Ugly Employment Data for October

By SBE Council at 4 November, 2022, 1:03 pm

By Raymond J. Keating – 

You don’t have to dig too deeply to see that the October employment report was pretty ugly.

Establishment vs. Household Survey

While the establishment survey estimated that payrolls increased by 261,000 in October, the household survey, which better captures startup and small business activity, offered a very different picture of the labor market in October.

First, employment declined by 328,000, with the employment-population ratio declining from 60.1 percent in September to 60.0 percent in October. Pre-pandemic this stood at 61.2 percent.

Second, the labor force declined slightly (-22,000), along with a drop in the labor force participation rate from 62.3 percent in September to 62.2 percent in October. Pre-pandemic this stood at 63.4 percent.

Third, the unemployed increased by 306,000 in October. Therefore, the rise in the unemployment rate from 3.5 percent in September to 3.7 percent in October was an actual negative development (which is not always the case with this dubious indicator as a higher unemployment rate, for example, can result from substantial growth in the labor force while employment still rises).

The question is:

Do the household survey negatives in October point to lagging employment data catching up to the negatives in the broader economy that we’ve experienced in 2022?

If so, this would, oddly, please the Federal Reserve, which is trying to inflict additional harm on the economy in an effort to bring down inflation (see SBE Council’s recent assessment of this strategy). It also would align with anti-growth policies – on the tax, regulatory, trade and government spending fronts – advanced by Congress and the Biden administration.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.