The US Bureau of Labor Statistics (BLS) publishes the summary of the employment situation – the employment report or the jobs report. Posting is always at 8:30am ET on the first Friday of each month. The report is based on surveys of households and employers. It estimates the number of wage earners in the US economy, the average number of hours they work per week, and their average hourly earnings. In addition, the bureau’s report also provides unemployment rates in several versions.
The survey is based on data from approximately 145,000 businesses and government-public authorities, 700,000 workplaces and 60,000 households. The survey is based on the weekly pay period that includes the 12th day of the month. That is, a report for August, for example, refers to the week of August 12 and not until the end of August.
The employment report is particularly important because it is the first of the economic data available for the previous month. The rest of the macro data are published only after a week or two. However, as mentioned, it refers to the period of the week of the 12th of the month.
The impact of the employment report on the markets is great. The impact on the decisions of the Federal Reserve is very significant because the central bank (the Federal Reserve – the Fed) uses the report to assess the state of the economy for the purpose of determining monetary policy. In simple words, the interest rate is also determined based on the employment report. A better than expected report indicates a hot economy, perhaps too hot. In a time of inflation an economy is too hot, this is a problem and it may accelerate interest rate increases.
The numbers in the employment report are seasonally adjusted to filter out fluctuations such as the annual spike in retail hiring ahead of the holiday shopping season and the winter slowdown in construction, though the BLS also provides the data without seasonal adjustments.
Along with the rate of jobs added each month, the report through the household survey provides the official unemployment rate, or U-3, calculated as the percentage of unemployed people actively looking for work in relation to the total labor force. Unemployed according to the survey is a person who is available for work in the reference week and has made specific efforts to find work during the previous four weeks, unless he is awaiting an expected return from layoff.
The report provides alternative measures of unemployment and underemployment, including discouraged workers who would like a job but have stopped looking for such work and those who want a full-time job but work part-time, as well as rates of job loss during the month and unemployed for 15 weeks or more.
Household survey data on employment status are determined by race, gender, age and education, as well as veteran status and length of service; disability status; classification of workers, industry and trade; and whether the worker is US-born or foreign-born. The unemployed are also counted according to the reason and duration of unemployment.
So we understand that this is a very important report, we just have to remember – a single month of increases or decreases in jobs is not a trend, and it is still critical information, especially if there is continuity in the data (increase, decrease, continuous surprise for the better or vice versa). In any case, even a single figure is important and with as mentioned great significance for the Fed and the markets mainly in hopes of sensitivity in the economy.
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