Understanding the gap between payrolls, household employment

While nonfarm payroll jobs continue to exhibit steady growth, household employment figures have been on a downward trajectory. Yahoo Finance Anchor Seana Smith examines the latest employment data — ahead of tomorrow’s JOLTS (Job Openings and Labor Turnover Survey) print and Friday’s jobs report — exploring what they reveal about the current state of the labor market.

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This post was written by Angel Smith

Video Transcript

While non farm payrolls are growing steadily, household employment is sliding.

Yahoo Finance’s Shana Smith joins me now with a closer look.

Shana Hey there, Josh.

All right, so this is a trend that has certainly been capturing Wall Street’s attention over the most recent months.

So we wanted to break down exactly what we have seen from the most recent report and then ultimately, what?

That could potentially tell us about what is happening in the US economy at this juncture.

So what you have on the screen right here?

This is the trend that we’ve seen in non farm payrolls.

Now they have continued to grow, remain steady, especially when you compare it to the historical average.

The numbers that we have gotten most recently really point to a jobs market here that remains strong.

I wanna compare that to the trend that we have seen in the household employment survey.

So as you can see, that’s the light blue line here, and that has been declining as the non farm payrolls, which is a survey here of businesses, has been holding steady.

Now it is important to point out that the household employment survey here that brighter blue line here on the screen.

It is a smaller pool in terms of what the survey is, uh, who the survey is asking.

And they are also surveying How holds there So lots of questions.

Just about what?

Uh, indicator is more important or maybe more reliable here in the longer term.

But I wanna talk about the gap that we are seeing here because the gap in the most recent report did widen just a bit.

And this is really what the reaction was on the street to that last print.

And what this, uh, what this chart really breaks down is maybe the theory behind why this is happening.

And there was a new note out from Alpine research really pointing or Alpine macro.

Excuse me, really Pointing to the fact that maybe some of this has to do with immigration, we certainly have seen a surge in immigration over the last several years.

And when you take a look at, it’s estimated about 4 million undocumented immigrants right now live in the US.

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So Alpine macro was pointing to the fact that if just under half of the undocumented immigrants are actually working, that would actually drop or account for about half of the discrepancy that we are seeing between these two charts.

And and I want to point this out because this is also something that big banks like Morgan Stanley.

When you take a look at Goldman, when you take a look at JP.

Morgan have been calling out just this gap that we’ve been seeing in the household and the non par payroll survey and exactly what this signals and why this is happening.

That key question.

Why?

So some of that now being pointed to maybe immigration is having an outside effect or impact on that.

And maybe that’s why we’re seeing these two readings remain so far apart at this point in the economic cycle.

All right, big number coming Friday morning.

Thank you, Shanna.