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Friday, August 02, 2013 9:25 AM

Establishment Survey: +162K Jobs, May and June Revised Lower; Household Survey: +227K; Part-Time Jobs +103,000

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Initial Reaction

The establishment survey showed a gain of 162,000 jobs.

The previous two months were revised lower. The employment change for May revised down by 19,000 (from +195,000 to +176,000), and the employment change for June revised down by 7,000 (from +195,000 to +188,000).

The unemployment rate dropped 0.2 to 7.4%.

Explaining the Unemployment Rate Drop

  • Employment rose by 227,000 of which 103,000 were part-time jobs. 
  • The Civilian Labor Force Declined by 37,000 even though population rose by 204,000.
  • Those "Not in Labor Force" rose by 240,000.
  • Participation Rate fell 0.1 to 63.4%, a mere 0.1 higher than the low of 63.3% dating back to 1979.

July BLS Jobs Statistics at a Glance

  • Payrolls +162,000 - Establishment Survey
  • US Employment +227,000 - Household Survey
  • US Unemployment -263,000 - Household Survey
  • Involuntary Part-Time Work +19,000 - Household Survey
  • Voluntary Part-Time Work +84,000 - Household Survey
  • Baseline Unemployment Rate -0.2 - Household Survey
  • U-6 unemployment -0.3 to 14.0% - Household Survey
  • Civilian Labor Force -37,000 - Household Survey
  • Not in Labor Force -240,000 - Household Survey
  • Participation Rate -0.1 at 63.4 - Household Survey

Quick Notes About the Unemployment Rate

  • 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.
  • In the last year, those "not" in the labor force rose by 1,598,000
  • Over the course of the last year, the number of people employed rose by 2,035,000 (an average of 170,000 a month)
  • In the last year the number of unemployed fell from 12,745,000 to 11,514,000 (a drop of 1,231,000)
  • Percentage of long-term unemployment (27 weeks or more) is 37.0%, an increase of 0.3 from last month. Once someone loses a job it is still very difficult to find another.
  • 8,245,000 workers who are working part-time but want full-time work. A year ago there were 8,245,000. There has been no improvement in a year. This is a volatile series.

June 2013 Jobs Report

Please consider the Bureau of Labor Statistics (BLS) July 2013 Employment Report.

Total nonfarm payroll employment increased by 162,000 in July, and the unemployment rate edged down to 7.4 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in retail trade, food services and drinking places, financial activities, and wholesale trade.

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

Unemployment Rate - Seasonally Adjusted

Month to Month Changes Since 2009

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Change From Previous Month by Job Type

Hours and Wages

Average weekly hours of all private employees fell 0.1 to 34.4 hours. Average weekly hours of all private service-providing employees fell 0.1 to 33.2 hours. Average hourly earnings of all private workers fell $0.02 to $23.98. Average hourly earnings of private service-providing employees fell $0.02 to $23.69.

Real wages have been declining. Add in increases in state taxes and the average Joe has been hammered pretty badly. For 2013, one needs to factor in the increase in payroll taxes for Social Security.

For further discussion of income distribution, please see What's "Really" Behind Gross Inequalities In Income Distribution?

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 2012

Birth Death Model Adjustments For 2013

Birth-Death Notes

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

In general, analysts attribute much more to birth-death numbers than they should. Except at economic turns, BLS Birth/Death errors are reasonably small.

For a discussion of how little birth-death numbers affect actual monthly reporting, please see BLS Birth/Death Model Yet Again.

Table 15 BLS Alternate Measures of Unemployment

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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 7.4%. However, if you start counting all the people who 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 14.0%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

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 over 9%. In addition, there are 8,245,000 people who are working part-time but want full-time work.

Grossly Distorted Statistics

Digging under the surface, much of the drop in the unemployment rate over the past two years is nothing but a statistical mirage coupled with a massive increase in part-time jobs starting in October 2012 as a result of Obamacare legislation.

Mike "Mish" Shedlock

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