Survey says.....

People, a very interesting jobs report this morning, no?

Let's start with the Establishment Survey which reports 114,000 net new non-farm jobs in September.

That's a bad number.

But, revisions to July and August have raised job creation in those months by 86,000 ("The change in total nonfarm payroll employment for July was revised from +141,000 to +181,000, and the change for August was revised from +96,000 to +142,000").

Those are decent numbers.

But, as you may have seen, the blockbuster number is that the unemployment rate fell to 7.8%. And, this did not happen because people left the labor force. Labor force participation was "little changed".

You may ask, if it takes more than 150,000 net new jobs to lower unemployment unless people leave the labor force, and we had 114,000 jobs and no decline in labor force participation, how did unemployment fall .3 percentage points?

Well, unemployment is calculated from the Household Survey, which is separate from the Establishment survey and it (Household) reports that, "total employment rose by 873,000 in September", which is what caused the drop in the unemployment rate.

Obviously, 114,000 is pretty different than 873,000, even allowing for the sampling errors in the surveys. Why the big difference?

Is that because there were 760,000 new farm jobs? Technically it could be, but probably not.

The BLS has a report on the differences between the two surveys. Here is a good summary chart:

Since 2002, the two series track each other closely, though the household survey (the blue line) has been getting further and further away from the establishment survey (the red line):

The biggest difference between the dynamics of the two is that the household survey is way more volatile. Here I've graphed the growth rates of the two and you can see the difference (the household survey is the blue line, the establishment survey is the red line).

This month, one of the two jobs numbers is an outlier. If recent patterns hold, either the establishment survey number will get revised up or the household survey number will reverse itself in the next month (or some combination of the two).

While the household number is fantastic news for the economy, we need to realize that it might not last, given the high volatility of the dynamics of that survey.