Shocking September jobs report defies historical precedent | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Better late than never.

The Bureau of Labor Statistics finally released the September jobs report on Thursday, November 20, 48 days later than it would have if the government hadn’t been shut down for 43 days.

The BLS typically releases its monthly non-farm payroll jobs report, “The Employment Situation,” on the first Friday of the following month. The September report was initially scheduled to be released on October 3.

BLS September jobs data (month-to-month change)

Jobs added: 119,000
Civilian labor force: 171,248,000
Labor participation rate: 62.4% (+0.1%)
Employed people: 163,645,000 (+251,000)
Unemployment rate: 4.4% (+0.1%)
Unemployed people: 7,603,000 (+219,000) Source: Bureau of Labor Statistics

“The stronger-than-expected non-farm payrolls at 119 thousand are likely to grab a few headlines as it suggests the labor market remains far from recessionary territory,” said Daniela Hathorn, senior market analyst for Capital.com.

In the age demographic, adult women aged 20 and older experienced the largest increase in unemployment, rising from 3.8% in August to 4.2% in September.

Racially, the Asian American unemployment rate jumped 0.8% to 4.4%. While Black or African American workers saw no change in month-to-month unemployment, year over year, the unemployment rate has jumped nearly 2%, from 5.7% to 7.5%.

The majority of people who lost their jobs completed temporary jobs. More than 3.5 million people completed their job terms, while 861,000 left their jobs. Another 2.3 million people re-entered the workforce after taking some time off, also contributing to the unemployment rate.

More than 1.8 million people have been unemployed for at least 27 weeks, while nearly 1.3 million have been unemployed for 15 to 26 weeks. The majority of unemployed people have been out of work for either less than 5 weeks (2.2 million) or between 5 and 14 weeks (2.4 million).

The numbers are an encouraging sign for an economy that seemed like it was teetering after the August BLS jobs report showed the unemployment rate ticking up for the third consecutive month.

But the BLS data paint a different story than another trusted source of data: the ADP jobs report.

The U.S. economy added 119,000 jobs in September, according to the Bureau of Labor Statistics.

Photo by Spencer Platt on Getty Images

BLS data cleaves from the ADP September jobs report

The monthly ADP private sector jobs report is one of the most trusted non-government sources for jobs data.

ADP, one of the largest human resources technology companies in the country, bases its National Employment Report on anonymized weekly payroll data from more than 26 million U.S. private-sector employees, representing approximately one-fifth of the country’s private-sector workforce.

Largest private U.S. employers:

Walmart: 1.6 million employees
Amazon: 1.1 million employees
UPS: 443,000 employees
Target: 427,346 employees
Home Depot: 418,000 employees Source: Ringover

The data are so trusted that even the Federal Reserve had used them since 2018 to supplement BLS reports. However, that partnership ended in October under mysterious circumstances, the Wall Street Journal reports.

The ADP September jobs report was much different than the BLS numbers.

“Despite the strong economic growth we saw in the second quarter, this month’s release further validates what we’ve been seeing in the labor market, that U.S. employers have been cautious with hiring,” said ADP Chief Economist Nela Richardson.

ADP estimated that private employers shed 32,000 jobs in September, primarily in the services sector, which includes finance, education/health services, professional and business services, and leisure and hospitality.

Small and medium-sized companies with between 1 and 499 employees shed more than 60,000 jobs, while large companies added 33,000.

BLS, ADP data are usually highly correlated, so September is an outlier

The monthly BLS and ADP reports have one significant difference: The ADP report excludes public-sector jobs, whereas the BLS report includes them.

Despite this major difference, the data sets have a long history of correlation.

Statisticians use the coefficient of determination (also known as R2) to gauge how closely two sets of data relate to each other. The R2 ranges from zero to one; the higher the value, the more related the numbers.

According to Gallup, since the start of the ADP series in 2010, the R2 for the ADP and BLS private sector employment reports is 0.9817 when seasonally adjusted.

A graph from Pew Research Center illustrates the close correlation between the data sets.

Still, Gallup recognizes that you can’t perfectly substitute one for the other.

“For one thing, the ADP data isn’t representative of the entire economy; the company’s client base tilts more toward mid-sized businesses than the BLS employer survey does. The ADP data also excludes government workers entirely and doesn’t allow as detailed of an analysis as the BLS datasets,” according to Gallup.

Meanwhile, in the background, the Federal Reserve is digesting all of this data, and economists have their eye on the next FOMC meeting on December 9-10.

The Federal Reserve watches job numbers closely

The Federal Reserve closely monitors the job numbers to fulfill its dual mandate of achieving full employment and maintaining stable inflation.

Policymakers could be confused by the juxtaposition of ADP citing 32,000 job losses in September, while the BLS notes net job gains of 119,000.

Last month, the White House announced that there likely won’t be an October BLS jobs report due to the government shutdown, making the data even more confusing going forward.

“Jobs numbers are notoriously volatile and subject to revisions (as we just saw for August and July),” said Todd Campbell, co-editor in chief of TheStreet. “The Fed will likely rely more on alternative private jobs insight for October and November. The volatility is why the Fed focuses more on the unemployment rate.”

The minutes from the latest Fed meeting in October show some disagreement over whether it should cut interest rates.

Fed Chair Jerome Powell said after the meeting that a December rate cut was not a “foregone conclusion.”

CNBC reported that market traders had been pricing in a near certainty for another rate cut in the December session, but that confidence fell to a 1 in 3 chance, according to the CME Group’s FedWatch measure of future pricing, after the minutes were released.