April 5, 2024
The unemployment rate fell 0.1% in March to 3.8% after having risen 0.2% in February. In March the labor force rose by 469 thousand.. Employment jumped by 498 thousand. As a result, the number of unemployed workers fell; by 29 thousand and the unemployment rate declined 0.1% to 3.8%. In contrast, payroll employment rose by 303 thousand in March compared to the 498 thousand increase in civilian employment. We would not draw too many conclusions about the drop in civilian employment in January and February and the dramatic increase in March This series tends to be very volatile
How come the two estimates of employment are different? First, the two are figures are derived from separate data streams. The payroll number is calculated from employment numbers reported by a large number of employers across all industries. Employment for the unemployment rate calculation is derived from knocking on doors and asking people if they have a job. It is known as the household survey. It tends to be more volatile than the payroll employment data. One conceptual difference is that the household survey includes people who are self-employed which would not be captured in the establishment survey. In the end, there is always monthly noise between the two series. Over time the two surveys seem to show roughly comparable gains in employment.
In the wake of the Fed’s series of rate hikes the labor market is doing particularly well. The Fed considers full employment to be 4.0% which means that at that level everybody who wants a job has one. Given that the unemployment rate is slightly below the full employment threshold there will be continuing upward pressure on wages as firms bid against each other to get the required number of workers and as workers and unions try to offset some of the decline in real earnings that has occurred over the past two years..
While the official rate is the most widely used, the reality is that the official rate can be misleading because it does not include “underemployed” workers. There are two types of “underemployed” workers. First, there are people who have unsuccessfully sought employment for so long that they have given up looking for a job. Second, are those workers that currently have a part time position but indicate that they would like full time employment. The total of these two types of underemployed workers are “marginally attached” to the labor force. The number of these workers has risen in recent months as some people appear to have gotten a part-time job but would like a full-time position..
To incorporate the impact of these workers who are marginally attached to the labor force, we should probably be focusing on the broader measure of unemployment which was unchanged in March at 7.3% after having risen 0.1% in February. Full employment for this measure of unemployment is somewhere around the 8.0% mark.
Given the steady gains in employment we look for GDP growth of 2.5% growth in the first quarter.
Stephen Slifer
NumberNomics
Charleston, SC
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