Employment Survey's Diverge

The Washington Post details:

One is called the payroll survey. It asks mostly large companies and government agencies how many people they employed during the month. This survey produces the number of jobs gained or lost. In July, the payroll survey showed that companies added 172,000 jobs, and federal, state and local governments cut 9,000.

The other is the household survey. Government workers ask whether the adults in a household have a job. Those who don’t are asked whether they’re looking for one. If they are, they’re considered unemployed. If they aren’t, they’re not considered part of the work force and aren’t counted as unemployed. The household survey produces each month’s unemployment rate.

In July, the household survey showed that the number of people who said they are unemployed rose by 45,000. In a work force of155 million, that doesn’t make a big statistical difference. But it was enough to raise the unemployment rate to 8.3 percent from 8.2 percent in June.

Unlike the payroll survey, the household survey captures farm workers, the self-employed and people who work for new companies. It also does a better job of capturing hiring by small businesses.

But the household survey is more volatile from month to month. The Labor Department surveys just 60,000 households, a small fraction of the more than 100 million U.S. households.

Looking at the data, the household survey was even worse than that. Not only did the number of unemployed rise by 45,000, the number leaving the workforce spiked (resulting in the number employed dropping significantly), resulting in the unemployment rate rising despite the better headline number.

Source: BLS

Gaming the System... Disability Edition

In my post outlining the decline in employment (excluding teens), reader Mike pointed out another interesting phenomenon:

One of the stories I read about this month's BLS report dealt with the rise in people on disability. I thought charting this over a few dozen years and several recessions might tell an interesting story.

Unfortunately, the BLS only reports this data going back to 2008, but the most recent data shows an interesting trend. From the looks of it, we have what appears to be a not-so-coincidental mirror image between the decline in those unemployed with the rise in the number of people not working via claims of disability. I know next to nothing about disability, but my guess is individuals whose employment benefits have run out, have been increasingly taken advantage of disability (or tried to) as a replacement.

Source: BLS

Employment (Excluding Teen Hires) Turns Negative

Peter Boockvar provides details of the ugly job report:

June Payrolls totaled 80,000, 20,000 less than expected and well below the ADP whisper. The two prior months were revised down by a net 1000. The private sector added 84,000 jobs (13,000 from goods producing, 71,000 from services) vs expectations of a gain of 106,000. The unemployment rate held steady at 8.2% as the 128,000 increase in the household survey was basically offset by the 156,000 increase in the size of the labor force.

Below is an updated chart of the stagnant unemployment rate and slightly up ticking broader unemployment measure.

Unfortunately, things were even worse than that. When looking at the household survey, we see that the headline measure of unemployment doesn't account for the fact that teen employment (likely low pay part-time workers on summer break) accounted for more than 100% of all new jobs. Excluding teens (the second bracket from the left in the chart below), we can see that negative employment number. In addition, individuals over 20 continue to flee the workforce (more than 150,000 more 20+ year olds were classified as "not in the labor force").

A truly ugly report on first glance.

Source: BLS

Ugliest Employment Chart You'll See?

Per Felix Salmon:

As Mike Konczal noted this morning, a key indicator of labor recession is still in force: if you’re unemployed, you’re still more likely to drop out of the labor force entirely than you are to find a job.

Let's see how that trend has fared over the longer term.

The chart below shows the ten year rolling change in the number of individuals employed divided by the ten year rolling change of those individuals no longer in the labor force. Any number over 1 means that the marginal person of working age is more likely to have gotten a job ten years later than to be out of the labor force.

In the late 1980's / mid 1990's, this marginal individual was a whopping 8x more likely to have found a job than no longer be looking. Today? 0.35x, which means that the marginal individual of working age (relative to 2002) is 3x more likely to be out of the labor force, than to have found a job.

Source: BLS

Employment Market Continues to Muddle Along

The NY Times details:

The nation’s employers added 115,000 positions on net, after adding 154,000 in March. April’s job growth was less than what economists had been predicting. The unemployment rate ticked down to 8.1 percent in April, from 8.2 percent, but that was because workers dropped out of the labor force.

The share of working-age Americans who are in the labor force, either by working or actively looking for a job, is now at its lowest level since 1981 — when far fewer women were doing paid work.

The first chart shows the unemployment rate from the payroll survey, which shows the headline improvement.



The next chart shows the issue with the calculation. The reason for the improvement in the unemployment rate is due to the continued departure of millions from the labor force (if you're not looking for a job, you're not technically unemployed).



The final chart attempts to account for the declining labor force through a cyclical adjustment. Similar to Shiller's cyclically adjusted P/E ratio, the below normalizes the labor force participation rate through a 10 year rolling average, then assumes the difference in that average and the latest number of participants are unemployed (or in the case of a rising workforce, it reduces the number of unemployed).

What we see is that the labor force was potentially much stronger than headline figures indicate throughout the 1960's - 1990's as the participation rate increased (in no small part due to women entering the labor force), as it took some time for the labor market to accommodate the increase. Since 2000, the reverse has been true as the participation rate has trended down... now at the lowest rate since 1981. Taking the current number of workers and assuming a cyclically adjusted labor force, unemployment is still above 10%.



Which seems more accurate at first glance.

Source: BLS

Employment Report: Not as Bad as I First Thought

Upon first glance, Friday's employment release was disappointing, but Scott Grannis pointed to something that does provide optimism.

In the past two months the household survey has made up for that lagging performance by posting growth of 740K jobs.

Below is a breakdown of the household survey broken down by the public (government) and private (business) sectors. The huge divergence accounts for how the household survey could show a net negative growth print for March, while the private sector grew by 336,000.

The private sector recovery over the last twelve months is now the same as the peak we saw last cycle (though that in itself was the "jobless" recovery). The main concern I see is whether the drag from the public sector will in itself cause the aggregate economy to stall, but this makes me much more optimistic than I was on Friday about a continued (albeit slow) recovery.

Source: BLS

A Weak Jobs Report

While the payroll (i.e. business) survey showed a net gain of 120,000 jobs in March (which in itself was weak), the household survey (the survey used to calculate the unemployment rate) actually showed a decline. Note that while this may just be noise after a warm winter that may have pulled hiring forward, the net result is most likely a (much) weaker employment situation than previously thought.

The Washington Post details how the unemployment rate can fall in the face of lost jobs:

In March, the household survey showed that the number of people who say they have a job fell by 31,000 and the number of people looking for a job fell by 79,000. That lowered the unemployment rate to 8.2 percent.

As the chart below shows, both the headline unemployment rate and broader measure of unemployment dropped as people left the workforce.

Breaking this down further, we see a continued split in terms of the male and female population. Men continue to find work (though the number of men dropping out rose in March), while women continue to run into difficult times, losing jobs and dropping out of the workforce in sizable numbers (more than 300,000 left in March alone).

Which all adds up to a stalling (perhaps temporarily) in the number of hours worked per person (on average), while remaining at a level WAY below historically norms.

Source: BLS

Employment Breakdown... Are We There Yet Edition?

The Washington Post details:

U.S. employers added 227,000 jobs in February to complete three of the best months of hiring since the recession began. The unemployment rate was unchanged, largely because more people streamed into the work force. The Labor Department said Friday that the unemployment rate stayed at 8.3 percent last month, the lowest in three years.

 And hiring in January and December was better than first thought. The government revised those figures to show 61,000 an additional jobs.

The headline unemployment rate was unchanged (below we show why this figure is largely irrelevant), but the broader measure showed improvement.

The household survey shows the large increase in people returning to the workforce. Note that this survey does not feed into the headline figure, but the rationale for why the headline number stayed flat is the same. Basically, the BLS wants us to believe certain individuals no longer wanted jobs and now (with improved prospects of finding a job), they do. Whatever.... the details are quite strong, especially for women.

And a measure I've been following for some time. The number of actual hours worked per person shows continued improvement (albeit off a very low figure).

Ladies and gentlemen.... we may FINALLY be at a tipping point.

Source: BLS

Employment Data Stripping Out Adjustments

As I detailed yesterday, over the past few years:

the population grew at a much faster rate than previously expected

The result is that while employment data continued to improve, the number of individuals not in the labor force is much higher than previously thought. The following chart strips out the adjustment made for that higher population to show the change in employed, unemployed, and not in the labor force during the month of January.

What we see is a HUGE amount of revision, but an improving underlying situation. As an example, the number of individuals no longer in the labor force is more than a million higher than previously thought (very bad), but the number not in the labor force actually came down in January from December (as seen in the blue dot, which is a good thing).

So... what does this tell us? It tells us things were worse than we thought (and we thought things were bad), but if this new information is accurate it shows things are significantly improving.

Source: Calculated Risk

Breaking Down the Labor Report

Good News

The LA Times details the good news coming out of this morning's jobs report:

The unemployment rate fell for the fifth straight month after a surge of January hiring, a promising shift in the nation's outlook for job growth.

The Labor Department says employers added 243,000 jobs in January, the most in nine months. The unemployment rate dropped to 8.3 percent from 8.5 percent in December. That's the lowest in nearly three years.

Employers have added an average of 201,000 jobs per month in the past three months. That's 50,000 more jobs per month than the economy averaged in each month last year.

In addition, as Calculated Risk predicted yesterday, there were revisions to past months employment data.

The change in total nonfarm payroll employment for November was revised from +100,000 to +157,000, and the change for December was revised from +200,000 to +203,000. The total nonfarm employment level for March 2011 was revised upward by 165,000.

Not So Good News

The Washington Post detailed, yesterday, the not-as-good news:

"On the face of it, a lower unemployment rate sounds good,” but the recent declines reflect not only an uptick in job growth but also the exit of thousands of potential young workers from the labor force.

When people stop looking for work, they are no longer counted as part of the labor force or “unemployed.” Evidence suggests that many of the young dropouts, who proved to be instrumental in Mr. Obama’s election in 2008, are continuing their schooling to avoid the tough job market and to increase their skills and chances of eventually securing employment.

The actual data shows this to be exactly what has happened (and at an increasing rate) as the population grew at a much faster rate than previously expected. As a result, according to the household survey, even though employment increased at an even faster rate than the payroll survey, there is a much larger portion of the population that is no longer in the labor force. In addition, looking at the details below.... it appears this is really having an increased affect not only on students, but especially on women (although employment among women jumped, meaning there are millions more women out there than previously thought... teen boys everywhere rejoice).

If they are all going back for more education, this should pay off over the long-run. If not, then the headline improvement in the labor market may be inflated.

Source: BLS

Where the Ladies at?

My last post Men at Work outlined that employment among men has rebounded since 2009, while employment among women has stagnated over that time after strong relative performance (as compared to men) at the beginning of the recession.

Taking a deeper dive, after a 60+ year trend (think WWII) of women entering the workforce in large numbers, we have now seen a decline not only relative to population growth, but in absolute terms as well.

A chicken or the egg argument can be made for the relationship between employment among women and real economic growth (were women more likely to work when the economy was strong or did women entering the workforce create a strong economy), but the relationship is strong none-the-less.

Source: BLS

Men at Work

The NY Post details (hat tip Eddy):

Since the US economic recovery started in mid-2009, a whopping 97 percent of the new jobs — all but 43,000 of 1.4 million positions created — have gone to the guys, according to data released yesterday by the National Women’s Law Center, which analyzed jobs data between June 2009 and December 2011.

By my calculation, using figures from the BLS, the numbers are even more striking. Since June 2009, women have lost ~750 thousand jobs while men have gained ~1.5 million. Since the bottom in BLS data (December 2009), men have gained 93% of all new jobs (2.62 million of the 2.82 million).

It is important to note that men have simply regained employment they had lost, as the recovery still puts job losses by men above women since the beginning of the recession.

Source: BLS

Employment: Positive, But No Blow Out

The Good: Unemployment rates (both headline and those including underemployed) continued to decline.

The Bad: unemployment rates continued to decline in large part due to individuals dropping from the labor force.

The Good: there is a definitive sign that hours worked per person (an important aspect of GDP growth) has bottomed and is once again growing.

The Pretty Good: private sector growth has been consistent (but perhaps too low), but headline figures have been dragged down by a decline in government workers (due to austerity). My opinion is that government workers tend to add less to economic activity, so headline employment may underestimate GDP growth.

Source: BLS

Is this the Employment Figure We've Been Waiting For?

Is this finally an employment figure that shows we are out of the weeds? Not so fast per Peter Boockvar (via The Big Picture):

ADP said private sector job adds totaled 325k in Dec, a blowout compared to expectations of 178k and compares with 204k in Nov. Job gains were mostly led by small and medium sized businesses in the service providing sector but we also saw job gains of 52k in the goods producing area of which 22k were created in manufacturing and 26k in construction. Bottom line, it’s great news to see this level of job gains in the private sector but Macroeconomic Advisors, which compiles the data, did say December seasonals may have had ‘idiosyncratic’ influences of the report. Dec ’10 also saw a big jump from the prior few months only to fall back in the months after.

We'll see official employment figures tomorrow. Fingers crossed...

Update:

The FT outlines why this may be a seasonal event (even more at Calculated Risk)

Source: ADP

Traction on the Jobs Front... Headline vs. Actual

First the (very strong) "headline", then the details.

The WSJ with the headline:

The U.S. labor market strengthened in November as private employers continued to add jobs at a healthy pace, while the unemployment rate fell to its lowest level since March 2009.

Nonfarm payrolls rose by 120,000 last month, the U.S. Labor Department reported Friday in its monthly survey of employers. Private companies added 140,000 jobs, while the public sector—federal, state and local governments—lost 20,000 jobs.

The unemployment rate, obtained by a separate survey of U.S. households, fell to 8.6% in November from 9.0% the previous month. The rate hadn't been below 9% since March, when it was 8.8%. The rate is now lower than at any point since March 2009, when it was 8.6% as well.

In another positive development, October's figure for nonfarm payrolls was revised upward to show a gain of 100,000 from a previously reported 80,000, while September was revised up to a 210,000 gain from 158,000.

The chart below shows the good news... an improving job market with declining unemployment and underemployment.

Now the details...

A improvement in the sense that jobs are being added, but a bifurcation between the "haves" (those getting jobs) and "have nots" (those so disgruntled they are leaving the workforce completely). Notice the huge spike in the number not in the labor force. In other words, the unemployment rate dropped not only due to an increase in the number of individuals employed, but also due to the number no longer counted as unemployed because they have dropped out of the labor force. Also notice the huge split between men (getting jobs) and women (losing jobs and leaving the job market). No clue what is going on there...

A better picture emerges when viewed as a percent of the total population of individuals qualified to work. The chart below shows the number in the labor force as a percent of that broader population, as well as the number employed. The good news is we continue to see stability in the employment to population ratio (i.e. jobs are growing at the rate of population), the bad news is that rate has been stagnant and remains near a 30 year low. The other concern is that the number of people participating in the job market continues to decline, so unemployment could present a long term issue even if the economy bounces back (those that left the workforce may find themselves unqualified to return).

If the above trend continues, expect the unemployment rate to continue to decline regardless of whether the job market improves. The good news is that this will result in a positive headline each month. It will be interesting to see if that headline helps with confidence, which makes a the recovery self fulfilling.

Source: BLS

Unemployment: Due to Lack of Domestic Expansion, Not Layoffs

The BLS released their latest Business Employment Dynamics report that breaks out positive change in employment (by expansions and new business openings) and negative change in employment (by contractions and business closings). The data lags a few quarters so it is not very good for looking at short-term trends, but the long-term trend is quite interesting.

The first chart outlines each component, which I then normalized by population to get an apples to apples comparison over the years. What may be surprising is that the negatives (contractions and closings) have actually come down as a percent of population over the past few decades (in fact there has been a huge "contraction in contractions" recently). The bad news is that the level of expansions and openings are down (by an even larger amount) over that time frame.

The next chart compares expansions vs contractions (i.e. existing business employment dynamics) and openings vs closings (i.e. new business employment dynamics). From the below chart we can see that the largest contributor to (the lack of) job growth has been existing business dynamics (though a long-term decline of new businesses have likely played a role in the lack of expansion hiring).

Taken together, we can summarize the charts as follows:

• Layoffs via contractions and closing may be less of an issue (than at least I thought)
• There has been a decline in new business employment over the past few decades
• The lack of expansionary hiring (and negative expansionary "shocks" during the last two recessions) seems to be the the likely reason we are facing high unemployment

The issue we face is that the lack of expansionary hiring among businesses is structural in nature. As I've detailed before, the shift in hiring by existing businesses from the U.S. to overseas has played a huge role (the example of China is shown here). The good news is that policy may be able to fix some of this, either through incentives for new business development and/or shifting employment back to the U.S. (the latter of which I expect targeted policy at some point, regardless of the kicking and screaming by pro free-trade economists and corporations).

Source: BLS

R.I.P. Teen Workforce

Last Thursday, my friend GYSC had a post at his blog Economic Disconnect titled Odd Jobs Over the Years. He outlined the jobs he has had over the years, many of them during his pre-teen / teenage years.

Reading the post allowed for some self reflection on jobs I had before turning 20 (lawn mowing, snow shoveling, race track concession stand, snack bar at a swim club, waiter at a retirement community, waiter at a diner, painter, medical assembly line, data entry at a local college... to name a few). While some of these jobs were miserable and some quite enjoyable, I truly believe that in aggregate they helped me figure out what it was that I wanted to be (and what I didn't), the "rules" of work, as well as the importance of hard work.

Which is why the below chart is absolutely terrifying to me. It shows that for the next generation of teens (and now early 20-somethings) only 1 in 4 teens are employed, down from the 40-50% range from 1950 through the end of the century. A large portion of the next generation will be left behind.

I had the above post all ready to go, when I came across a similar post over at Rortybomb, but that post points to something perhaps more concerning:

To leave the United States for a minute, one way people are trying to understand the Arab Spring is through the lens of mass youth unemployment and inequality. Given how high unemployment has been in these MENA – Middle-East and North African – countries, what else could we expect besides revolution?

He then shows a series of charts (this one is telling) that shows unemployment among the youth in MENA countries is awfully similar to levels seen among 16-24 year olds in the U.S.

Source: BLS

Job Opening and Labor Turnover Point to (Slow) Recovery

NPR reports:

U.S. employers advertised more jobs in September than at any other point in the past three years. The increase suggests hiring could pick up in the next few months. Competition for jobs is fierce. And many employers aren't rushing to fill some because they are worried about the strength of the economy. Still, most economists say the increase in openings is a reassuring sign. Nearly 3.4 million jobs were posted in September, the Labor Department said Tuesday. That's the most since August 2008, one month before the financial crisis intensified.

Digging into the data, we see that hiring, openings, and layoffs are moving in the right direction, but the levels of hiring and openings are still significantly below pre-crisis levels. Also note that while job openings are bouncing, we haven't seen the same improvement in actual hiring (perhaps this points to the difficulty in finding talent and/or we are due for a bounce in hiring).

Diving a bit deeper, the below chart shows the ratio of quits and hires to layoffs. In a nutshell, when people are confident enough to quit or are being hired at an increasing pace relative to layoffs, it means things are improving.

So we are bouncing off of lows (a good thing), but still need a lot of improvement.

Source: BLS

Breaking Down Employment

BusinessWeek details:

U.S. employment climbed in October at the slowest pace in four months, illustrating the “frustratingly slow” progress cited by Federal Reserve Chairman Ben S. Bernanke this week.

The 80,000 increase in payrolls was less than forecast and followed gains in the prior two months that were revised up by 102,000, Labor Department figures showed today in Washington. The unemployment rate fell to a six-month low of 9 percent from 9.1 percent even as the labor force expanded.

The above 80,000 figure was non-farm payroll. Taking a deeper dive into the household data (the figure used for the unemployment rate and one that historical has better captured any upturn in employment), we see a slightly improved, but sluggish employment recovery.

Month over Month

• 277,000 more employed individuals (better than the headline payroll figure of 80,000)
• 95,000 less unemployed (the difference being population growth)
• Only 17,000 individuals leaving the labor force

Long-Term

The sluggishness of the recovery can be seen below in both the longer term picture of unemployed (i.e. unemployment rate) and underemployed (i.e. broader total unemployment), which remains extremely elevated.

How About the Levels

Another way to view the magnitude of the downturn and lack of recovery is below. While the number of individuals employed is roughly 3% higher than seen 10 years ago, the number after normalization for population growth is down a whopping 8% and has not seen any improvement since the downturn (i.e. since the downturn in employment bottomed, the rate of employment growth has matched population growth).

Source: BLS

Employment Reports Mixed

PBS details:

According to the "establishment survey" of places that hire, the economy added more jobs than predicted: just over 100,000. More significantly, the last two months' numbers were revised upward by another 100,000 or so.

Yet when we turn to the "household survey" of actual people, the headline unemployment rate remains unchanged at 9.1 percent. How come?

The numbers suggest that the working-age population (16 and over) grew by 200,000 last month, and another 200,000 people rejoined the workforce - that is, are back looking for work. The household survey also shows that 400,000 more Americans were employed this month than last. So it's a wash.

Disturbingly, our U-7 number actually went UP. How so? Because -- and here's the bad news in this month's numbers -- the total number of workers toiling part-time, but looking for FULL-time work, jumped by 400,000, about 5 percent. Since "part-time for economic reasons" are included in our U-7, the number rose from 18.26 percent to 18.41 percent, the third highest month since we inaugurated U-7 back in December.

Source: BLS