Summary: Looking at today’s employment report (PDF here) we can draw one big conclusion. The economy continues to grow more slowly than we’d hope given the massive on-going monetary and fiscal stimulus programs (which cannot be continued forever). Oddly enough, this is not obvious to everyone.
- Good news. Bad news. Take your choice
- The cumulative change 2012 has been small
- This is bad news; worse might lie ahead
- For more information
(1) Good news. Bad news. Take your choice
Compare the July employment report results (seasonally adjusted) to the 90% confidence level for the monthly employment reports using the two metrics the Bureau of Labor Statistics provides. This month they disagree big-time.
(a) The household survey (CPS, source of the unemployment rate): a loss of 195,000 jobs in July, + or – 280,000 (not a statistically significant change). The population increased by 199,000, the labor force dropped by 150,000 and the number not in the labor force increased by 348,000. The report didn’t mention these odd swings.
(b) The establishment survey of non-farm employment (CES): a gain of 163,000 +or – 100,000 (a statistically significant change). Quite an improvement over recent CES monthly changes:
- April: +68,000
- May: +87,000
- June: +64,000
(2) The cumulative change 2012 has been small
The monthly numbers are noisy. More useful are the longer-term trends.
(a) The not seasonally adjusted change over the past 12 months of non-farm jobs per the establishment survey: 1.83 million (1.4%). That’s faster growth than both population and the labor force, both roughly 1%/year.
Due to revisions to the data, year-over-changes in the household survey are too complex for us to do here.
(b) Look at the changes this year, the seasonally adjusted change from January to July (in thousands). The two reports have diverged somewhat on the number and per cent change in jobs YTD., with the establishment report showing slower growth than the household report. More important is that both show growth.
The establishment survey:
The household survey provides a broader context, looking at the civilian non-institutionalized population age (16+):
|Not in labor force||87,874||88,340||466||0.5%||1.1%|
(3) The details show continued slow growth
Many who look at these numbers debate the tiny details, but ignore the large fact: both measures show slow recovery from the depths of the recovery. Very slow recovery. These numbers are less accurate than the headline numbers.
- The number of long-term unemployed continue to shrink, down 16% YoY to a still-high 5.2 million.
- The number of discouraged workers (drop-outs from the labor force) continues to shrink, down 24% YoY to 852,000.
- Libertarians rejoice! The number of government employees continues to shrink, down 105,000 YoY (0.5%) to 22 million.
- With so many companies closely managing their workers’ hours, average weekly hours might no longer tell us much. It’s flat YoY at 34.5.
- The number of full-time jobs have risen faster than part-time (2.1% vs. 1.4%, from the Household survey). There are 27 million part-time jobs and 116 million full-time jobs.
- The alternative measures of unemployment (there is no “right” number) als0 improve. The broadest metric (the U-6) has dropped from 16.3% last July to 15.2% now (non-seasonally adjusted).
(4) The big picture
We are applying powerful fiscal and monetary stimulus to get this slow recovery. Near-zero interest rates plus borrowing $1.3 trillion dollars over the past 12 months ($6T since the recession began in December 2007; data here), and we get only a 1.4% increase in jobs.
So far no evidence of the powerful sustainable recovery the optimists have promised so many times since the trough in Spring 2009. The reason is obvious: the stimulus provided first aid. It stabilized the economy, buying time for measures to rebalance our warped somewhat dysfunctional economy. We wasted that time (as we squandered the stimulus spending).
Now for the bad news: the world economy is slowing. The economic and social stress of a slowly growing world might be heavenly compared to what lies ahead if the world slumps again into recession in its weak condition.
Really awful would be a US recession. One starting with an 8.3% unemployment rate and an 8%+ fiscal deficit.
But we’re probably not in a recession yet. The most reliable real-time indicators suggest stable or slowing growth. If you watch just one indicator, I recommend the weekly new claims for unemployment. It clearly flagged our descent into the 2008-09 crash.
For More Information about the US economy
- A status report about the US economy (we party so hard we cannot hear the alarms ringing), 27 March 2012
- About America’s economic recovery: the good news and the bad, 1 May 2012
- About the May jobs report – a few new jobs, bought at great cost, 1 June 2012
- The Titanic’s lessons for us about the coming economic crisis, 4 June 2012
- America is rich and powerful because we can borrow. Will this debt build a stronger America?, 5 June 2012
- US economic update. Everything that follows is a result of what you see here., 8 June 2012
This post originally appeared at Fabius Maximus and is posted with permission.
4 Responses to “Good News About Jobs! Bad News About Jobs! The Reports Disagree.”
What ongoing massive fiscal stimulus program? The Republican House has slashed fiscal stimulus.
Labor force participation is still low by 2.7%, from January 2007, representing 6.5 million not counted in labor force unemployment rate, and if counted would raise U3 to 12.5%. For 20 years, Aug. 1988 to Aug 2008, with a few exceptions, participation rate had been over 66%. Today at 63.7%. 43% not joining labor force in last six months is high, normal around 37%. A U3 unemployment at 12.5% is still an improvement from 12 and 24 months ago. A boost to EITC and min. wage would spur some growth. Obama's jobs plan involves hiring credits to businesses. The Republican Congress won't allow it. Roosevelt would use the WPA method. Unemployment dropped from 25% to 9.6% between 1933-1937, see Marshall Auerback, Next New Deal, Aug. 30, 2010.
I believe running deficits equal to 8+% for 3 years plus qualifies as stimulus. And though republicans may have held it back modestly they have been completely ineffective at holding back important aspects of it. So that's on the fiscal front. On the monetary front stimulus has been gargantuan on almost any comparable historical level. And that has run unabated regardless of political persuasion. So I guess your question was not really a question rather a plea for the government to what try 15% or 20% of GDP on spending. It makes so little to sense to burden your children with problems the last generation created. Take your medicine, your will feel better in a few years. Under the current spasm of politics the best advice to give the youth is move to a more rational and reasonable country. Our ancestors or parents had the sense to leave their respective countries in pursuit of religious economic or political freedom, we should encourage the same of our children. The US has formally entered a permanent state of subsidy. in other words, if you like Europe your gonna love the US seems to be the mantra of the dependency sponsors.
Essentially, you are (whether you realize it or not) arguing in favor of a "hard" 1930's- style depression rather than our current "soft" depression. This may be exhilarating if you are the hyper- rich 1%, but it may be somewhat less enjoyable for the 99%, and especially for the bottom 20- 30% who would stand to starve to death in the hard depression scenario. As for the size of the Federal budget deficit, you seem to have slipped from your usual acumen- I thought you knew the difference between active and passive fiscal policy and deficits/ surpluses. The fact is that the entire increase in the Federal deficit is accounted for by the combined effects of a collapse in tax receipts, an increase in the automatic stabilizers, and the money pissed away on TARP. In other words, our deficits are passive deficits, not indicative of an expansionary fiscal policy.