Employment Report Slightly Less Weak-But Still Weak

The U.S. employment report indicated that the U.S. labor market was slightly less weak in October than in September-but still weak.

The main improvement was that unlike the previous month, average hourly earnings rose and the average work week did not drop, As a result average weekly earnings rose in nominal terms after having declined the previous month. However, it remains to be seen how much, if any, of that nominal increase in average weekly earnings will translate into a real increase as I suspected that consumer prices rose faster in October.

On the other hand, the number of people that had a job continued to fall and the unemployment rate rose to 10.2%-the highest since 1983. It should be noted that the widely quoted payroll employment could underestimate the number of lost jobs. Payroll survey employment fell by 5.5 million in the latest 12 months while household survey employment fell 6.6 million. Basically the entire discrepancy has come in the latest 3 months, when the payroll survey indicated just 600,000 lost jobs while the household survey indicated 1.8 million lost jobs. In the latest month, the drop in payroll survey employment was 190,000 while the drop in household survey employment was 589,000.

Since these two surveys are supposed to measure the same real world phenomenon they should give the same results. When they don't you can be sure that at least one of them is wrong, but usually the truth lies somewhere in between. Most economists, including me, believe that the payroll survey is more reliable particularly when it comes to monthly fluctuations. However, while the truth is probably closer to the payroll survey number, the consistently much larger loss in household survey employment indicates that the payroll survey probably underestimate job losses.