This month’s employment report was essentially flat, but there were some gems hidden inside for those who took the time to follow Yogi Berra’s axiom “sometimes you can see a lot just by looking.” The surge in employment in the February household survey has since fizzled to sideways. The payroll report has been increasing, catching up with that surge. The household survey counts all workers, including self-employed, and only counts them once. It is used to calculate the unemployment rate, which has fallen to 3.9%. The payroll report counts numbers of workers on payrolls, generally from payroll tax submissions. That means the payroll report double-counts workers with multiple jobs, such as a person with a full-time job and a part-time job.

The unemployment rate has been distorted by the number of workers who left the workforce based on the guidelines of the Bureau of Labor Statistics. We will know if the economy is improving if the unemployment rate temporarily worsens, a strange quirk in the rate calculation that catches many observers by surprise. When unemployed workers believe there are jobs to be had, they usually return to the workforce at a rate faster than they can be absorbed. This period usually lasts about six months before that swarm is absorbed. It turns out that February was not a swarm, just a strong month. It’s nothing to worry about at this time. There is good news in other aspects of the labor force. 

One good sign in the employment report was the increase in manufacturing workers and hours worked. In the months ahead, this will ripple through to the service industries (distribution, retail, transportation, etc) that employ many more workers than manufacturing does.