Employment Level Falls by 43,000

November 4, 2016

The media is ballyhooing the October employment report as evidence of strong job growth and a strong labor market.  Don’t be fooled.

Sure, the headline numbers look good.  According to the establishment survey, the private sector added 142,000 jobs and unemployment fell to 4.9% (from 5.0% in September).  That’s good.  However, in the new normal where 100,000 is the new zero, it’s not great.

But look deeper.  The employment level – the number of people employed according to the household survey – actually fell by 43,000 in October.  The drop in unemployment?  That’s only due to a supposed decline of 195,000  workers in the labor force – the old “vanishing labor force” trick that the Obama administration has used often to mask the reality of a weak labor market.  In fact, with the population growing by 224,000 in October, the labor force grew by over 100,000.  Without that trick, unemployment actually rose by a tenth of a percent in October, and an honest measure of unemployment – one that grows the labor force along with the growth in population – has unemployment at 7.9%.

Regarding the employment level, it’s also worth noting that since February it has risen by 851,000.  That’s an average increase of 106,000 per month – barely keeping pace with growth in the population.  Consequently, there’s been no improvement in the historically high rate of 7.9% unemployment (the rate it would be if the labor force grew in proportion to the population).

It’s also worth noting that per capita employment – the employment level divided by the population – is exactly where it was in February.  No improvement.

October’s employment report is one more piece of evidence that the economy continues to stagger along in a zombie-like state.

Next up:  the September report on the trade deficit, also released this morning.

 


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?


Surprise! More Great Jobs News in October! (Just before the Election)

November 2, 2012

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

Although all the “experts” maintain that it’s impossible for the federal government to manipulate the monthly employment report figures, you can’t help but wonder.  At a time when all other economic data shows a stalled or barely-growing  economy, we suddenly get two months of rosy employment reports.  Last month it was the household survey that claimed that the employment level grew by 873,000 jobs, cutting the unemployment rate a whopping 0.3% in one month to exactly 0.1% better than when President Obama took office.  This month, it’s the establishment survey’s turn, claiming that payrolls grew by 171,000, far exceeding expectations of about 125,000.  And, once again, the household survey added another 410,000 jobs.  But, probably fearing that people would begin to take seriously those who claim that the figures are massaged, the household survey also claimed that 578,000 people re-entered the work force, resulting in a small rise of 0.1% in unemployment, raising that figure to 7.9% – exactly where it stood when the president took office. 

To top it all off, per capita employment rose to the highest level since the recovery from the “Great Recession” began in 2010.

Come on, you have to admit that all of this seems just a little fishy.  Casting more suspicion on the data is the fact that the average workweek shrank by 0.1 hours and average hourly earnings fell by one cent.  Those aren’t things that happen in periods of robust job growth.

Nevertheless, here are the charts of the data:  Unemployment Chart     Per Capita Employment     Labor Force & Employment Level     Unemployed Americans

* * * * *

The breakdown of the new jobs, according to the establishment survey is as follows:

  • Professional & business services:  + 51,000
  • Retail trade:  + 36,000
  • Health care:  + 31,000
  • Leisure & hospitality:  + 28,000
  • Construction:  + 17,000
  • Manufacturing:  unchanged
  • Wholesale trade:  unchanged
  • Transportation & warehousing:  unchanged
  • Information:  unchanged
  • Financial activities:  unchanged
  • Government:  unchanged
  • Mining:  – 9,000

The growth in construction jobs is the first in a very long time.  The report also points out that manufacturing jobs have been flat since April.  The report also notes that job growth in August and September was revised upward significantly, by a total of 84,000 jobs.