Notes on the October Jobs Report

Quite a bit of handwringing over the paltry gain of 194,000 jobs announced for the prior month, but a bit of a deeper dive is warranted here.

Economist Dean Baker noted in a tweet "State &Local government employment fell 123k, a big drag on job growth -- hard to explain as most schools are open. Employment at state and local level is still down by 874k from before the pandemic."

And the reason for that odd occurrence is seasonal adjustment. Every year, when the school semester ends, we seasonally adjust numbers for July and August because we KNOW we're going to lose over a million jobs thanks to school closures. It's as predictable as the sunrise. We adjust back in September. But I remember this number getting a skew at the beginning of summer as well, because a lot of districts allowed their semesters to close weeks later than normal to make up for school closures and COVID disruptions. Hiring for the education sector, in raw numbers, without seasonal adjustment? About a million jobs.

This is one thing that has bothered me about the data being released since COVID began. Seasonal adjustment requires a measure of consistency. You can't produce meaningful numbers without it. So a careful interpretation of the data is warranted here, aside from looking at the headline numbers, (which you should be doing anyway.)

Julia Pollak of Zip Recruiter noted: "Instead of rushing back to the labor force when schools reopened, 246k workers aged 25-54 LEFT the labor force between August and September—likely due to Delta."

That's not something you expect from a workforce that knows unemployment benefits are going to be chopped. (Sorry for all the Horace Greeley types out there.)

Dean Baker also noted "unincorporated self-employed fell 123k in Sept, but still 619k above the 2019 level." That represents a profound change in the nature of the American workforce.

Lastly, we had some upward revisions to prior months, about 169,000 total for July and August, so on a 90 day lookback, not in terrible shape, but of course, markets (and the media) never look at revisions, even far larger ones.

I would assume the choke points we're experiencing in the supply chain, which has closed several auto plants, has done some foot dragging as well. There was growth in manufacturing, but only by 26,000.

We're still down 8.8 million jobs from when the COVID fiasco started, so there is a long way to go and as I've noted in previous pieces, you can expect an elevated level of churn just like this month's report to continue, until this scourge is buttoned up for good.

On a percentage basis, the job recovery isn't bad compared to previous recessions, but this is unlike any recession we've ever known. As I've noted before, it takes a long time for labor markets to sort and clear, so I never expected a straight path upwards and we won't get one.

The administration knows the economy can't fully recover until COVID is crushed, hence the headlong demand for mandated vaccinations. I would expect stronger results going forward.