Yves here. Due to a communication failure between Lambert and me, you are getting Hugh’s report on the monthly employment release late. Apologies!
By Hugh, who is a long-time commenter at Cfdtrade. . A complete archive of Hugh’s reports can be found .
The Brief Version
The most recent attempt to explain away the jobs crisis is to reset the level of structural employment, the non-accelerating inflationary rate of unemployment (NAIRU), at 6.6%. This means that the unemployment rate can not descend further without sparking inflation. Although this month’s unemployment rate inched up to 6.7%, under this reasoning, it is still game over, mission accomplished as lambert would say, on the jobs front. The argument for this higher level of structural unemployment runs like this. The job market is tightening as witnessed by higher wages and a greater willingness of workers to quit their present jobs in search of better ones. The February data support neither of these propositions. In February, average weekly wages for 4/5 of the labor force fell and are currently running below inflation on a yearly basis. The number of workers quitting their jobs as reflected in the unemployment numbers has been on the decline for the last two years and represents a relatively small fraction (7.5%) of the unemployed.
Bad weather has probably had no effect on the jobs numbers because of the way these are calculated. If you worked one hour during the reference week, you are counted as having a job. Bad weather could have some effect on the wage data, but we have had bad weather in both December and January with very little effect on them. It is interesting though that while the bottom 4/5 of workers lost $1.09 in wages a week in February due to declining hours, the top 20% gained $7.61 in them.
In seasonal terms, February marks the beginning of the rebuild in jobs after the large post-Christmas job losses. Unadjusted, that is where the economy is now, the number of unemployed was little changed, while the number of employed rose by 600,000. Most of these came from outside the labor force and most found full time employment. The business survey reported 750,000 new jobs in February. However, 450,000 of these were in state and local education, possibly tied to the end of the winter holidays. Healthcare which had been a major driver of jobs growth has gone noticeably cold, probably as a consequence of Obamacare.
I have yet to come up with a satisfactory adjustment for where the participation rate should be taking into account the effects of Boomer retirements. My back of the envelope calculations suggest a reduction of no more than 0.5% which would still leave my calculated measures of unemployment and unemployment well over 10%. The jobs crisis, both in terms of numbers and quality, is still very much with us.
Potential Labor Force
In January, the potential labor force as defined by the Civilian Non-Institutional Population over 16 increased 170,000 from 246.915 million to 247.085 million. Multiplying this by the employment-population ratio (58.8%) yields 100,000, a rough indicator of the number of jobs needed to keep up with population growth.
Seasonally adjusted, the labor force increased 264,000 from 155.460 million to 155.724 million.
Unadjusted, it increased 646,000 from 154.381 million to 155.027 million. This is 300,000 more than a year ago. So while the labor force is not growing as fast as it once was, we can not say yet it has entered a secular decline.
The participation rate is the ratio of the labor force to the potential labor force. Seasonally adjusted, the participation rate was unchanged at 63.0%.
Unadjusted, it grew two-tenths of a percent to 62.7%. So while an improvement, it remains near secular lows.
Seasonally adjusted, employment grew 42,000 from 145.224 million to 145.266 million.
Unadjusted, it increased 608,000 from 143.526 million to 144.134 million. The size of this increase was expected. It is part of the spring rebuild and is about the same size as last February. It looks like about three-quarters of this increase is from workers joining orr rejoining the labor force.
Seasonally adjusted, the E-P ratio was unchanged at 58.8%.
Unadjusted, it grew two-tenths percent to 58.3%.
Seasonally adjusted, unemployment increased 223,000 from 10.236 million to 10.459 million.
Unadjusted, it grew just 38,000 from 10.855 million to 10.893 million. Unadjusted, the change in unemployment looks like this:
Job losers -128,000
Job leavers -12,000
New entrants +75,000
Of note here is the job leavers, that is those who quit their jobs. There has been a lot of talk lately about a tightening in the job market, meaning that workers would feel more comfortable about ditching their current job (becoming unemployed) in expectation of finding a better one. But that is not what we see at the unadjusted or current level. Unadjusted, only 813,000, or 7.5% of the unemployed are job leavers, and their numbers have been decreasing over the last 2 years. In other words, this is not a picture of a tightening job market. More workers are not risking unemployment in hopes of finding something better.
Seasonally adjusted, unemployment increaseded one-tenth percent to 6.7%.
Unadjusted, it was unchanged at 7.0%.
Full Time vs Part Time Employment
Seasonally adjusted, full time employment increased 163,000 from 117.656 million to 117.819 million. Part time employment decreased 210,000 from 27.540 million to 27.330 million.
Unadjusted, full time employment grew 549,000 from 115.774 million to116.323 million. And part time employment increased 58,000 from 27.752 million to 27.810 million. This indicates that most of the increase in employment this month came in full time jobs.
Involuntary vs. Voluntary Part Time Employment
Seasonally adjusted, involuntary part time workers fell 71,000 from 7.257 million to 7.186 million. Voluntary part timers decreased 138,000 from 19.165 million to 19.027 million.
Unadjusted, involuntary part time employment decreased 374,000 from 7.771 million to 7.397 million. This is some 900,000 fewer than a year ago, but still significantly higher than the pre-recession levels of around 4.5 million. Voluntary part time workers increased 178,000 from 19.473 million to19.651 million.
The U-6, the BLS’ broader measure of un- and under employment fell 0.1% to 12.6%, seasonally adjusted.
The seasonally adjusted U-6 was composed of 10.459 million unemployed, 7.186 million involuntary part time workers, and 2.303 million of the marginally attached (those who have no job but looked for work in the last year but not the last month; a decrease of 289,000 from January), or 19.948 million, a decline of 137,000 from last month.
The unadjusted U-6 decreased four-tenths of a percent to 13.1%.
The BLS uses a restrictive job seeker definition of unemployment, that is without a job but have looked for one in the last 4 weeks. The marginally attached are not counted as part of the labor force and their use in the U-6 is an indication that this is what the BLS considers its functional undercount to be.
The BLS also has a more extended category: Not in Labor Force, Want a Job Now (seasonally unadjusted). In February, this decreased 417,000 to 6.091 million and partially agrees with the increase in the unadjusted labor force.
This BLS category does not often reflect well actual movements in the economy. So I have developed a simple alternative to it. I calculate the size of where the labor force should be by multiplying the potential labor force of the NIP by a participation rate characteristic of a solid economic expansion (67%, the Clinton boom was at or above this level for nearly 40 months). The difference between this and the current labor force measures the size of the real BLS undercount, those who do not have jobs but would work if jobs were available to them. This then allows me to recalculate where real unemployment is and where real un- and under employment (disemployment) is.
.67(247.085 million) = 165.547 million (where the labor force should be)
165.547 million — 155.724 million = 9.823 million , a decrease of 150,000
165.547 million — 155.027 million = 10.520 million, a decrease of 532,000
Real Trend Unemployment (that is seasonally adjusted) :
10.459 million (U-3 unemployment) + 9.823 million (undercount) = 20.282 million, an increase of 73,000
20.282 million / 165.547 million = 12.3%, marginally up 0.1%
Real Unemployment Now (i.e. seasonally unadjusted) :
10.893 million (U-3 unemployment) + 10.520 million (undercount) = 21.413 million, down 494,000
21.413 million / 165.547 million = 12.9%, down 0.3%
Real Trend Disemployment:
Real Trend Unemployment + involuntary part time workers seasonally adjusted = 20.282 million + 7.186 million = 27.468 million, up 2,000
27.468 million / 165.547 million = 16.6%, unchanged
Real Disemployment Now:
Real Unemployment Now + involuntary part time workers seasonally unadjusted = 21.413 million + 7.397 million = 28.810 million, down 868,000
28.810 million / 165.547 million = 17.4%, down 0.5%
Even if we were to postulate a correction factor to these numbers of 0.5% to account for Baby Boomer retirements, we are still talking about unemployment rates 5.5%-6.0% above the official rate and disemployment rates around 4% above their U-6 counterparts.
The number of long term unemployed (6 months or more), as defined within the BLS job seeker model, increased 203,000 to 3.849 million. The long term unemployed account for 36.8% of the U-3 unemployed, an increase of 0.8%. The median number of weeks of unemployment, seasonally adjusted, is 16.4 weeks (around 4 months) and the average is 37.1 weeks (about 9 months), indicating what we know that a lot of people who are unemployed have been unemployed a very long time.
White unemployment increased one-tenth percent to 5.8%. White teen unemployment increased 0.8% to 18.3%. African American unemployment decreased 0.1% to 12.0%. African American teen unemployment decreased 5.6% to 32.4% (a fluke?).
Employment of women head of household (i.e. single moms) decreased 7,000 to 9.333 million.
Seasonally adjusted, the number of private sector jobs increased 162,000 and increased 13,000 in government resulting in the reported net 175,000 increase. December’s poor showing remained poor with a further minor upward revision of 9,000 to 84,000. January was revised upward 16,000 to a lackluster 129,000
Seasonally adjusted, total nonfarm jobs increased 175,000 to 137.699 million. Total private jobs increased 162,000 to 115.848 million.
Unadjusted, total nonfarm jobs grew 750,000 to 136.183 million (after falling 2.836 million last month). Total private jobs increased 300,000 to 114.021 million. Government jobs grew 450,000 to 22.162 million, principally from 228,000 in state government education and 212,700 in local government education (These gains reversed last month’s losses and could reflect school holidays.)
Unadjusted, where the economy is now, construction was largely unchanged with 7,000 jobs lost to 5.526 million. Manufacturing gained 16,000 to 11.964 million (which due to revisions is essentially the same level as last month).
Unadjusted, the super sector private service-providing added 191,000 to 95.658 million (after losing 1.991 million in January), of which retail dropped 212,500 to 14.9486 million, professional and business services added 142,000 jobs to 18.694 million, of which temp jobs increased 30,000 to 2.6855 million, healthcare (an apparent effect of Obamacare in this once fast growing segment) added just 800 jobs to 14.5719 million, and leisure and hospitality added 79,000 to 13.861 million.
Hours and Earnings
Average weekly hours for all employees on private nonfarm payrolls decreased one-tenth hour to 34.2 hours (0.3 hours less than a year ago). Average hourly earnings increased 9 cents to $24.31/hour, and average weekly earnings grew 65 cents cents to $831.40 (This is actually $1.42 less than what was initially reported for last month.), a yoy increase of 1.3%.
Average weekly hours for production and nonsupervisory (blue collar and clerical) personnel decreased two-tenths hour to 33.3 hours (five-tenths hour less than a year ago). Average hourly earnings increased 9 cents to $20.50/hour. Average weekly wages decreased $1.09 to $682.65, a 1.0% increase yoy. Since this group accounts for 4/5 of workers, this means while their wages on average went down last month, those of the top 20% went up $7.61/week.
Household data (Employment/unemployment)
Statistical significance: +/ – 300,000
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 9 Full time workers
A 11 Reason for unemployment
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: +/ – 90,000
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