American households may be signaling the job market is stronger than the payroll numbers indicate.
Employers said they took on 120,000 workers in November, bringing job gains over the past four months to 534,000, Labor Department data showed today in Washington. A separate survey of households showed 278,000 more people were employed last month, pushing the increase during the same period to 1.28 million.
At turning points in the economy, the latter may prove more accurate because it’s more likely to pick up hiring at small companies and new firms that may be under the government’s radar. In another sign of recovery, the payroll figures the last three reports have been revised up by a combined 91,000 on average for the prior two months.
“Maybe we are doing a little better than the payroll survey suggests,” Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, said in a research note. “The payroll survey keeps getting revised up and up and up,” he said, and “the household survey is more likely to catch start-ups.”
The employment increase in the household survey helped propel a decrease in the jobless rate to 8.6 percent, the lowest since March 2009, from 9 percent in October, today’s report showed. The median forecast of economists surveyed by Bloomberg News projected no change.
A shrinking workforce also contributed to the decline in joblessness, taking some of the shine off the unexpected drop.
“When the unemployment rate declines, we want to see both employment and participation increase as discouraged workers return to the labor force,” Neil Dutta, an economist at Bank of America Corp. in New York, said in a note to clients. “Today, we got the former, but not the latter, making the 0.4 percentage point drop look a bit suspect. We would not be surprised to see the unemployment rate give back some of its decline in coming months.”
Small companies may be behind the recent increase in household jobs. The net share of owners planning to hire over the next three months rose 4 points to a net 7 percent, the highest reading since September 2008, a report today from the National Federation of Independent Business showed today. Small- business owners increased employment in November for the first time in five months.
“The employment indicators delivered a significant positive signal, still at weak levels but a meaningful movement forward,” William Dunkelberg, chief economist for the NFIB, said in a statement. “A bit more job creation should emerge.”
To be sure, the household survey is a more volatile series than the payroll survey because the sample is smaller. It covers about 60,000 families, compared with the poll of employers that covers 140,000 businesses representing about 440,000 worksites.
“We can’t get too excited, because if you look at the past 12 months they are showing the same picture,” said Gault. “The household survey was doing worse earlier on and is now catching up.” Nonetheless, if this divergence continues, “that would be stronger evidence that the payroll number is underestimating.”
At the same time, consecutive gains over the past four months in the household survey cannot be easily dismissed.
“While this survey is far more volatile than the establishment survey, four months could be considered a trend, meaning the labor market might be stronger than the payrolls tally suggests,” Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, wrote in a note to clients.
The household survey does include groups not captured by the payroll figures, like people working for themselves and agricultural workers. After adjusting to make the data adhere with what is captured in payrolls, the household figures showed a 498,000 jump in hiring in November. Since November 2010, adjusted household employment has climbed by 2.5 million compared with a 1.6 million payroll increase.
An increase in hiring of temporary workers, which may foreshadow gains in permanent staff as companies wait to make sure improvement in sales is sustained, is also a positive signal. Payrolls at temporary-help agencies climbed by 22,300 in November and are up by 98,900 in the past five months, today’s report from the Labor Department showed.
“Over time, household employment and payroll employment have trended together, but in recent years the household measure has tended to lead, suggesting bigger payroll gains are coming very soon,” Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York, said in a note to clients. “There are clear signs in the household employment and temp numbers to suggest better times are ahead.”
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