US October Employment Report: Establishment Survey Shows Solid Improvements

Christophe Barraud

 

According to the Bureau of Statistics, total nonfarm payrolls increased by 204,000 in October (largely above expectations), and the unemployment rate remained unchanged at 7.3%. The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours while average hourly earning rose 0.1% MoM.

 

It’s difficult to talk about the household survey to the extent that the government shutdown impacted significantly all figures such as part-time jobs or unemployment rate. The fact is that, in some cases, people were counted twice.

 

From BLS:

 

In the household survey, individuals are classified as employed, unemployed, or not in the labor force based on their answers to a series of questions about their activities during the survey reference week. Workers who indicate that they were not working during the entire survey reference week and expected to be recalled to their jobs should be classified in the household survey as unemployed on temporary layoff.
 
In October 2013, there was an increase in the number of federal workers who were classified as unemployed on temporary layoff. However, there also was an increase in the number of federal workers who were classified as employed but absent from work. BLS analysis of the data indicates that this group included federal workers affected by the shutdown who also should have been classified as unemployed on temporary layoff. Such a misclassification is an example of nonsampling error and can occur when respondents misunderstand questions or interviewers record answers incorrectly.
 
According to usual practice, the data from the household survey are accepted as recorded. To maintain data integrity, no ad hoc actions are taken to reassign survey responses.

 

Concerning the establishment survey, results are impressive with an upward revision in August and September, accompanied by a figure above 200K in October. As a consequence, the short term momentum of NFPs is strengthening and is now above the threshold of 200K:
-> Moving average 3 months: 202K
-> Moving average 4 months: 174K
-> Moving average 5 months: 173K
-> Moving average 6 months: 174K

 

Moreover, seasonal retail hiring was solid. According to the BLS employment report, retailers hired seasonal workers in October at the highest level since 1999.

 

Finally, on a cumulative perspective, the report shows that labor market has created almost 2.5 million jobs since the launch of QE3 (september 2012).

 

To conclude, we should wait for the November report (post-shutdown) to be sure that the labor market conditions are strenghtening. However, on a cumulative perspective, it’s clear that the employment situation improved significantly since the launch of QE3.