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Friday, August 03, 2012 10:23 AM


Headline Jobs +163,000, But Household Survey Shows -195,000 Jobs; Unemployment +.1 to 8.3%


ADP got the headline job number correct, I certainly didn't. However, one look beneath the surface shows this was actually an anemic jobs report.

Unemployment was up, and the household survey shows a loss of 195,000 jobs. The household numbers are even worse because part-time employment went up.

Jobs Report at a Glance

Here is an overview of today's release.

  • US Payrolls +163,000 - Establishment Survey
  • US Employment -195,000  - Household Survey
  • US Unemployment Rate +.01 at 8.3% - Household Survey
  • The Civilian Labor Force fell by 150,000. Otherwise the unemployment rate would have risen more.
  • Average workweek for all employees on private nonfarm payrolls steady at 34.5 hours
  • The average workweek for production and nonsupervisory employees on private nonfarm payrolls steady at 33.7 hours.
  • Average hourly earnings for all employees in the private nonfarm workers sector rose by 2 cents.
  • The change in total nonfarm payroll employment for May was revised from +77,000 to +87,000, and the change for June was revised from +80,000 to +64,000.

Recall that the unemployment rate varies in accordance with the Household Survey not the reported headline jobs number, and not in accordance with the weekly claims data.

Quick Notes About the Unemployment Rate

  • US Unemployment Rate +.1 to 8.3% 
  • In the last year, the civilian population rose by 3,683,000. Yet the labor force only rose by 1,655,000.
  • This month the Civilian Labor Force fell by 150,000.
  • This month, those "not" in the labor force increased by 348,000 to 88,340,000, another record high. If you are not in the labor force, you are not counted as unemployed. 
  • In the last year, those "not" in the labor force rose by 2,027,000 
  • Over the course of the last year, the number of people employed rose by 2,770,000.
  • Participation Rate was steady at 63.8%;
  • There are 8,246,000 workers who are working part-time but want full-time work, an increase of 36,000
  • Long-Term unemployment (27 weeks and over) was 5.185 million a decline of 185,000.
  • Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

Over the past several years people have dropped out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low. Some of this was due to major revisions last month on account of the 2010 census finally factored in. However, most of it is simply economic weakness.

June 2012 Jobs Report

Please consider the Bureau of Labor Statistics (BLS) July 2012 Employment Report.

Total nonfarm payroll employment rose by 163,000 in July, and the unemployment rate was essentially unchanged at 8.3 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in professional and business services, food services and drinking places, and manufacturing..

Click on Any Chart in this Report to See a Sharper Image

Unemployment Rate - Seasonally Adjusted



Nonfarm Employment - Payroll Survey - Annual Look - Seasonally Adjusted



Employment is above the total just prior to the 2001 recession, and about where it was in 2005.

Nonfarm Employment - Payroll Survey January 2008 through July 2012 - Seasonally Adjusted



click on any chart for sharper image

Between January 2008 and February 2010, the U.S. economy lost 8.8 million jobs.

Since the employment low in February 2010, nonfarm payrolls have expanded by about 4.3 million jobs. Of the 8.8 million jobs lost between January 2008 and February 2010, approximately 48.8% percent have been recovered (not accounting for normal demographics growth)

Statistically, 125,000+- jobs a month is enough to keep the unemployment rate flat. For a discussion, please see Question on Jobs: How Many Does It Take to Keep Up With Demographics?

Thus far in 2012, job growth has averaged 151,000 per month, about the same as the monthly average for 2011 (+153,000).

The average employment gain over the last 29 months has been 138,000, barely enough (statistically speaking) to make a dent in the unemployment rate.

Yet, the civilian unemployment rate has fallen from 9.8% to 8.3%.

Current Report Jobs



Average Weekly Hours



Average Hourly Earnings vs. CPI



BLS Birth-Death Model Black Box

The BLS Birth/Death Model is an estimation by the BLS as to how many jobs the economy created that were not picked up in the payroll survey.

The Birth-Death numbers are not seasonally adjusted, while the reported headline number is. In the black box the BLS combines the two, coming up with a total.

The Birth Death number influences the overall totals, but the math is not as simple as it appears. Moreover, the effect is nowhere near as big as it might logically appear at first glance.

Do not add or subtract the Birth-Death numbers from the reported headline totals. It does not work that way.

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 as noted by numerous recent revisions.

Birth Death Model Adjustments For 2011



Birth Death Model Adjustments For 2012



Birth-Death Note

Once again: Do NOT subtract the Birth-Death number from the reported headline number. That approach is statistically invalid.

Household Survey Data



click on chart for sharper image

In the last year, the civilian population rose by 3,683,000. Yet the labor force only rose by 1,655,000. Those not in the labor force rose by 2,027,000 to yet another record high 88,340,000.

That is an amazing "achievement" to say the least, and as noted above most of this is due to economic weakness not census changes.

Decline in Labor Force Factors

  1. Discouraged workers stop looking for jobs
  2. People retire because they cannot find jobs
  3. People go back to school hoping it will improve their chances of getting a job
  4. People stay in school longer because they cannot find a job

Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

Part Time Status



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There are 8,246,000 workers who are working part-time but want full-time work.

BLS Alternate Measures of Unemployment



click on chart for sharper image

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

Notice I said "better" approximation not to be confused with "good" approximation.

The official unemployment rate is 8.3%. 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.

U-6 is much higher at 15.0%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Duration of Unemployment



Long-term unemployment remains in a disaster zone.

Grossly Distorted Statistics

Given the complete distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is easy to misrepresent the headline numbers.

Digging under the surface, the drop in the unemployment rate over the past two years is nothing but a statistical mirage. Things are much worse than the reported numbers indicate.


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