The April Jobs Report Shows Continued Slow Growth, Bought at Great Cost

Summary:  The news media focuses on the month-to-month changes in the jobs report, which consist mostly of noise. Strong months confirm the optimists; weak months confirm the pessimists. In fact the trend of growth remains the real story, with the US economy near stall speed — supported only (like the other developed nations) by massive multi-year fiscal and monetary stimulus. Slow growth bought at great cost. A cost we cannot long continue to pay, borrowing and squandering the money ($ which instead could be rebuilding America). Just like Japan since 1989.

Contents

  1. Conclusions
  2. About the recovery
  3. Household survey
  4. Establishment survey
  5. Unemployment
  6. Other important metrics
  7. For more information about US economy

(1)  Conclusions

Here we examine the April 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.  This report paints a picture consistent with the many other streams of information about the economy: slow growth. Slowing slow growth, as shown by this from ECRI — through March. The April numbers (1.6%, 1.2%) are small ticks up in these lines.

From ECRI, 5 April 2013From ECRI, 5 April 2013

(2)  About the recovery

To understand the jobs report one must first understand the recovery of which it is one aspect:  during this period the government’s public debt increased $1.03 trillion — 6.5% 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 — plus increasingly unconventional monetary policy.

In other words, organic growth has not yet resumed.  The US economy has stabilized and slowly improves only due to the massive “drugs”  of monetary and fiscal stimulus (the former boosted with QE3 as the latter winds down).  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 eliminated pressure for reform.  We have had the New Deal stimulus without the New Deal reforms (some of which failed, but the others laid the foundation for the great post-war boom).

(3)  The Household survey

The Current Population survey is a simple survey of households, with large error bars but no revisions.  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 points before the establishment survey.

Here are the numbers, in thousands, not seasonally adjusted. Note that 1/3 of the new jobs during the past year are part-time jobs.

Description April 2012   April 2013   Change   Change
Employed 141,934 143,579 1,729 1.2%
…Employment-population ratio 58.5% 58.6% +0.1 0.2%
Full-time 113,999 115,674 1,675 1.5%
Part-time 27,996 28,050 54 0.2%
Unemployed 11,910 11,014 -896 -7.5%
…Unemployment rate 7.7% 7.1% -0.6 -7.8%

(3)  The establishment survey

The second survey asks employers to report the number of jobs.  Over one or more quarters it usually shows a similar pattern of growth as the household survey, giving us confidence in the results.  During the past year it shows slow improvement at the roughly same rate as the household report (as usual).  However, the household survey has shown slower growth during the past few months than the establishment survey.

These are in thousands, not seasonally adjusted numbers.

Description April 2012   April 2013   Change   Change
Total nonfarm 133,400 135,494 2,094 1.6%
Total private 111,051 113,232 2,181 2.0%
Total government 22,349 22,262 -87 -0.4%
From the April BLS reportFrom the April BLS report

(4)  Measures of Unemployment

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

Compare the change in the seasonally adjusted numbers of the 4-week moving averages (source here) of April 2012 and 2013. Faster decline than either the CPS and CES surveys.

  • April 2012: 378,500
  • April 2013: 357,500  (-5.5% — weak improvement)

(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 April 2012 April 2013
U-1 4.8% 4.3%
U-2 4.3% 3.9%
U-3 7.7% 7.1%
U-4 8.3% 7.6%
U-5 9.1% 9.0%
U-6 14.1% 13.4%

(5)  Another important metric:  wages and hours worked

April 2012 vs. 2013 (seasonally adjusted), from the Establishment Report:

  • Average private nonfarm hours worked per week:  34.5 vs. 34.4  (no significant change)
  • Average weekly earnings of nonfarm private workers:  $808 vs. $821 (up 1.6% = no real change after inflation)

(6)  For more information about the US economy

  1. A certain casualty of the recession: the US Government’s solvency, 25 November 2008
  2. 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
  3. The Robot Revolution arrives, and the world changes, 20 April 2012 — about structural unemployment
  4. America is rich and powerful because we can borrow. Will this debt build a stronger America?, 5 June 2012
  5. US economic update. Everything that follows is a result of what you see here., 8 June 2012
  6. America’s strength is an illusion created by foolish borrowing, 10 October 2012
  7. Did the US fall into recession during 2012? Are we in recession today?, 6 March 2013

This piece is cross-posted from Fabius Maximus with permission.

2 Responses to "The April Jobs Report Shows Continued Slow Growth, Bought at Great Cost"

  1. Ed Dolan
    EdDolan   May 3, 2013 at 6:43 pm

    "The US economy has stabilized and slowly improves only due to the massive “drugs” of monetary and fiscal stimulus (the former boosted with QE3 as the latter winds down)."

    Hard to square this with the numbers. Fiscal stimulus has been "wound down" for ages now. The government sector (government consumption purchases and gross investment) has made a negative contribution to GDP growth for 10 consecutive quarters. Maybe you think a smaller government is a good thing, fine, many do, but there is not way it is "boosting" the economy. It is an open question how effective QE3 has been at stimulating real demand, but at best, it is helping to push against negative pressure of fiscal austerity.

    If you don't like those data, try these: The best measure of the amount of the stance of fiscal policy is the change in the structural primary budget balance (surplus or deficit adjusted for the business cycle and interest payments). A move toward deficit shows expansionary policy, a move toward surplus shows austerity. From 2009 to 2013, the movement of the SPBD has been +4.1 percent, that is, a massive tightening of fiscal policy. Under current law, it will be another +1.4 percent from 2013 to 2014. (Check out a the relevant charts here: http://www.economonitor.com/dolanecon/2013/04/04/

    In short, we can't even discuss the slow US recovery without acknowledging that fiscal policy has been strongly procyclical.

  2. Mcalester Watercooler   May 7, 2013 at 10:22 am

    Maybe you will both agree that the politically driven economic policies have NOT been helpful — but more likely a hinerance to recovery?