Mish's Global Economic Trend Analysis |
| Spoiling the "Great Employment News" Posted: 08 Mar 2013 02:24 PM PST This article originally appeared on MarketWatch under the title Jobs numbers are far worse than they look. I selected my title from a humorous comment on MarketWatch by reader "Homer Price" who writes "Mike, What are you doing ? Trying to spoil the GREAT EMPLOYMENT news. Just wait until next year when the Unaffordable Care Act kicks in. THE BEST IS YET TO COME ............................. " There are other interesting comments as well. Inquiring minds may wish to take a look. Now for my article ... Economists were surprised by the massive "beat" in today's reported job numbers. The unemployment rate dropped .2 to 7.7% and the economy allegedly added 236,000 jobs. Is that what really happened? No not really. According to the household survey (on which the unemployment rate is based) the economy added a healthy 170,000 jobs. However, a whopping 446,000 of those jobs were part-time jobs. Simply put, the economy shed 276,000 full-time jobs. The BLS labeled those 446,000 part-time jobs as "voluntary". I am not so sure. A Gallup Survey yesterday on Jobs show the percentage of workers working part time but wanting full-time work was 10.1% in February, an increase from 9.6% in January, and the highest rate measured since January 2012.  Gallup notes "Although fewer people are unemployed now than a year ago, they are not migrating to full-time jobs for an employer. In fact, fewer Americans are working full-time for an employer than were doing so a year ago, and more Americans are working part time. Although part-time work is clearly better than no work at all, these are not the types of good jobs that millions of Americans are still searching for." Obamacare Effect Obamacare is in play. Recall that under Obamacare, the definition of full-time employment is 30 hours. The BLS cutoff is 34 hours. At 30 hours, companies have to pay medical benefits so they have been slashing the number of hours people work. This reduced the number of hours people worked and provided an incentive for many to take on an extra job. We can see the effect in actual BLS data. Multiple Jobholders as a Percent of Employed  After declining for years, the percent of those working two or more jobs is again on the rise. Multiple Jobholders  In the past month there was a surge of 679,000 in the number of people working multiple jobs. The seasonally-adjusted increase, as shown above, was 340,000. One can look at the data two ways.
Evidence suggests more of the latter than the former. Expect Downward Revision in Establishment Survey The reported 236,000 surge in the establishment survey is not real. It will be revised away. This is why: In the household survey one is either working or not, thus multiple jobs do not distort the reported unemployment rate (although there are many other distortions such as the participation rate and declining labor force). The establishment survey, however, is distorted by people working multiple jobs. A surge in multiple-job workers would artificially hike the baseline number. I expect revisions later, probably huge downward revisions. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com "Wine Country" Economic Conference Hosted By Mish Click on Image to Learn More  |
| Jobs +236,000, Unemployment Rate 7.7%, Part-Time Employment +446,000 Posted: 08 Mar 2013 09:14 AM PST Initial Reaction The establishment survey reports of +236,000 job. For the first time in four months the establishment survey was accompanied by a healthy +170,000 surge in the household survey. Let's dig deeper. The economy added a whopping 446,000 part-time jobs. Thus, the economy shed 276,000 full-time jobs. Those part-time jobs were supposedly "on purpose". It's fair to point out the volatile nature of part-time statistics, but the 446,000 increase is unusually large. One possible explanation for the surge in voluntary part-time employment is retirees needing additional income. However, that theory is not consistent with a labor force shedding 130,000 workers. Part-time employment for "economic reasons" rose by 15,000. Those not in the labor force rose by 296,000 and the labor force itself fell by 130,000. Those factors, coupled with the massive rise in part-time employment explains the .2 drop in the unemployment rate. Long-term unemployment (27 weeks or more) rose by 89,000, the first increase since October. This is a decent report, but it is nowhere near as good as it looks at first glance, with obvious questions about part-time employment and duration of unemployment. February BLS Jobs Report at a Glance
Recall that the unemployment rate varies in accordance with the Household Survey not the reported headline jobs number, and not in accordance with the weekly claims data. Quick Notes About the Unemployment Rate
February 2013 Jobs Report Please consider the Bureau of Labor Statistics (BLS) February 2013 Employment Report. Total nonfarm payroll employment increased by 236,000 in February, and the unemployment rate edged down to 7.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services, construction, and health care. Click on Any Chart in this Report to See a Sharper Image Unemployment Rate - Seasonally Adjusted  Average weekly hours rose .1 to at 34.5 hours. A year ago average hours were 34.6 hours. Average hourly earnings rose .05 to $23.82. Real wages have been declining. Add in increases in state taxes and the average Joe has been hammered pretty badly. For 2013, one needs to factor in the increase in payroll taxes for Social Security. For further discussion of income distribution, please see What's "Really" Behind Gross Inequalities In Income Distribution? BLS Birth-Death Model Black Box The BLS Birth/Death Model is an estimation by the BLS as to how many jobs the economy created that were not picked up in the payroll survey. The Birth-Death numbers are not seasonally adjusted, while the reported headline number is. In the black box the BLS combines the two, coming up with a total. The Birth Death number influences the overall totals, but the math is not as simple as it appears. Moreover, the effect is nowhere near as big as it might logically appear at first glance. Do not add or subtract the Birth-Death numbers from the reported headline totals. It does not work that way. Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another as noted by numerous recent revisions. Birth Death Model Adjustments For 2012  Birth Death Model Adjustments For 2013  Birth-Death Notes Once again: Do NOT subtract the Birth-Death number from the reported headline number. That approach is statistically invalid. In general, analysts attribute much more to birth-death numbers than they should. Except at economic turns, BLS Birth/Death errors are reasonably small. For a discussion of how little birth-death numbers affect actual monthly reporting, please see BLS Birth/Death Model Yet Again. Household Survey Data  Decline in Labor Force Factors
Were it not for people dropping out of the labor force, the unemployment rate would be well over 10%. Part Time Status (in Thousands)  click on chart for sharper image There are 7,988,000 workers who are working part-time but want full-time work. This is a volatile series. Table 15 BLS Alternate Measures of Unemployment  click on chart for sharper image Table A-15 is where one can find a better approximation of what the unemployment rate really is. Notice I said "better" approximation not to be confused with "good" approximation. The official unemployment rate is 7.7%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6. U-6 is much higher at 14.3%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years. Duration of Unemployment  Long-term unemployment remains in a disaster zone with 38% of the unemployed in the 27 weeks or longer category. Grossly Distorted Statistics Given the complete distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is easy to misrepresent the headline numbers. Digging under the surface, much of the drop in the unemployment rate over the past two years is nothing but a statistical mirage. Things are much worse than the reported numbers indicate. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com "Wine Country" Economic Conference Hosted By Mish Click on Image to Learn More |
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