Jobs Decrease by 125,000, Rise by 100,000 Excluding Census; Unemployment Rate Drops to 9.5%; A Look at the Details

This morning the BLS reported a decrease of 125,000 jobs. However, that reflects a decrease 225,000 temporary census workers. Last month there was an increase of 411,000 temporary census workers. Next month will also likely be negative due to the dismissal of more temporary workers.

Excluding the census effect, the economy added 100,000 jobs but interestingly 20,500 of them were private temporary jobs. Temporary jobs have become a way of life.

Excluding the census effect, government added 17,000 jobs. That is going to change in the coming months (possibly dramatically depending on Congressional stimulus actions) as states are forced to layoff workers for budgetary reasons.

That will be a good thing because Firing Public Union Workers Creates Jobs. Unfortunately, politicians and Keynesian clown economists will not see it that way.

Hidden beneath the surface the BLS Black Box - Birth Death Model added 145,000 jobs.

However, as I have pointed out many times before, the Birth/Death numbers cannot be subtracted straight up to get a raw number. It contributed to this month's employment total for sure, but the BLS will not disclose by how much.

On the whole, this was an OK jobs report (depending on your expectations), yet perhaps as good as it gets for a while.

The unemployment rate dropped only because of a declining participation rate. Last month the number of unemployed was 15 million. This month it was 14.6 million. Clearly the economy did not add 400,000 jobs.

The drop in participation rate was not that surprising because (as I expected) some of the long-term unemployed stopped looking jobs, or opted for retirement.

Nonetheless, I still do not think the top in the unemployment rate is in and expect it may rise substantially later this year as the recovery heads into a coma and states are forced to cut back workers.

Employment and Recessions

Calculated risk has a great chart showing the effects of census hiring as well as the extremely weak hiring in this recovery.



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The dotted lines tell the real story about how pathetic a jobs recovery this has been. Bear in mind it has taken $trillions in stimulus to produce this.

June 2010 Report

Please consider the Bureau of Labor Statistics (BLS) June 2010 Employment Report.

Total nonfarm payroll employment declined by 125,000 in June, and the unemployment rate edged down to 9.5 percent, the U.S. Bureau of Labor Statistics reported today. The decline in payroll employment reflected a decrease (-225,000) in the number of temporary employees working on Census 2010. Private-sector payroll employment edged up by 83,000.

Unemployment Rate - Seasonally Adjusted



Nonfarm Payroll Employment - Seasonally Adjusted

Since September 2009, temporary help services employment has risen by 362,000.

Establishment Data



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Highlights

• 125,000 jobs were added
• 22,000 construction jobs were lost
• 9,000 manufacturing jobs were added
  
• 91,000 service providing jobs were added
• 1,000 retail trade jobs were added
• 46,000 professional and business services jobs were added
• 17,000 education and health services jobs were added
• 37,000 leisure and hospitality jobs were added
  
• 208,000 government jobs were added

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

Production and non-supervisory work hours was flat at 33.4 hours and average hourly earnings
was flat at $19.00.

Birth Death Model Revisions 2009



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Birth Death Model Revisions 2010



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Birth/Death Model Revisions

The BLS Birth/Death Model methodology is so screwed up and there have been so many revisions and up it is pointless to further comment other than to repeat a few general statements.

Please note that one cannot subtract or add birth death revisions to the reported totals and get a meaningful answer. One set of numbers is seasonally adjusted the other is not. In the black box the BLS combines the two coming out with a total. The Birth Death numbers influence the overall totals but the math is not as simple as it appears and the effect is nowhere near as big as it might logically appear at first glance.

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).

Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another.

Household Data

Both the number of unemployed persons, at 14.6 million, and the unemployment rate, at 9.5 percent,edged down in June.

In June, the number of long-term unemployed (those jobless for 27 weeks and over) was unchanged at 6.8 million. These individuals made up 45.5 percent of unemployed persons.

The number of unemployed reentrants to the labor force fell by 286,000 in May, offsetting an increase in April.

The civilian labor force participation rate fell by 0.3 percentage point in June to 64.7 percent. The employment-population ratio, at 58.5 percent, edged down over the month.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 8.6 million, was little changed over the month but was down by 525,000 over the past 2 months. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

[Mish Note: In January the number was 8.3 million]

Persons Not in the Labor Force

In June, about 2.6 million persons were marginally attached to the labor force, an increase of 415,000 from a year earlier. (The data are not seasonally adjusted.) These individuals 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.

Table A-8 Part Time Status



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The key take-away is there are 8,627,00 of workers whose hours may rise before those companies start hiring more workers.

Table A-15

Table A-15 is where one can find a better approximation of what the unemployment rate really is.



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Grim Statistics

The official unemployment rate is 9.5%. 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 16.5%.

Looking ahead, there is no driver for jobs. Moreover, states are in forced cutback mode on account of shrinking revenues and unfunded pension obligations. Shrinking government jobs and benefits at the state and local level is a much needed adjustment. Those cutbacks will weigh on employment and consumer spending for quite some time.

Expect to see structurally high unemployment for years to come.

Keep in mind that huge cuts in public sector jobs and benefits at the city, county, and state level are on the way. These are badly needed adjustments. However, economists will not see it that way, nor will the politicians.

Recap

All things considered, this report looks OK on the surface (depending of course on what your expectations were headed into the report). Beneath the surface, a close inspection of the details shows problems like government hiring and temporary employment hiring.

The reported jobs were barely enough to hold the unemployment rate steady, yet the unemployment rate only dropped because workers opted out of the work force.

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