About the May Jobs Report – a Few New Jobs, Bought at Great Cost

Summary:  Most people focus on the month-to-month changes in the jobs report, which consists mostly of noise (unpleasant noise recently).  The year-to-date and 12-month changes are more revealing.  We remain in a slow recovery, somewhat faster than in 2010.  The results of the past two months (not shown here) suggest severe slowing!   Enjoy this progress, as it was bought at great cost. A cost we cannot long continue to pay.

Contents

  1. Conclusions
  2. Household survey
  3. Establishment survey
  4. Unemployment
  5. Other important metrics
  6. For more information about US government finances

(1)  Conclusions

Here we examine the May employment report from the Bureau of Labor Statistics.  They conduct two surveys: one of households, one of businesses.  They are not directly comparable, each giving different perspectives on the US economy.  Today we look at the changes year-to-date and especially year-over-year changes (the latter avoids seasonal adjustments distorted by the warm winter).  The picture painted is consistent with the many other streams of information about the economy — effective rebuttal to both those seeing a good recovery as well as the cultists insisting all the government data is faked to re-elect Obama or benefit the Trilateral Commission.

The important detail to know about the recovery:  during this period the government’s public debt increased aproximately $1.3 trillion — aprox 8.5% of GDP (see debt here and GDP here), one of the higher fiscal deficits in the world.  Our shiny recovery results from massive borrowing and spending, without which we’d be in a deep recession, like Italy or even Spain.

In other words, organic growth has not yet resumed.  The US economy has stabilized and slowly improves due to the massive “drugs”  of monetary and fiscal stimulus.  Both have severe side-effects, which at some unknown point in the future will become problematic or untenable.  But the worst side effect was unexpected:  the stimulus has eliminated the pressure for reform.  We have had the New Deal stimulus without the New Deal reforms (some of which failed, but some setup the great post-war boom).

(2)  The Household survey

The Current Population survey is a simple survey of households, with large error bars but no revisions and few adjustments.  It’s worth watching because it’s the basis for the headline unemployment rate, it gives some useful data not in the more-accurate business (establishment) survey, and because some research suggests that the household report shows inflection reports before the establishment survey.

Year to date the seasonally-adjusted household survey shows 300 thousand new jobs per month.  But the past two months have seen only 127 thousand new jobs per month.

During the past year, the number employed growing at the roughly same rate as the civilian non-institutionalized population.  But the number not in the labor force grew even faster.  These are non-seasonally adjusted numbers.

Description May 2011 May 2012 Change Change
Civilian non-instit population 239,313 242,966 3,653 1.5%
Civilian labor force 153,449 154,998 1,549 1.0%
…Participation rate in the labor force 0.64 0.64 0.0 0.0%
Not in the labor force 88,864 87,968 2,104 2.5%
Employed 140,028 142,727 2,699 1.9%
…Employment-population ratio 0.58 0.59 0.01 0.3%
Full-time 112,618 114,634 2,016 1.8%
Part-time 27,410 28,092 682 2.5%
Unemployed 13,421 12,271 -1,150 -8.6%
…Unemployment rate 8.7% 7.7% -1.0% -11.5%


(3)  The establishment survey

The second survey asks employers to report jobs.  It shows a similar pattern of growth as the household survey, giving us confidence in the result.  Slow improvement. These are non-seasonally adjusted numbers.

Description May 2011 May 2012 Change Change
Total nonfarm 131,889 133,727 1,838 1.4%
Total private 109,354 111,337 1,983 1.8%
Total government 22,535 22,390 -154 -0.6%


(4)  Measures of Unemployment

(a)  New claims for unemployment insurance – one of the most accurate and useful real-time metrics

Comparing the year over year change in the seasonally adjusted numbers of the 4-week moving average (source here):

  • last week in May 2011: 424,000
  • week of 26 May 2012: 374,500 (-12% YoY)

(b)  The unemployment rate – a complex metric that gets far too much attention

The analysts at BLS calculate six measures of unemployment, from narrow to broad definitions.  None is more real than the others; none are easily comparable to the rough estimates of unemployment during the 1930s (the first reliable surveys were in the early 1940s).  Most people consider U-3, or U-4, or U-5 as the most useful measure.  U-6 includes people with part-time jobs who prefer full-time work, and so includes underemployment.

Any way you count it, unemployment has decreased during the past year.  Slowly.  These are non-seasonally adjusted.

Metric May ’11 May ’12
U-1 5.5% 4.7%
U-2 5.1% 4.3%
U-3 8.7% 7.9%
U-4 9.2% 8.4%
U-5 10.0% 9.3%
U-6 15.4% 14.3


(5)  Another important metric: 
wages and hours worked

May 2011 vs. May 2012 (seasonally adjusted):

  • Average private nonfarm hours worked per week:  34.4 vs. 34.4  (no significant change)
  • Average hourly earnings of nonfarm private workers:  $23.02 vs. $23.41 (up 1.7%)

(6)  For more information about the US economy

  1. A certain casualty of the recession: the US Government’s solvency, 25 November 2008
  2. We have been warned. Death of the post-WWII geopolitical regime, 28 November 2008
  3. Beginning of the end of the Republic’s solvency. Soon come the first steps to a reformed regime – or a new regime., 14 August 2009
  4. Another crack in Republic’s foundations: not the size of the debt, but when it’s due, 30 October 2009
  5. A look at our government’s debt – rising because we like to spend, 29 December 2009
  6. See the very essence of the US government’s financial problems (clue:  it’s us), 2 April 2010
  7. A status report about the US economy (we party so hard we cannot hear the alarms ringing), 27 March 2012
  8. The Robot Revolution arrives, and the world changes, 20 April 2012

This post originally appeared at Fabius Maximus and is posted with permission.