Jobs Decrease by 131,000, Rise by 12,000 Excluding Census; Unemployment Steady at 9.5%; June Revised from -125,000 to -221,000

This morning the BLS reported a decrease of 131,000 jobs. However, that reflects a decrease of 143,000 temporary census workers.

Excluding the census effect, government lost 59,000 jobs. Were the trend to continue, this would be a good thing because Firing Public Union Workers Creates Jobs.

Unfortunately, politicians and Keynesian clown economists will not see it that way. Indeed there is a $26 billion bill giving money to the states to keep bureaucrats employed. This is unfortunate because we need to shed government jobs.

Hidden beneath the surface the BLS Black Box - Birth Death Model added 6,000 jobs. This is one of the saner birth/death revisions in recent months. However, January and July always are.

The civilian labor force participation rate (64.6 percent) and the employment-population ratio (58.4 percent) were essentially unchanged in July; however, these measures have declined by 0.6 percentage point and 0.4 point, respectively, since April.

The drop in participation rate this year is the only reason the unemployment rate is not over 10%. The drop in participation rates is not that surprising because 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 unless Congress does substantially more to support states.

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.



click on chart for sharper image

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.

May, June Revisions

The change in total nonfarm payroll employment for May was revised from +433,000 to +432,000, and the change for June was revised from -125,000 to -221,000.

July 2010 Report

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

Total nonfarm payroll employment declined by 131,000 in July, and the unemployment rate was unchanged at 9.5 percent, the U.S. Bureau of Labor Statistics reported today. Federal government employment fell, as 143,000 temporary workers hired for the decennial census completed their work. Private-sector payroll employment edged up by 71,000.

Unemployment Rate - Seasonally Adjusted



Nonfarm Payroll Employment - Seasonally Adjusted

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

Establishment Data



click on chart for sharper image

Highlights

• 131,000 jobs were lost
• 11,000 construction jobs were lost
• 36,000 manufacturing jobs were added
  
• 38,000 service providing jobs were added
• 6,700 retail trade jobs were added
• 13,000 professional and business services jobs were lost
• 30,000 education and health services jobs were added
• 6,000 leisure and hospitality jobs were added
  
• 202,000 government jobs were lost. Of them, 143,000 were temporary census workers

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 rose .1 to at 33.5 hours and average hourly earnings rose $.02 at $19.02.

Birth Death Model Revisions 2009



click on chart for sharper image

Birth Death Model Revisions 2010



click on chart for sharper image

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, were unchanged in July.

In July, the number of long-term unemployed (those jobless for 27 weeks and over) was little changed at 6.6 million. These individuals made up 44.9 percent of unemployed persons.

The civilian labor force participation rate (64.6 percent) and the employment-population ratio (58.4 percent) were essentially unchanged in July; however, these measures have declined by 0.6 percentage point and 0.4 point, respectively, since April.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged over the month at 8.5 million but has declined by 623,000 since April. 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

About 2.6 million persons were marginally attached to the labor force in July, an increase of 340,000 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



click on chart for sharper image

The key take-away is there are 8,529,00 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.



click on chart for sharper image

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

The private sector hiring increase of 71,000 is very weak for a recovery. That number is not enough to keep the unemployment rate steady. However, the unemployment rate comes from the Household Survey (a phone survey), not from actual payroll data.

For a comparison of BLS jobs to ADP (the largest payroll processor in the US), please see...

ADP vs. BLS Job Reports - Who to Believe?

ADP vs. BLS Tracking Errors - Who to Believe - Update

With the revisions in May and especially June, this report was even weaker than it looks on the surface. This economy is sputtering, not recovering, in spite of trillions of dollars of stimulus.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List