By Hugh, who is a long-time commenter at Naked Capitalism. Originally published at Corrente (archives).
The big number is that unemployment dropped two-tenths of a percent from 8.3% to 8.1%. However, the illusory nature of this drop can be seen in the fact that the number of jobs increased only 96,000. Essentially, what happened is that the unemployment rate declined, not because people found jobs but because the BLS defined them out of the labor force. Both of these numbers are seasonally adjusted.
In revisions of jobs numbers from the previous two months, June was revised down 19,000 from 64,000 to 45,000. It had originally been reported at 80,000, already a weak number, in the July report. The good, not great, number of 163,000 for July was decreased by 22,000 to 141,000. So a downward adjustment of 41,000 overall.
Before beginning, I should note that I look at both seasonally adjusted and unadjusted data. The official numbers the most cited are seasonally adjusted. Seasonal adjustment is a smoothing of the data flattening out the hills and valleys of employment and jobs over the course of the year. However, employment and jobs (which are not the same thing and come from two different surveys) are seasonal. So if you want to know who actually is employed and what jobs are doing, you need to look at the unadjusted numbers.
With that, the potential labor force as represented by the non-institutional population over 16 (which is never seasonally adjusted) or NIP increased 212,000 from 243.354 million to 243.566 million. Multiplying this by the employment-population ratio (58.3% seasonally adjusted) gives us 124,000 an estimate of the number of jobs needed to keep up with population growth in August. So you can see immediately that the 96,000 jobs reported created in August (seasonally adjusted) did not even keep up with population growth.
Looking at the Household data (people), in August, the labor force (employed + those defined as unemployed, no job but looked for one in the 4 weeks before the survey was conducted), declined 368,000 from 155.013 million to 154.645 million (seasonally adjusted). This is a strongly negative number. Last year in 2011, for example, the labor force grew 316,000 July-August (seasonally adjusted); in 2010, it grew 325,000.
This negativity is magnified in the unadjusted number. Unadjusted, the labor force contracted 1.271 million from 156.526 million to 155.255 million, compared to seasonal contractions of 468,000 in 2011 and 592,000 in 2010.
These declined are directly reflected in the participation rate (which is the ratio of actual labor force to the potential labor force or NIP). Seasonally adjusted, the participation rate declined two-tenths of a percent to 63.5% and cliff dived four-tenths of a percent to 63.7% unadjusted.
In August, the number of employed seasonally adjusted decreased 119,000 from 142.220 million to 142.101 million versus increases of 304,000 in 2011 and 199,000 in 2010.
Unadjusted, employment decreased 568,000 versus drops of 49,000 in 2011 and 115,000 in 2010.
As we already know from the fall in the U-3 or official unemployment rate, the number of unemployed decreased in August 250,000 from 12.794 million to 12.544 million, seasonally adjusted.
Unadjusted, the number of unemployed fell off 704,000.
Now normally a decline in the number of unemployed would be a good thing, but not when the number of employed also falls. In that case, the sum of these two or the decline in the size of the labor force represents, not people who left the labor force, but people the BLS defined out of it. This illustrates the central flaw in the way the BLS approaches its work. These people defined out of the labor force did not stop needing a job. They stopped looking for one.
In August, the U-6, the BLS’ broader measure of un- and underemployment, decreased seasonally adjusted 0.3% to 14.7%.
The seasonally adjusted U-6 rate (14.7%) represents 23.136 million people and reflects the 12.544 million of the U-3 unemployed seasonally adjusted, 8.031 million involuntary part-time workers (down 215,000 from July), and 2.561 million marginally attached to the labor force (up 32,000; these have looked for work in the last year but not in the last month). This is the number Romney has been citing recently.
The BLS measure of its undercount, those it defines as not in the labor force who want work but have not looked for work in the last month (seasonally unadjusted) increased 194,000 in August from 6.837 million to 7.031 million. Now remember unadjusted the labor force decreased by 1.271 million. This was more than twice the usual seasonal contraction. Are we really to believe that some 400,000-500,000 extra people this year decided they no longer wanted a job?
This kind of discrepancy is a prime reason I have developed an alternate calculation to measure the BLS undercount. In my alternate calculation, I compare the current labor force to where we would expect it to be in a solid economic expansion: labor participation rate of 67%. The difference between these two is my measure of the undercount.
.67(243.566 million) = 163.189 million (where the labor force should be)
163.189 million — 154.645 million = 8.544 million (the real BLS undercount)
This is an increase of 510,000 from the July figure of 8.034 million. This is the capture of the undercount that the BLS misses.
With this number we can now go back and calculate where the U-3 and U-6 really are, that is the real unemployment and real disemployment rates.
Real unemployment: 12.544 million (U-3 unemployment) + 8.544 million (undercount) = 21.088 million (up 260,000 from July)
Real unemployment rate: 21.088 million / 163.189 million = 12.9% (up from 12.8% in July)
Real disemployment: Real unemployment + involuntary part time workers = 21.088 million + 8.031 million = 29.119 million (up 45,000 from 29.074 million in July)
Real disemployment rate: 29.074 million / 163.189 million = 17.8% (unchanged from July)
The U-3 long term unemployed (those unemployed for more than 6 months and who have looked for work in the last month) decreased 152,000 to 5.033 million. The long term unemployed are 40% of the unemployed (seasonally adjusted). This figure is vastly understated because it does not take into account millions long term out of a job in the undercount.
In unemployment by race, overall unemployment among whites declined two-tenths of a percent to 7.2% with male over 20 unemployment decreasing 0.1% to 6.8%; female over 20 unemployment decreasing 0.3% to 6.5%; and teen unemployment both sexes increasing 1.3% to 22.8%.
African American unemployment was unchange at 14.1% with African American male over 20 unemployment decreasing 0.5% to 14.3%; African American female over 20 unemployment increasing 0.5% from 11.5% to 12%; and African American teen unemployment both sexes increasing 1.3% to 37.9%. Overall the African American unemployment rate (U-3 seasonally adjusted) remains about twice that of whites.
Turning to the Establishment survey, 96,000 nonfarm jobs seasonally adjusted (SA) were added in August bringing the total to 133.330 million. This is in keeping with last year’s number of 85,000. Private employers added 103,000 jobs and government lost 7,000. Most of the jobs added were in the low quality job category: food services, professional and technical services, and ambulatory care. Manufacturing lost 15,000 jobs.
Unadjusted (NSA), 252,000 were added, as compared with 135,000 in 2011 and 159,000 in 2010.
Average weekly hours for all private workers were unchanged at 34.4 hours. Average hourly earnings decreased one cent to $23.52 and average weekly earnings declined 34 cents to $809.09.
Echoing this, average weekly hours for production and nonsupervisory (blue collar) workers were unchanged at 33.7 hours. Average hourly earnings decreased one cent to $19.75, and average weekly earnings declined 33 cents to $665.58.
This continues the trend of slow erosion in workers’ wages.
Overall, this is another nothing to slightly worsening report. Real unemployment hit 21 million and edged up to 12.9%. Real disemployment remained unchanged at 17.8% with the increase in the unemployed offset by a decrease in involuntary part timers. Wages and hours went nowhere, and the number of jobs created seasonally adjusted did not keep up with population growth. The one ray of sunshine is that the number of jobs created seasonally unadjusted was a good 252,000, although the quality of these jobs was not good. But even this is conditioned because the two surveys on which the BLS report was based were at odds.
Household data (Employment/unemployment)
Statistical significance: +/ – 400,000
The A tables: http://www.bls.gov/cps/cpsatabs.htm
A 1 for most information and categories
A 2 Unemployment by race
A 8 Part time workers
A 12 Duration of unemployment
A 15 U 6 un- and under employment
A 16 Persons not in labor force
Establishment date (jobs)
Statistical significance: +/ – 100,000
The B tables: http://www.bls.gov/ces/cesbtabs.htm
B 1 Total jobs and jobs by industry/type
B 2 Weekly hours, all employees
B 3 Hourly and weekly earnings, all employees
B 6 Weekly hours, blue collar
B 7 Hourly and weekly earnings, blue collar
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Plenty of subsidies to Big Oil: how many jobs does Big Oil create in the US? I’ve read less than 600K. Republican tax cuts have been in place for a decade. Let Republicans go out and film the job search process, from job application, to interview, if there is one, to job offer, if there is one. Confront Republicans, because this is the first time in 40 years Republicans can’t say tax cuts create US jobs.
Jobs in oil and gas extraction are right around 200,000. Jobs in support of these activities probably something less than this. The total, my guesstimate, would probably be in the 350K area.
More austerity will fix this!
Wait, are we talking about “JAWBS”, for god’s sake?? You know, the “service industry”? Those “jawbs?” Oh, right, just at or above minimum wage. Fucking fantastic! All is right and God is in his Kingdom! Get real, people…these are NOT what most people used to think about as conventional
“jawbs”, no way. But, point of fact, that’s where a shitload of the “unemployed” eventually find a paycheck. OOOOH, Obama, dude, you done good, dude, read GOOD! Give me a fricking break!
This has been going on since the 1990s, at least. Someone had to populate Clinton’s retail economy.
At this point, it’s not even news anymore.
The numbers look like successfully achieved policy to me, fully supported by both legacy parties. Those who have jobs are desperate to keep them, those without are desperate to get them. Wages get pushed down to world levels, and corporate profits have never been higher. Also, servants, security guards, and, er, service providers come cheap and exhibit compliance.
So what’s not to like?
So what’s not to like you ask?
I was lucky enough to have a brilliant anthropologist as one of my teachers along my educational route. Looking at our society from an anthropological perspective has one describing current humanity like clutches of those zombie ant colonies.
What we are living through at this time certainly does give new meaning to the term “civilized”.
Seems more like brainwashed by TV to me.
The lesson to take from the Obama, ahem, recovery is that the number of full time, well paying jobs has fallen off a cliff. How will the Fed fiscal deficit, in real terms trending at 10% GDP, be reigned back with a collapsing tax base? Clue it won’t. This is the problem with endless QE it acts as a hidden tax on those who have last use of money, ordinary workers, and it rewards enormously those who have first use, the FIRE sector and government.
And now we are apparently about to have another trillion dollar ‘stimulus’, so another tax increase on the middle class to goose a stock market already at record highs and to stimulate a housing market that was declared brain dead years ago. Central planning has never worked, ever ever, but we will have to learn that lesson again.
As for the gubermint propaganda, it’s becoming harder for even the most slavish MSM supporters of the status quo to report ‘falling’ unemployment with a straight face. The election is two months away but the blatant nature of the misreporting is making the exercise increasingly self defeating.
Canada added 34,000 jobs in August. At the usual 10 to 1 ratio (Canada has 1/10 the population) , the U.S. would have added 340,000. Strikingly, Ontario (Canada’s largest province and the most manufacturing-oriented) lost 25,000 jobs in August.
What a sad post. Unemployment fell why it rose in July. What a joke you do not understand.
Capitalism is central planning. Nor is “QE” central planning as the asset is made into private finance.
Please post better. You aren’t even trying.
let those over 55 buy into medicare to encourage early retirement
getting an individual plan at a reasonable cost is a burden after years of employer provided group coverage
and the premium dollars will support the program
And Brian says what? I’ll bet he /she thinks that meant something.
Well, no, actually they are going to end Medicare “as we know it” for anyone under 55. Until they also end it for people over 55, because that would happen next. Expansion is not on the table.
The important thing to remember is the President could end unemployment and put people back to work immediately with an executive order, just as FDR did with the WPA.
This is an intentional policy. Your unemployed kid, neice, husband, sister, are dangling on the edge of poverty for no reason but ambition and naked greed.
Here’s your takeaway: It’s not going to get better. This is the new normal. Get used to it.
The Ones don’t care. Profits are sky high. Their stock market is lovin’ it. This is their economy. They want to break the middle class: D.C. is executing the plan. Oh, but they also want your hero worship and admiration, so be sure to buy lots of tickets to movies about debonaire action hero billionaires. He’s such an adorable rascal when he breaks the law for the greater good!
So, who do you support…..ADP or BLS? If the benchmark revisions by the BEA come back with 750,000 more jobs created than expected, what then? Considering the BLS is still using recession hedonics from 2008-9 in their calculations, that may be screwing up the actual job creation numbers……even a bunch of part time ones. But that has been going on since the 90’s(really the 80’s).
This happened in 2005 and I got my azz reamed in the market.
Even though the error margin is 4 times greater in the Household (people) survey, I would say look to it for direction and look especially at the unadjusted numbers and how the changes in them compare to previous years (principally the past two but for some analyses the last 10-15 years).
As you note, the Establishment survey (jobs) has modeling problems, especially at the level of seasonal adjustment.
ADP, UI, and Pew are other sources, but so far at least I have not found them to be more useful. One source that I don’t use and probably should investigate is tax receipts.
Paul Craig Roberts on spinning economic news.