Employment Numbers Dashing the Recoveristas’ Fantasy World

Summary:    The US economy continues its slow “recovery.”  It’s not an organic recovery, as it results from three rounds of massive fiscal and monetary stimulus — powerful medicine, with serious side-effects (to be felt in the future).  Lost in our delusions, we confuse this with actual health.  Note how the third round of stimulus (QE2 and extension of the Bush tax cuts) is never called a “stimulus”.  Just like babies, who hide themselves by putting their head in a box.  Richard Koo, who predicted this, remains unknown (at the end are links to his work).


  1. Why does anyone watch the Establishment Survey numbers?
  2. The Current Numbers: January 2011
  3. The Recovery!
  4. For more information

(1)  Why does anyone watch the Establishment Survey (CES) numbers?

Answer:  because it tells us what we want to hear.  Until the revisions, which we ignore.  The most important of these are the annual benchmark revisions, after which the CES numbers are the definitive historical record.  Unfortunately, the initial results bear only a slight resemblance to the final results, as they’re largely modeled from a few early responders.  And the early responses do not include small businesses, the center of the current downturn.

In accordance with annual practice, the establishment survey data have been revised to reflect comprehensive universe counts of payroll jobs, or benchmarks. These counts are derived principally from unemployment insurance tax records for March 2010.  As a result of the benchmark process, all not seasonally adjusted data series were subject to revision from April 2009 forward, the time period since the last benchmark was established. — BLS Establishment Estimates Revised to Incorporate March 2010 Benchmarks

The revisions eliminated 378 thousand of the jobs added from April 2009 to March 2010) — numbers that so delighted the Recoveristas.  Revised estimates for April 2010 – December 2010 based on the revisions through March 2010 eliminated another 72 thousand jobs.  So we have these results in the second and third years of the recovery, which began June 2009 (the CES measures civilian non-farm employment):

  • Accurate numbers from June 2009 to March 2010: 1,055 thousand  jobs lost (-0.8%)
  • Estimates from March 2010 to January 2011:  827 thousand  jobs added (+0.6%)

So far we have net job losses during the recovery.  But government debt and business profits are up, so Party On!

(2)  The Current Numbers:  January 2011

Some aspects of employment are leading indicators, some are lagging indicators.  Broadly speaking, employment is one of the major metrics of the nation’s health, both economic and social.

These are numbers from the Census’ Household Population survey (tables A and A-1) for January, released 4 February 2011.  IMO the household survey gives a more reliable real-time picture than the establishment survey (CES), which measures civilian non-farm employment.  Here’s the story for January.  All rounded to the nearest million.  It’s almost identical to the numbers for the past few months.

  • 239 million – the civilian non-institutional population, adults 16+ years old (17 million are 16-19 years old).
  • 153 million of these are in the labor force (6 million are ages 16-19).
  • 139 million have jobs (4 million are ages 16-19)
  • 26 million of those jobs are part-time jobs; 8 million of those with part-time jobs would prefer full-time jobs.
  • 14 million of the labor force are unemployed:  1 million  quit, 9 million were fired, 5 million entered or re-entered the labor force.
  • 1 million have become discouraged and stopped looking.

The median duration of unemployment is 21.8 weeks (up from 20.0 in January 2010.  The mean duration continues to rise:   36.9 weeks, up from 30.5 weeks in January 2010 (table A-12).  The mean is large due to the six million workers who have been unemployed for 27 weeks or more.  The level of long-term unemployment during this downturn is a post-Depression high .

Much has been made of the declining ratio of workers to population.  For example, the fraction of men over 16 who have jobs is a post-Depression low.  Get used to it.  This ratio can only fall further as the boomers age.

(3)  The Recovery!

(a)  Wall Street and the media obsess over tiny changes in the monthly employment reports, which are often statistically insignificant.  Like the January gains.  These surveys are not that accurate, and changes of a few thousand mean nothing among 300 million Americans.  Instead we should watch the levels and trends.  What improvement in jobs has this recovery brought us since it started in June 2009?  Here are the results for the past 12 months (January 2010 – January 2011, seasonally adjusted, in thousands), from the Current Population Survey of today’s Employment Report.

  • Civilian non-institutional population 16 or older:   up 1,872 thousand  (+0.8%)
  • Civilian labor force:  down 167 thousand  (-0.1%)
  • Employed:     up 812 thousand  (+0.6%)
  • Unemployed:  down 979 thousand  (-6.6%)
  • Not in the labor force;  up 2,039 thousand (+2.4%)

The number of unemployed people decreased as they either got jobs of dropped out of the labor force.  The civilian over-16 population grew, but the net addition went into “not in the labor force” bin.  Here are the net job results  for the recovery so far:

  • From June 2009 to March 2010:  1,026 people thousand people lost their jobs (-0.7%)
  • From March 2010 to January 2011:  371 thousand people got jobs (+0.3%)

The Household report (CPS) confirms the Establishment report (CES) that we have net job losses during the recovery. A few trillion dollars in government stimulus doesn’t buy as much recovery as it used to.

(b)  What about unemployment?

The Census provides six measures of unemployment, depending on definitions of the labor force and unemployed.  The four most widely used (U-3 to U-6. None are easily comparable to those of the great depression (the government began measuring unemployment in the 1940′s; earlier numbers are rough estimates).  They can be seen at Table A-15

Despite the rants of people making stuff up, these alternative measures are not the “real numbers”, nor can they be compared to the past — especially not to those of the Depression (there were no employment surveys until the 1940s; the historical numbers are rough estimates).

(c)  Check your work!

As my teachers said, always check one’s conclusions with different methods.  First, look at the Social Security employment taxes in December:  down 12.9% year-over-year.  This is a reliable if rough measure of American median wage income (i.e., jobs and pay).  That’s a large drop for a metric which showed small declines throughout the year; perhaps there were timing issues.  But even Q4 and full year resuls are bad news.

Second, look at new claims for unemployment:  the 4 week average is 430 thousand new claims per week, down from the average during the past year of roughly 460 thousand/week.  That’s accurate real-time data, and indications of a slow recovery.

The birth/death model, BLS staff’s guess at small business activity, in January shows the large negative number typical of the past few years (an adjustment for past over-optimism).  It is not seasonally adjusted, so it cannot properly be subtracted from the final seasonally-adjusted CES employment number.

(d)  Conclusion

Do we have a recovery? Yes, but very slow in terms of jobs and wages.  A wide range of economic data still suggests that the recovery stalled in Spring 2010 as the stimulus faded and resumed in late Fall — on the announcement of the stimulus programs — monetary (QE2) and fiscal (extension of the Bush tax cuts, expenditures larger than the first two stimulus packages).

NOTE:  are tax cuts expenditures?  Yes, when done without corresponding spending cuts — when they result in more borrowing.

(4)  For more information

Predictions of Richard Koo:

Other posts about employment:

  1. America passes a milestone!, 20 January 2010 — More jobs in government than manufacturing
  2. Yes, it is a “mancession”, with men losing more jobs than women. Just like all recessions., 5 October 2009
  3. Update on the “mancession”, 2 December 2009
  4. A look at the engines of American job creation, 12 January 2010
  5. An ominous trend: number of Americans working for the government vs. those making things, 5 March 2010 — Update to the Oct 2009 post.
  6. The coming big increase in structural unemployment, 7 August 2010
  7. The coming Robotic Nation, 28 August 2010
  8. The coming of the robots, reshaping our society in ways difficult to foresee, 22 September 2010
  9. Economists grapple with the first stage of the robot revolution, 23 September 2010
  10. Arithmetic of decline: America’s lost decade for jobs, 27 November 2010

Originally published at Fabius Maximus and reproduced here with permission.