October’s Employment Report: Disturbing

By SBE Council at 3 November, 2023, 1:05 pm

by Raymond J. Keating – 

Members of the media, along with too many policy leaders and economists, tend to look at two datapoints from the monthly employment report released by the U.S. Bureau of Labor Statistics – the payroll number and the unemployment rate – and way too often, that means that the substantive aspects of the jobs data are missed.

According to the latest report for October 2023, the establishment survey showed that nonfarm payroll employment grew by 150,000 and the unemployment rate edged up slightly from 3.8 percent to 3.9 percent. Kind of a yawner, right?

Well, when you actually dig further into the report, matters grow more troubling or disturbing. The household survey, while more volatile from month to month, better captures startup and small business activity, and generally offers a more comprehensive look at the job market. Here are some key points from the household survey:

• The number of employed declined by 348,000 in October, and the employment-population ratio fell from 60.4 percent in September to 60.2 percent in October.

• Those participating in the labor force fell by 201,000, with the labor force participation rate moving down slightly from 62.8 percent in September to 62.7 percent in October. (The following chart shows the long-run trend in both the employment-population ratio and the labor force participation rate, and how each has failed to get back to pre-pandemic levels, as well as being far shorter of pre-Great Recession levels.)

• The number of unemployed increased by 146,000 in October, and those not in the labor force jumped by 416,000.

• Finally, there were negatives on the self-employment (i.e., full-time business owners with and without employees) front as well. Incorporated self-employment data is not seasonally adjusted, so the appropriate comparison is to the same month in previous years. In October 2023, there were 6.626 million incorporated self-employed compared to 6.851 million in October 2022. Similarly, there was a decline in unadjusted unincorporated self-employed, from 10.095 million in October 2022 to 9.773 million in October 2023.

For good measure, in terms of the seasonally adjusted unincorporated self-employed, that fell from 9.726 million in September 2023 to 9.65 million in October 2023. That October level was down from 10.119 million in February of this year.

Now, the Fed, which is bent on undermining economic and employment growth in a misguided way to fight inflation via higher interest rates (see SBE Council’s latest on monetary policy here), might be happy with these rather grim numbers via the household survey for October, the rest of us shouldn’t be.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist and The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist.