An Alternative Civilian Employment Measure

Several observers have pointed out the gap between civilian employment as measured by the CPS, and the nonfarm payroll employment numbers obtained from the CES. The CPS measure includes new population controls, which depend on the estimated immigration. CBO estimates a lot more net immigration than Census, which when applied to employment might alter our views of employment.

From Orrenius et al. (2024).

Source: Orrenius et al./Dallas Fed (2024).

Over 2022-23, CBO estimates 3.9 million more net immigrants than Census. Wedging in this number into 2021M07-23M06 population, using the same labor force participation rate and  employment-to-labor force rate as observed through 2023M06 yields the following picture.

Figure 1: Civilian employment as reported (bold orange), adjusted to add in extra 3.8 mn immigrants (pink). Uses reported increase in employment for 2023M07-06. Source: BLS, Dallas Fed, and author’s calculations.

This modifies the picture of business cycle indicators including alternative employment measures:

Figure 2: Nonfarm Payroll (NFP) employment Philadelphia Fed early benchmark (bold dark blue), civilian employment adjusted to CBO immigration (orange), industrial production (red), personal income excluding current transfers in Ch.2017$ (bold green), manufacturing and trade sales in Ch.2017$ (black), consumption in Ch.2017$ (light blue), and monthly GDP in Ch.2017$ (pink), GDO (blue bars), all log normalized to 2023M04=0. Source: BLS via FRED, Federal Reserve, BEA 2024Q1 third release, S&P Global Market Insights (nee Macroeconomic Advisers, IHS Markit) (7/1/2024 release), and author’s calculations.

Here’s the picture of standard indicators, for comparison:

Figure 3: Nonfarm Payroll (NFP) employment from CES (bold blue), civilian employment (orange), industrial production (red), personal income excluding current transfers in Ch.2017$ (bold green), manufacturing and trade sales in Ch.2017$ (black), consumption in Ch.2017$ (light blue), and monthly GDP in Ch.2017$ (pink), GDP (blue bars), all log normalized to 2023M04=0. Source: BLS via FRED, Federal Reserve, BEA 2024Q1 third release, S&P Global Market Insights (nee Macroeconomic Advisers, IHS Markit) (7/1/2024 release), and author’s calculations.

Note that the modification to civilian employment does not make much difference since the indicator is normalized to 2023M04. Normalizing to an earlier date would change the contour of employment substantially.

 

11 thoughts on “An Alternative Civilian Employment Measure

  1. Macroduck

    This makes a lot of sense.

    Eye-balling Figure 1, it looks like the adjusting for CBO’s higher immigration estimate adds nearly 2 million jobs. Figure 1 gives the impression that most of the divergence between between the official and adjusted series occurred prior to Q4 last year. Since Q4, we still have a nearly 1.9-million-job discrepancy to account for, if my math is right. So the CBO immigration adjustment explains about half the discrepancy.

    Here’s a picture of the difference between household and establishment jobs numbers:

    https://fred.stlouisfed.org/graph/?g=1pPjz

    It looks like there has been a pretty steady accumulation of disagreement since early 2022. The CBO adjustment works for the first 2/3 of that period, then stops working. That’s curious. Of course, there will be revisions which might change this picture.

    Reply
  2. James

    Menzie – please forgive me for constantly posting about climate change – but it should be obvious to all – climate change is not a hoax – we are now having 30, 40, 50 year extreme weather events every couple of years – our political leaders at the local, state and federal levels should be focused on reducing emissions (investing in renewable energy) – building in adaptation and mitigation of climate change in local infrastructure https://www.wearegreenbay.com/weather/beyondtheforecast/severe-flooding-and-flash-flood-warnings-issues-through-northeast-wisconsin/

    Reply
    1. Moses Herzog

      Fran Blanche on YT is very good at explaining CO2 (sorry I am too lazy to do the subscript) levels in the atmosphere and water levels. She doesn’t have much patience for the type of people on this blog such as Bruce Hall who think the atmosphere is “half ogygen and half CO2”. Yes, pretty retarded.

      Follow Fran Blanche people, you’ll learn something new in almost very upload she does and you won’t regret it.

      Reply
  3. New Deal democrat

    I performed a similar exercise last month, arriving at a similar-looking graph. In so doing, I made a couple of basic assumptions to arrive at a back-of-the-envelope estimate: (1) the immigration is from Latin America; and (2) it is younger, in the prime working age demographic, plus their children, vs. the native born population.

    Since the beginning of 2022, the native born population has only grown by less than 1.4 million, or only 0.6%; while the foreign born population has grown by 3.7 million, or 8.3% – and remember, these are the Census Bureau numbers, which the CBO data indicates sharply underestimate immigration during that time.

    Cumulatively since March 2022 the CBO estimates show an additional 1% growth in population, or roughly 3.36 million, vs. the Census Bureau.

    Further, the overall employment/population ratio over the past two years is roughly 60%, vs. 64% for the Latin American ethnic group. In so doing, I was conservative, assuming working age immigrants have been bringing their children, who obviously are not in the 25-54 demographic.

    A 64% employment ratio for an additional 3.36 million people generates an additional 2 million+ employees vs. using the Census Bureau estimates.

    Using those parameters, the adjusted Household Survey showed almost as many jobs as the Establishment Survey through the end of last year, before stagnating so far this year – but still within the range of noise.

    A big part of the stagnation in the adjusted estimate this year is that over the last 12 months the native born labor force has declined by about .5M and native born employed have declined by almost 1M, while after adjustment foreign born employment has risen by about 1.5M.

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  4. Macroduck

    Off topic – another big European country swings left.

    Starmer’s Labour Party won in the UK, ending a long and embarrassing period of Tory Rule. Now, after a first round of voting in which Le Pen’s National Rally party scored well enough that the BBC’s talking heads have assured us NR would lead a parliamentary coalition, it looks like left and center-left parties have shut the right out of government in the second. Center-right President Macron’s desperate decision to call elections has thus driven France to the left rather than to the right.

    So much for arrogant pundits over-interpreting. So much for the relentless swing to the right. Swing, yes – relentless, no. As of noon, Paris time, voter turn-out was the highest in 4 decades, convincing evidence that the electorate really doesn’t want ultra-rightists in government.

    Le Pen’s party had snuggled up to Putin and she was threatening to curtail arms shipments to Ukraine. Parties on the left are all over the place when it comes to Russia, and have avoided the subject of Ukraine during the election run-up. The left is dead-set against Macron’s pension reforms; we’ll see what happens to yield spreads come Monday.

    As unpopular as pension reform has been, I wouldn’t be surprised if the French left cements a bit of voter support by derailing pension reform. I’m less convinced that the UK Labour Party can escape the political harm of inheriting the Tory mess.

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  5. pgl

    Was debate night a big win for Trump? Maybe not. My thesis has been the fate of his overvalued fake twitter company has always been that the suckers are betting on a Trump Presidency in 2025. It seems the stock price was almost $39 a share before debate night but has tanked to just over $29 a share.

    Trump Media & Technology Group Corp. (DJT)
    https://finance.yahoo.com/quote/DJT/

    Just saying!

    Reply
  6. pgl

    ‘I was in those meetings’: Trump official spills about Project 2025’s ‘overreach’ on women
    https://www.rawstory.com/trump-project-2025-pence-staffer-spills/

    Donald Trump is not to be believed when he says he knows nothing about Project 2025, according to a former official in his White House.

    Former Mike Pence Homeland Security staffer Olivia Troye, a child of a Mexican immigrant mother who recently took to social media to call out her former boss for demeaning her own background, appeared on CNN on Sunday to discuss the controversial Project 2025. Trump has recently tried to distance himself from the 900-page plan to reshape the federal government, but it is run by his own former White House officials.

    In her CNN interview, Troye was asked what she thinks about Trump trying to claim ignorance on this issue. The host asked her, “Do you believe him?”

    “No. I mean, look, this is preposterous if you look at the collaborators and the authors of this plan. A lot of these people came from directly people that served in Trump’s cabinet during his administration,” Troye replied. “There are people that I worked with. I sat in those policy meetings with them.”

    She then dropped some senior official names, saying “a lot of people were senior administration officials whether it be John McEntee, who was in charge of staffing for presidential personnel, or whether it be Stephen Miller, who’s behind the scenes pulling the strings on this as well. But you’ve got Ben Carson listed in here. You have the former deputy secretary of DHS, the acting secretary, Ken Cuccinelli in here writing about immigration and DHS.”

    She added that Carson has “been out there on the campaign trail with the president.”

    When asked if the plan represents “a winning strategy for conservatives,” Troye noted that she is “a lifelong Republican,” but that she believes the plan “is complete overreach by the federal government on our individual liberties.”

    “And I just want to be clear, to women and men who support women and our individual right to health care, I know that we all have differing views on it. I certainly lean conservative on it, but there’s language in here that says liberal states have become sanctuaries for abortion tourism.”

    Reply

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