000 in the last 12 months. Additionally, wages have grown by an average of 68 cents per hour over the last year, or 2.7%, following years of stagnant growth. Despite the weak headline number, there are mostly positive trends in the employment situation in America.
The ADP National Employment Report also measures the level of non-farm payrolls, but does not include any government jobs. ADP looks at payroll data for about half of their total US clients, or about 400,000 businesses representing about 24 million employees in the United States to compile their report.
This month, the ADP report showed an increase of 263,000 jobs in their data vs the 98,000 reported by the BEA. There is usually a discrepancy between the two reports on a monthly basis, but over time their averages tend to fall in line. This again show the danger of putting too much stock in to a single monthly reading of these employment reports.