August Employment Report

First Friday of the month, so the employment report is out for last month. Despite all of the news about Katrina, there is no impact yet, as the hurricane hit Florida and the Gulf after the survey reference week (the one including the 12th of the month). Following an earlier example, let's break it down, starting with Table A:

1) Top line number: Change in nonfarm employment measured from the establishment (or payroll) survey came in at +169,000.

2) Revisions to the top line number from previous months: Each month, the establishment survey revises its prior two months of data, as more establishments report in. So the last number not revised is for May (reported in last month's release), when payrolls were 133.413 million. Payroll job growth for June and July were revised up, by 9,000 and 44,000, respectively. So the last three monthly numbers (with the last two subject to further revision in the coming months) are 175k, 242k, and 169k, for a total of 133.999 million employed in the establishment survey. A three-month average of 195k per month looks pretty solid.

3) Don't forget the workweek: The employment report also reports the length of the workweek for private production or nonsupervisory workers. This month, it held steady at 33.7 hours. Updating some calculations in my earlier post, a change of one tenth of an hour in the average workweek would be the equivalent of a change in the labor input of about 318,000 workers. That's larger than the typical change in the number of bodies, so always watch the workweek (and it's revisions, which had no effect this month).

4) Earnings growth: The survey also reports the average hourly wages and average weekly earnings for private production or nonsupervisory workers. Since these numbers are revised over the subsequent two months as well, go back to May (in last month's report) to find values of $16.03 and $540.21, respectively. The August figures of $16.16 and $544.59 reflect growth at an annual rate of 3.3% (they are the same because hours haven't changed). That may be a little bit better than inflation--inflation ran at a 3.5% annual rate from January to July but only a 1.9% annual rate from April to July. We won't know for sure until the August CPI estimate comes out.

5) Unemployment Rate: The top line number in the household survey is the unemployment rate, which is reported to have fallen by 0.1 percentage point, down to 4.9 percent of the labor force. (The actual change is 0.08 percentage point, rounded up to 0.1.)

6) Other Ratios from the Household Suvey: The decline in the unemployment rate is due to an increase in household employment of 373k, a decline of 106k in unemployment, and an increase of 1k in those not in the labor force. So this is going to mean good things for the labor force participation rate and employment-to-population rate. Both are up by 0.1 percentage point, to 66.2 and 62.9, respectively.

7) Caveats to the Household Employment measure: Once again, we get a pretty large disparity between the household and payroll measures of employment growth (373k versus 169k). Part of this is due to different samples (e.g., household survey includes the self-employed, establishment survey counts multiple job holders). The rest is that they are both estimates of an underlying population number. In general, the establishment survey is to be preferred for the purpose of counting the change in the number of jobs, because that number is estimated more precisely in the establishment survey (it's a bigger survey and it uses administrative data).

8) Alternative Measures of Unemployment: The full list is given in Table A-12. All but one shared the decline of 0.1 percentage point that the main number showed. We can also construct another one based on reclassifying all of those who are not in the labor force (i.e., not actively looking for work) but who do "want a job." This group fell from 5015k to 4823k between July and August. If we reclassified them as unemployed (and thus in the labor force), this augmented unemployment rate would have fallen by about 0.2 percentage point, from 8.1 to 7.9 percent.

9) Duration of Unemployment: Some commentators also look at the duration of unemployment, reported here. It lengthened over the month, from 17.6 to 18.9 weeks on average and 9.0 to 9.4 weeks at the median. The fraction of the unemployed who have been unemployed for 15 weeks or longer rose from 32.8 to 35.8 percent, and the share unemployed for 27 weeks or longer rose from 18.7 to 19.2 percent. These numbers are all down slightly relative to August 2004. The recent changes reflect a greater share of the short-term unemployed either finding jobs or leaving the labor force than the long-term unemployed.

Plenty of other stuff to look at, but these are the highlights. For Fed watchers, it will be interesting to see whether the anticipated economic weakness due to Hurricane Katrina or these retrospective data on a fairly strong labor market will prevail in the decisions to keep raising short-term interest rates.

Linked at Outside the Beltway Traffic Jam.