Change in Total Non Farm Payrolls Vs. Job Hires

A Zerohedge article describes how job hires are correlated to the change in payrolls.

A discrepancy occurred from 2010 onwards as layoffs went down.

1) The nonfarm payroll number is a measure of the number of U.S. workers in the economy that excludes proprietors, private household employees, unpaid volunteers, farm employees, and the unincorporated self-employed.

2) The job hire number is the amount of people that are actually getting a job per month. So if job hires increase, the amount of workers in the economy increase, if all else stays equal.

But the amount of workers in the economy also depends on the amount of layoffs.

=> Change in amount of workers in the economy (blue chart) = job hires (red chart) – layoffs

A discrepancy occurred from 2010 onwards as layoffs went down. So the increase in payrolls was not due to increased hiring, but due to a decrease in layoffs.

Conclusion: The importance of monitoring this chart is to know how much of the increase in payrolls is due to hiring. Because hiring is the real driver in the jobs market.

Correlation: Net Turnover Vs. Change in Non-Farm Payrolls Vs. Change in Unemployment Rate

A Zerohedge article caught my attention. There is another way to calculate the non-farm payroll numbers and this is called the JOLTS (Job Openings and Labor Turnover) data. When you subtract hires and separations from each other, you get the change in non-farm payroll numbers.

Change in NFP = Hires – Separations.

As you can see here, the charts do match with each other and it looks like the JOLTS data is more accurate than the NFP data (which gets revised a lot). This correlation isn’t a very important one, but you can use the JOLTS data to predict the NFP data and with NFP data, you can predict the trend of the unemployment rate.

This brings me to this more interesting chart.

Here you can see the change in NFP data versus the change in unemployment rate. As you can see, whenever the NFP changes to the downside (less people get jobs), the unemployment rate of change edges upwards.

So, the key is to watch these JOLTS and NFP data and predict the curve of the unemployment rate.