July Employment Report

August 11, 2016

It’s difficult to know what to make of the July employment report, released on Friday, in which the Bureau of Labor Statistics (BLS) announced that the economy added 255,000 jobs (on the heels of a gain of 292,000 in June), while the employment level rose by 420,000.  Considering the following, these numbers are hard to believe:

  • GDP (gross domestic product) rose by only 1.2% in the 2nd quarter, and by only 0.8% in the first quarter.  In per capita terms, that’s zero growth – perilously close to a recession.  Yet we’re to believe that the economy is adding jobs at more than double the rate of population growth, a rate more characteristic of far higher GDP growth?  Seems a stretch.
  • The “Labor Market Conditions Index” – a broader measure of the labor market (of which the BLS data is just one part) used by the Federal Reserve to assess labor market conditions, turned positive for the first time this year in July, but barely.  That index paints a picture of a flat, weak labor market at best.
  • Two days before the release of the BLS report, payroll processing firm ADP estimated that 179,000 jobs were created in July.  This was the 2nd month in a row that the BLS data far exceeded the ADP data.

On the other hand, there are reasons to believe the BLS data.  On the same day that ADP released its estimate, polling firm Gallup’s “Job Creation Index” held steady at a record-high level for the third month in a row.  First time unemployment claims have been running at historically low levels, although it should be noted that not getting laid off isn’t the same thing as getting hired, and the low rate of claims may have as much to do with the changing nature of jobs, making fewer people eligible for unemployment when their work slows down.

On Tuesday, the BLS announced that non-farm productivity fell for the third quarter in a row.  This is consistent with an economy that’s adding jobs in the face of weak demand.  But why?  Why would employers be piling on workers in a flat economy that’s teetering on recession?  Corporate earnings have been declining for several quarters now.  Companies are usually in full-blown, head count-cutting cost control mode by now.  Instead they’re hiring at a healthy clip?  It’s possible.  Given the political climate surrounding the income inequality issue, there seems to have been a collective effort by corporations to blunt some of the criticism by raising entry-level wages and, possibly, to continue hiring long past the point at which they would normally have begun laying people off.

But that won’t last forever.  Shareholders are growing impatient for companies to begin showing actual earnings growth again instead of just slowdowns in the rate of decline.  I have my doubts about how much longer the factors that are putting downward pressure on employment and wages – especially falling per capita consumption and population (labor force) growth – can be held at bay.

 

 


October Employment Report Belies a Stalled Economy

November 6, 2015

This morning’s release of the October employment report by the Bureau of Labor Statistics (BLS) blew away expectations.  According to the BLS, the economy added 271,000 jobs in October vs. expectations for an increase of 190,000.  It even handily beat the top end of the range of expectations – 240,000.  And unemployment fell by one tenth to 5.0%.  The economy must really be on a roll!

Well, maybe not.  A little perspective is in order.  First of all, unemployment didn’t really fall.  In September it was 5.051%.  In October it fell to 5.036% – a decline of only 0.015%.  Rounding the number to two significant digits makes it look like it fell from 5.1% to 5.0%.  Secondly, at the beginning of the report, the BLS observes that:

Over the past 12 months, the unemployment rate and the number of unemployed persons were down by 0.7 percentage point and 1.1 million, respectively.

While technically true, the BLS arrived at these numbers through heavy use of its favorite employment-enhancing trick – claiming that people have dropped out of the labor force.  A true accounting reduces these numbers to 0.3% and 410,000 respectively.  And a true accounting of unemployment puts the number at 8.8%.  The BLS admits in the report that the employment to population ratio is unchanged in the past year.  That’s true.  Take a look at this chart:  Per Capita Employment.  Per capita employment has risen five times in the past twelve months and dropped seven times, for a net loss of 0.03%.  October’s rise was barely a blip.

And the number of unemployed Americans is actually worse than it was ten months ago.  Here’s the chart:  Unemployed Americans.  Again, October’s decline is a barely-noticeable blip in the longer trend.

Earlier this week, Donald Trump took heat for claiming that the Federal Reserve helped the Obama administration with low interest rates and three rounds of quantitative easing.  The implication was that the Federal Reserve did some sort of political favor.  Probably not true, but the end result is the same – it definitely helped Obama with the economy.

A couple of days ago, Janet Yellen, chairperson of the Fed, made clear that an interest rate rise was definitely in the cards in December, leaving analysts scratching their heads over why.  Most of the economic data has been pointing to a slowing economy.  But, I believe, the Federal Reserve is getting desperate to get back in the game, since some are beginning to question its relevance in affecting the economy.  Interest rates at zero and $4.5 trillion of monetary easing have yielded nothing but the weakest economic recovery of the post-war era.  Is the October employment report a quirk, or does Trump have it backwards in this case and perhaps the BLS just threw the Federal Reserve a bone to help it justify its case?


BLS Begins Fudging “Employment Level” in October

November 12, 2014

Because of travel and family obligations, I’m a few days late commenting on the October employment report, released on Friday by the Bureau of Labor Statistics (BLS).

According to the report, the economy added 214,000 jobs in October, short of expectations for 240,000 jobs.  And, of course, unemployment fell once again to 5.8%, which aligns nicely with the number of jobs added.  But the way that they were brought into alignment is almost amusing.  Now that the unemployment rate has fallen below 6%, all of the pressure and media attention on that figure is off.  (Never mind the fact that it got down to that level primarily by claiming that workers left the labor force.)

As the unemployment rate fell, though, attention began to turn to the fact that the percentage of the population that’s actually  employed is still at historically low levels.  So, I suppose, we shouldn’t be surprised that it appears that the BLS has now begun to fudge the “employment level” – the number of Americans employed as determined by the household survey.  In October it jumped by 683,000.  However, if that was the only figure that the BLS fudged, then unemployment would have plunged by four tenths to 5.5%, which surely would have been met with a lot of skepticism.  No problem.  Just claim that 416,000 people rejoined the work force.  Voila!  Per capita employment takes a big jump.  Unemployment drops a tenth.  And the October employment report looks really rosy.

Nobody can believe that 683,000 Americans found work in October.  Two days before the employment report was released, payroll processing firm ADP announced its estimate that the economy added 230,000 jobs in October – a number that is consistent with past months and consistent with the BLS’s establishment survey.  The same day, polling firm Gallup announced that its “U.S. Job Creation Index” actually slipped in October.  The following day, Gallup also announced that its estimate of  “payroll-to-population rate” (per capita employment) actually fell in October to 44.4% from 44.8% in September.  That’s a big one-month drop.  And, that same day, Challenger estimated that layoffs rose sharply in October.  In light of the other data, the BLS’s claim that the employment level rose by 683,000 in October is clearly preposterous.


Unemployment Rises in January

February 1, 2013

The January jobs report, released this morning by the Bureau of Labor Statistics (BLS), was disappointing all the way around.  Nonfarm jobs fell to 157,000 from the December upwardly-revised reading of 196,000.  Private sector jobs rose by 166,000 – short of the consensus forecast of 185,000. 

Unemployment rose by 0.1% to 7.9%.  (If the government was being honest about it, the unemployment rate actually rose to 10.5%.  If they were really, really honest about it, unemployment actually rose to 18.7%.)  The average workweek fell by 0.1 hours.  Per capita employment edged down slightly for the third month in a row – the first time that’s happened since November, 2010 when the economy was still struggling to emerge from the recession. 

On Wednesday, we learned that GDP actually contracted in the 4th quarter.  Economists shrugged it off, attributing it to a one-off plunge in defense spending.  But today’s report may begin to corroborate that the economy is, in fact, struggling once again. 

Here’s the charts of the employment data I’ve been tracking:  Unemployment Chart, Labor Force & Employment Level, Unemployed Americans, Per Capita Employment.  These four charts paint a picture of an economy that’s been stalled for the past few months.  Factor in Wednesday’s GDP report and you have an economy teetering on the brink of recession. 

Not a surprise.  As President Obama pointed out early in his administration, resuscitating American manufacturing is the key to putting the economy back on solid footing.  But here’s an excerpt from today’s report:

Manufacturing employment was essentially unchanged in January and has changed little, on net, since July 2012.

Why should it have changed?  Obama has done absolutely nothing to fix the trade policy that has largely destroyed the manufacturing sector of the economy.  He promised he would, but it was a lie. 

This stubbornly high rate of unemployment is exactly what one would expect when you understand the role our growing population has in eroding per capita consumption (and, with it, per capita employment) and the role that attempting to trade freely with badly overpopulated nations has in fueling our trade deficit. 

* * * * *

Here’s a breakdown of the change in employment reported this morning by the BLS:

  • Retail trade:  + 33,000
  • Construction:  + 28,000
  • Health care:  + 23,000
  • Wholesale trade:  + 15,000
  • Mining:  + 6,000
  • Manufacturing:  no change
  • Financial activities:  no change
  • Professional & business services:  no change
  • Leisure & hospitality:  no change
  • Government:  no change
  • Transportation & warehousing:  – 14,000

 


Sub-Par Job Growth in October, but Employment Level Up

November 4, 2011

http://www.bls.gov/news.release/pdf/empsit.pdf

This morning’s employment report (link provided above) was a mixed bag of bad news and good news which, taken together, only provide further verification of an economy stuck in a “New Normal” mode of high unemployment. 

The bad news is that the BLS’s (Bureau of Labor Statistics) “establishment survey” shows that only 80,000 jobs were added in October, well below the pace of 125,000 needed to keep pace with growth in the labor foce. 

The good news is that the unemployment rate, determined by the BLS’s “household survey,”  fell from 9.1% to 9.0%.  The reason that it fell is more good news – the employment level rose by 277,000 (the 3rd consecutive monthly increase) – a rate that would have reduced unemployment even more if the BLS didn’t claim that the civilian labor force grew by 181,000.  In other words, it used the opportunity to reduce the pool of workers that it claims had given up looking for work. 

Here’s the chart of the work force and employment level:

Labor Force & Employment Level

As you can see, employment level has been slowly rising, but no faster than the real growth in the labor force.  The net result is that the number of unemployed Americans has been holding pretty steady and per capita employment remains stuck at recession lows:

Unemployed Americans     Per Capita Employment

And here’s my monthly update of the BLS data and my calculation of unemployment, along with the chart:

Unemployment Calculation     Unemployment Chart

This economy is headed nowhere, in spite of being propped up with trillions of dollars of stimulus in the past three years, all of which is coming to an end with big federal budget cuts (sure to be followed by more state and local budget cuts) on the horizon.  While some analysts see the potential for a double-dip recession fading, I see it as virtually a sure thing. 

* * * * *

Here’s a breakdown of the 80,000 new jobs reported in the establishment survey:

  • professional & business services:  + 32,000
  • leisure & hospitality:  + 22,000
  • retail trade:  + 16,000
  • health care:  + 12,000
  • mining:  + 6,000
  • manufacturing:  + 5,000
  • construction:  – 20,000
  • government:  – 24,000

Manufacturing employment, where the Obama administration has pinned its hopes for reviving the economy, has been flat for 3 months. 


500,000 American Workers Go Missing in January

February 4, 2011

http://www.bls.gov/news.release/empsit.nr0.htm

According to figures released by the Bureau of Labor Statistics (BLS) this morning (link to the report provided above), it seems that over 500,000 American workers went missing in January.  This is on top of the nearly 1.3 million that had previously vanished since May of 2009.  Nevertheless, the BLS managed to find a silver lining in this story, noting that fewer people seeking work translates into lower unemployment, which fell from 9.4% in December to 9.0% in January. 

But local authorities have grown concerned.  Sniffer dogs have been sighted behind unemployment offices and one can only speculate that they are searching for rumored mass graves of people who have vanished from the unemployment lines.  Layed off workers would be well-advised to avoid the unemployment office until the plight of the missing workers has been determined.

Seriously, folks, does the BLS really expect anyone to believe this morning’s report?  A half million people gave up looking for work?  Have they found some magical way to live without a source of income?  The last I heard, there were only two people who shared in the big mega-millions jackpot in January.  What happened to the other 499,998 people? 

No one will be fooled by this morning’s report.  The jobs data was horrendous.  Instead of the expected 140,000 new jobs, non-farm payrolls added only 36,000.  This is almost 100,000 below the number needed just to keep pace with the growth in the labor force.  So, once again, the government had to come up with some gimmick to gloss over the ugliness of this report, and once again it resorted to the “mysteriously vanishing labor force” trick. 

To be fair, there is a glimmer of good news in the report.  The employment level rose by 117,000 – almost enough to match the growth in the labor force.  For that reason, real unemployment – not the BS number conjured up by the BLS – remained virtually unchanged at 11.8%.  And the more inclusive measure of unemployment – U6a – (which factors in the 1.8 million workers buried in mass graves behind the unemployment offices) – remains unchanged at 21.0%.  And the number of unemployed Americans remains just below its recession peak of 18.9 million workers.  And per capita employment remains near its very lowest level of the recession. 

Here’s the calculation, followed by charts of the data:

Unemployment Calculation

Unemployment Chart  (Notice how U3 and U6, the government’s measures of unemployment, have turned down sharply in the last two months while U3a and U6a, the “un-fudged” versions of the same calculations, have unemployment virtually unchanged in that period.)

Labor Force & Employment Level  (Notice how the red line – the government’s estimation of the labor force – has been trending downward while the real labor force, as a function of the growth in the population (represented by the yellow line) has been rising steadily.)

Unemployed Americans     Per Capita Employment

The reported gain of 36,000 jobs (a figure arrived at from the BLS’s establishment survey) breaks down as follows:

  • Manufacturing:  + 49,000
  • Retail:  + 28,000
  • Health care:  + 11,000
  • Transportation & warehousing:  – 38,000
  • Construction:  – 22,000
  • Professional & business services (temp help):  -11,000

The jump in manufacturing jobs is indeed good news, since this is precisely the sector of the economy where job losses have been the worst for decades.  But I have my doubts that it’s sustainable.  Time will tell. 

Contraction in the last category – “temp help” – is bad news, since analysts have been pointing to growth in that figure over the last few months as a predictor of growth in permanent employment in the future. 

In the meantime, if you’ve recently been laid off, watch your back!


Worst String of Monthly Job Losses on Record

April 3, 2009

This morning, the Bureau of Labor Statistics released the unemployment report for the month of March.  Another 663,000 jobs were lost and U3 unemployment hit 8.5%.  The broadest measure of unemployment, U6, which includes those who have given up looking for work and those who have settled on part-time jobs while still seeking full time employment, hit 16.2% (not seasonally adjusted).  (See http://www.bls.gov/news.release/empsit.t12.htm)

Here’s some additional data that highlights how truly bad the job market is.  The number of unemployed has now risen eleven consecutive months.  This is short of the record of 17 consecutive months from August, 1981 through December, 1982.  However, the total number of unemployed for the current string of months blows away that old record, coming in at 5.49 million vs. the ’81-’82 record of 4.19 million.  In other words, the ranks of the unemployed has exploded at a record pace.  Also, it should be noted that the number of unemployed has grown in 18 of the last 22 months. 

In terms of the number of jobs lost, March marks the 15th consecutive month of job losses, only two months shy of the record of 17 (since record-keeping began in 1939) set in the ’81-’82 recession.  But the current string of job losses, at 5.13 million, blows away the ’81-’82 recession string of 2.84 million.  The number of jobs lost in March, 663,000, is the worst since September of 1945, when the U.S. was quickly winding down its war effort.  (It’d be tough to beat that record.  That month, 1,966,000 jobs were lost at a time when the U.S. population and work force were half of today’s level.)  (See http://data.bls.gov/PDQ/servlet/SurveyOutputServlet for more info.)

What’s worse is that no one expects this string of monthly job losses to end any time soon.  Another Great Depression, when unemployment hit 25% in 1933?  Probably not.  But we’re careening in that direction at a record pace.