Last Friday’s monthly non-farm payroll report showed a healthy headline number but the unemployment rate rose to 9.0%. The details, according to Mike Shedlock, were not so hot and can be found in its entirety here:
Thoughts on the Jobs Report Thoughts on the Jobs Report
On the surface, this was the third consecutive solid jobs report, not as measured by the typical recovery, but the best back-to-back reports we have seen for years. The Payroll Survey Establishment Data showed employment up by 244,000.
At that pace of hiring, the unemployment number would ordinarily drop, but not fast.
Instead, the unemployment rate ticked up. The reason is beneath the surface, employment fell by 190,000 according to the Household Survey.
According to the Household Survey, the number of unemployed rose by 205,000. Another 131,000 dropped out of the labor force or the unemployment rate would have been even higher.
Which survey to believe?
It is hard to say on one month's data. However, during a recovery the household survey is supposed to lead.
Unless the Household Survey is an outlier, the implications are not good
Last month I said "It is very questionable if this pace of jobs keeps up."
Well, it kept up if the Payroll Survey is correct, it sure didn't if the Household Survey is to be believed.
Recall that the unemployment rate varies in accordance with the Household Survey not the reported headline jobs number, and not in accordance with the weekly claims data.
Digging deeper into the Household Survey, we see some more interesting data. In the last year, the civilian population rose by 1,817,000. Yet the labor force dropped by 1,099,000. Those not in the labor force rose by 2,916,000.
In January alone, a whopping 319,000 people dropped out of the workforce. In February another 87,000 people dropped out of the labor force. In March 11,000 people dropped out of the labor force. In April, 131,000 dropped out of the labor force. The 4-month total for 2011 is 548,000 people dropped out of the labor force.
Many of those millions who dropped out of the workforce would start looking if they thought jobs were available. Indeed, in a 2-year old recovery, the labor force should be rising sharply as those who stopped looking for jobs, once again started looking. Instead, an additional 548,000 people dropped out of the labor force in the first four months of the year.
Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.
As I said, the report looks good on the surface; it does not look good if you poke around in the details.
April 2011 Jobs Report
Trade Date: 5/6/11
E-Mini S&P Trades*
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E-Mini S&P Trades*
(before fees and commissions):
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- Algorithm positions (12)
- “Reading the Tape” positions (11) …combined Secret’s, Algo, & “Reading the Tape” total… +23.75
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