Jobs Contract 19th Straight Month; Unemployment Rate Inches Lower to 9.4%

This morning, the Bureau of Labor Statistics (BLS) released the July Employment Report.

Nonfarm payroll employment continued to decline in July (-247,000), and the unemployment rate was little changed at 9.4 percent, the U.S. Bureau of Labor Statistics reported today. The average monthly job loss for May through July (-331,000) was about half the average decline for November through April (-645,000). In July, job losses continued in many of the major industry sectors..




Establishment Data



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Highlights

• 247,000 jobs were lost in total vs. 467,000 jobs last month.
• 76,000 construction jobs were lost vs. 79,000 last month.
• 52,000 manufacturing jobs were lost vs. 136,000 last month.
• 119,000 service providing jobs were lost vs. 244,000 last month.
• 44,000 retail trade jobs were lost vs. 21,000 last month.
• 38,000 professional and business services jobs were lost vs. 118,000 last month.
• 17,000 education and health services jobs were added vs. 34,000 added last month.
• 9,000 leisure and hospitality jobs were gained vs. 18,000 added last month.
• 7,000 government jobs were lost vs. 52,000 last month.

A total of 128,000 goods producing jobs were lost (higher paying jobs). It was nearly a clean sweep again this month with education and health services jobs the only real winner for the month.

Note: some of the above categories overlap as shown in the preceding chart, so do not attempt to total them up.

Index of Aggregate Weekly Hours

Work hours inched up to 33.1 from 33.0. Short work weeks contribute to household problems.

Birth Death Model Revisions 2008



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Birth Death Model Revisions 2009



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Birth/Death Model Revisions

After the typical in January in which the Birth/Death Model revisions bore some semblance of reality, the Birth/Death numbers remain in deep outer space. This month was closer to orbit however, as January and July are revision months. The BLS had a chance to catch up this month but did not. As usual their model added jobs.

At this point in the cycle birth death numbers should have been massively contracting for months. The BLS is going to keep adding jobs through the entire recession in a complete display of incompetence.

The Birth/Death numbers have been a joke for at least two years now.

BLS Black Box

For those unfamiliar with the birth/death model, monthly jobs adjustments are made by the BLS based on economic assumptions about the birth and death of businesses (not individuals). Those assumptions are made according to estimates of where the BLS thinks we are in the economic cycle.

The BLS has admitted however, that their model will be wrong at economic turning points. And there is no doubt we are long past an economic turning point.

Here is the pertinent snip from the BLS on Birth/Death Methodology.

• The net birth/death model component figures are unique to each month and exhibit a seasonal pattern that can result in negative adjustments in some months. These models do not attempt to correct for any other potential error sources in the CES estimates such as sampling error or design limitations.
• Note that the net birth/death figures are not seasonally adjusted, and are applied to not seasonally adjusted monthly employment links to determine the final estimate.
• The most significant potential drawback to this or any model-based approach is that time series modeling assumes a predictable continuation of historical patterns and relationships and therefore is likely to have some difficulty producing reliable estimates at economic turning points or during periods when there are sudden changes in trend.

Household Data

In July, the number of unemployed persons was 14.5 million. The unemployment rate was 9.4 percent, little changed for the second consecutive month.

The civilian labor force participation rate declined by 0.2 percentage point in July to 65.5 percent. The employment-population ratio, at 59.4 percent, was little changed over the month but has declined by 3.3 percentage points since the recession began in December 2007.

The number of long-term unemployed (those jobless for 27 weeks or more) rose by 584,000 over the month to 5.0 million. In July, 1 in 3 unemployed persons were jobless for 27 weeks or more.

The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in July at 8.8 million. The number of such workers rose sharply in the fall and winter but has been little changed for 4 consecutive months.

Persons Not in the Labor Force

About 2.3 million persons were marginally attached to the labor force in July, 709,000 more than a year earlier. (The data are not seasonally adjusted.) These individuals, who were not in the labor force, wanted and were available for work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the
survey.

Among the marginally attached, there were 796,000 discouraged workers in July, up by 335,000 over the past 12 months. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The other 1.5 million persons marginally attached to the labor force in July had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

Table A-5 Part Time Status



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The chart shows there are 8.8 million people are working part time but want a full time job. A year ago (not seasonally adjusted) the number was 6 million. This series has stabilized for the last 5 months. Perhaps the high is in or at hand.

Table A-12

Table A-12 is where one can find a better approximation of what the unemployment rate really is. Let's take a look



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Grim Statistics

The official unemployment rate is 9.4% and rising. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

It reflects how unemployment feels to the average Joe on the street. U-6 is 16.3%. Both U-6 and U-3 (the so called "official" unemployment number) are poised to rise further although most likely at a slower pace than earlier this year.

Looking ahead, there is no driver for jobs and states in forced cutback mode are making matters far worse.

Unemployment is likely to continue rising until sometime in 2010.

Depression Level Statistics

I consider these job losses to be depression level totals. Admittedly conditions are not as bad as the great depression, but this is certainly no ordinary recession by any economic measure including lending, housing, bank failures, jobs, the stock market, commodity prices, treasury yields etc. For more on this idea please see Humpty Dumpty On Inflation.

I have been calling for the rate to hit 9.8% by August. With only one month coming, today's report shows that is not going to happen. However, much of the "improvement" in the numbers today are as a result of the participation rate falling by .2%. In other words, the BLS stopped counting.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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