Employment in Pictures – Strikes and Weather

Summary

Weather and strikes have muddied the payroll report’s economic signaling. We will have to wait for revisions. The unemployment rate was not muddied, pointing to some strength in the labor market.

Comment

Weather, strikes, and low response rates highlight this month’s payroll report, making reading the economic signals all but impossible.

33-year Low in Response Rates

The payroll report is compiled from a survey of 60,000 businesses covering about one-third of the labor force. The Bureau of Labor Statistics (BLS) will ask about payroll staffing and follow up in the next two months.

The blue line in the chart below shows the response rate for the current month (first release). October’s response rate of 47.4% was the lowest in over 33 years. If a company does not answer the survey, they are assumed to have zero employees, like companies that go out of business and stop answering the survey.

Note that on the second and third attempts to get the survey completed, the response rate jumps to nearly 95%. So, expect significant revisions next month, which will most likely be higher as nonrespondents fill out the survey with a level of employment above zero.

Weather Was a Big Deal

The BLS measures the number of people who could not work due to bad weather. This does not mean they were unemployed. They could simply not do their jobs.

This measure is highly seasonal. Winter numbers can jump into the millions as blizzards can paralyze vast swaths of the country during the payroll report survey week.

So, it is best to look at each month individually. The following chart shows the number of people missing work due to bad weather each October. Over half a million people could not work this October due to weather, easily the highest level ever seen for this month.

How much did this impact the payroll report? The BLS said they could not determine this:

*US BLS: NOT POSSIBLE TO QUANTIFY EFFECT OF STORMS ON PAYROLLS
*US BLS: HURRICANES LIKELY AFFECTED OCT. PAYROLLS IN SOME SECTORS

Strike Impact Was Significant

The BLS also measures the number of workers on strike. In October 44,000 people were on strike, the highest number since the auto and Hollywood strikes last year.

The BLS offers details on these strikes:

Making economic assessments from this data is nearly impossible until we see future revisions. Is there any economic signal to take away from this report? As the headline below indicates, the unemployment report was not really affected by the anomalies above.

*US BLS: HURRICANES HAD NO DISCERNIBLE IMPACT ON JOBLESS RATE

The unemployment rate is calculated from a different survey of households. This survey seeks responses and keeps calling different people until it gets one. So, it is unsurprising that this type of survey is unaffected by weather or strikes.

As the chart below shows, the unemployment rate was unchanged in October at 4.1%.

Interestingly, this “un-triggered” the Sahm Rule. This rule states a recession is already underway when the three-month average of the unemployment rate rises more than 50 basis points above the lowest unemployment rate of the past year.

The drop in the three-month average in October (blue line) moved the Sahm rule back under 0.5% (bottom panel). All things being equal, this suggests continued economic strength.

In fairness, even Claudia Sahm, the creator of this rule, has warned that it might not work this time due to the rapidly changing increase in the supply of labor. This means the population growth of unemployed migrants is rising. Even Jay Powell has acknowledged this.

We detailed this in August.

Interactive Visual

The interactive charts below break down the labor market into several categories. Each tab defaults to show what we consider some of the more interesting series, but additional options are available in the drop-down menu.