"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Friday, October 5, 2012

The Jobs Numbers

Are weird, to say the least.   The unemployment rate (which is based on the "household" survey, a more volatile measure) jumped down to 7.8%.   The number of jobs created (which is based on the "establishment" survey, a much broader and hence less volatile measure) was only 114,000, which is 32,000 less than the average for this year of 146,000 per month, which in turn is less than 2011's average of 153,000 per month.   We need something on the ordre of 150,000 per month just to keep up with population growth.  So while the "unemployment rate" may be down, the actual employment of Americans looks to be flat.

Want proof that the employment figures in the household survey are volatile and hence less reliable?   Check out this chart of monthly job growth under the household survey since 2001:

That's a highly volatile measurement, to say the least.  

More importantly, the job growth for September in the household survey was 873,000 new jobs!   That's not just the highest number since 2001, that's the highest number in 29 years.   Put aside your suspicions of "cooking the books"... does anyone really think that number represents an improvement in the underlying real economy?   After two months in July and August where the household survey actually showed lost jobs?   But if that number isn't real, or represents some sampling anomaly, then the 7.8% number isn't real either.

Unpacking the data from the BLS further, here's what I find:

  • Manufacturing employment edged downward in September by 16,000 jobs.   That's after a loss of 22,000 manufacturing jobs in August.  Not a good sign of a real recovery.
  • Government jobs went up by 10,000 jobs in September and a revised 45,000 in August.   Does anyone think that more government employment helps the real economy?
  • Without seasonal adjustments, the total private employment in the establishment survey actually decreased by 377,000 in September.   Again, not a good sign when the "growth" is the result of a statistical manipulation.

James Pethoukis does a good job here of unpacking more of the data:

1. Yes, the U-3 unemployment rate fell to 7.8%, the first time it has been below 8% since January 2009. But that’s only due to a flood of 582,000 part-time jobs. As the Labor Department noted:
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) rose from 8.0 million in August to 8.6 million in September. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
2. And take-home pay? Over the past 12 months, average hourly earnings have risen by just 1.8 percent. When you take inflation into account, wages are flat to down.
3. The broader U-6 rate — which takes into account part-time workers who want full-time work and lots of discouraged workers who’ve given up looking — stayed unchanged at 14.7%. That’s a better gauge of the true unemployment rate and state of the American labor market.
4. The shrunken workforce remains shrunken. If the labor force participation rate was the same as when President Obama took office, the unemployment rate would be 10.7%.

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