Personal Finance: Understanding the jobs report

Personal Finance: Understanding the jobs report

May 16th, 2018 by Christopher A. Hopkins in Business Around the Region

On the first Friday of each month, a much-anticipated report is released by the Bureau of Labor Statistics. "The Employment Situation Survey," commonly called the jobs report, has the power to move markets because it is generally considered a key indicator of the health of the U.S. economy.

April extended a stretch of very positive employment numbers, with 164,000 new jobs created during the month. That was slightly below the average of 191,000 for the past 12 months, but quite respectable this late in a long expansionary cycle. Perhaps more interestingly, the unemployment rate fell to a 17-year low of 3.9 percent, well below the level economists think of as full employment. One key to understanding the low unemployment rate is the relentless decline in the percentage of Americans of employable age who are in the labor market, referred to as the labor force participation rate. That number has declined from 67.3 percent in 2000 to 62.8 last month.

Christopher A. Hopkins

Christopher A. Hopkins

Photo by Contributed Photo /Times Free Press.

Those numbers are heavily reported each month. But as important as the jobs report has become, few people outside the financial markets (and too few within) understand how the data is collected and presented in the monthly readout.

The Bureau of Labor Statistics was created in 1884 to compile data on employment, wages and prices in the U.S. economy. One of its first important reports was an 1891 study of the impact of tariffs on jobs and wages (turns out we knew in the 19th century that trade wars are bad and hard to win).

The jobs report is a compilation of two monthly surveys conducted by BLS employees. The first is a sampling of 390,000 employers, called the Current Employment Statistics Survey but commonly known as the "establishment survey." The bureau contacts business establishments each month regarding the number of private non-farm jobs, hourly wages, and hours worked. From this sample, an estimate of jobs created or lost in the economy is interpolated (164,000 in April). This is one of the two headline numbers that gets the most attention from investors.

The other main survey, the Current Population Survey, is broadly known as the "household survey." For this one, the BLS contacts around 60,000 individual households and asks how many residents have a job, are looking for a job, and whether they are working full or part-time. The household survey generally has a higher margin of error than the establishment report, but it picks up data on contract workers and the self-employed that do not show up in the business survey. This report is the source of the estimated unemployment rate (3.9 percent in April).

These two sources are compiled together and reported in what has become something of a ritual, with competing forecasters providing their own pre-game estimates moments before the official announcement at 8:30 a.m. on the first Friday of each month. Substantial variances from consensus level forecasts often make for a rocky start to trading on the exchanges.

A third, lesser-known but equally important monthly release by the BLS is the Job Openings and Labor Turnover Report (JOLTS). This survey includes a sampling of 16,000 employers who report hirings, terminations, and help wanted. JOLTS paints a picture of potential labor shortages among employers seeking to hire. The May report tallied a record 6.6 million job openings currently unfilled.

These important BLS reports paint a somewhat puzzling view of the labor market. The low unemployment rate and high level of job openings suggest a relatively strong economy. But the data also present a conundrum confounding economists: despite strong demand for workers, wages are stuck in neutral.

Next week, a look closer at the wage puzzle.

Christopher A. Hopkins, CFA, is a vice president and portfolio manager for Barnett & Co. in Chattanooga.

Getting Started/Comments Policy

Getting started

  1. 1. If you frequently comment on news websites then you may already have a Disqus account. If so, click the "Login" button at the top right of the comment widget and choose whether you'd rather log in with Facebook, Twitter, Google, or a Disqus account.
  2. 2. If you've forgotten your password, Disqus will email you a link that will allow you to create a new one. Easy!
  3. 3. If you're not a member yet, Disqus will go ahead and register you. It's seamless and takes about 10 seconds.
  4. 4. To register, either go through the login process or just click in the box that says "join the discussion," type your comment, and either choose a social media platform to log you in or create a Disqus account with your email address.
  5. 5. If you use Twitter, Facebook or Google to log in, you will need to stay logged into that platform in order to comment. If you create a Disqus account instead, you'll need to remember your Disqus password. Either way, you can change your display name if you'd rather not show off your real name.
  6. 6. Don't be a huge jerk or do anything illegal, and you'll be fine.

Chattanooga Times Free Press Comments Policy

The Chattanooga Times Free Press web sites include interactive areas in which users can express opinions and share ideas and information. We cannot and do not monitor all of the material submitted to the website. Additionally, we do not control, and are not responsible for, content submitted by users. By using the web sites, you may be exposed to content that you may find offensive, indecent, inaccurate, misleading, or otherwise objectionable. You agree that you must evaluate, and bear all risks associated with, the use of the Times Free Press web sites and any content on the Times Free Press web sites, including, but not limited to, whether you should rely on such content. Notwithstanding the foregoing, you acknowledge that we shall have the right (but not the obligation) to review any content that you have submitted to the Times Free Press, and to reject, delete, disable, or remove any content that we determine, in our sole discretion, (a) does not comply with the terms and conditions of this agreement; (b) might violate any law, infringe upon the rights of third parties, or subject us to liability for any reason; or (c) might adversely affect our public image, reputation or goodwill. Moreover, we reserve the right to reject, delete, disable, or remove any content at any time, for the reasons set forth above, for any other reason, or for no reason. If you believe that any content on any of the Times Free Press websites infringes upon any copyrights that you own, please contact us pursuant to the procedures outlined in the Digital Millennium Copyright Act (Title 17 U.S.C. § 512) at the following address:

Copyright Agent
The Chattanooga Times Free Press
400 East 11th Street
Chattanooga, TN 37403
Phone: 423-757-6315