Does the Decrease in Continuing Claims Reflect an Improved Employment Situation?

The Street outlines that continuing claims are continuing to trend down:

The total number of Americans filing for unemployment look a bit better than the initial claims data. Continuing claims for the week ended Aug. 13 fell to 3.641 million from 3.721 million, reaching the lowest level since September 2008. Economists were expecting the reading to come in at 3.7 million.

While this is not in itself a bad thing, it requires additional research to determine if it is in fact a good thing. The problem is that individuals are losing coverage as the length of many of those unemployed has extended well past the length they can receive benefits. In addition, the number of newly unemployed is unlikely to grow at the same pace even if the economy remains under pressure, as the overall number of individuals employed is smaller and "low hanging fruit" (apologies to anyone that is unemployed) were already laid off.

To account for some of this issue, the chart below shows the level of continuing claims since 2007 (which shows the peak in continuing claims in 2009), plus the increase in the number of individuals not in the workforce over that time to account for those no longer collecting unemployment.



Source: DOL / BLS

Natural Rate of Unemployment

Bloomberg details:

The new “normal” unemployment rate may now be 6.7 percent, rising as much as 1.7 percentage points from 5 percent before the recession began, according to researchers at the Federal Reserve Bank of San Francisco.

High rates of long-term joblessness, extended unemployment benefits and a mismatch of skills between workers and available jobs may be impeding a return to the previous level, said John Williams, the bank’s research director, and research associate Justin Weidner in a paper released today.

That's one explanation (and I can't disagree with the above facts), but perhaps the "natural" rate of unemployment was never as low as it appeared from the late 80's through late 00's either.



Source: BLS

A Nation of "Slackers"

Part time workers for slack business conditions that is.

Source: BLS

Unemployment Rate to Remain Elevated

I relayed this morning that the unemployment report was:

• Better than expected
• Shows the U.S. has been adding jobs across the board for the first time in years, thus we may finally be hitting a bottom

I initially wasn't going to show the unemployment rate as it continues to be useless (figures for the number of people that have "left" the workforce are still unrealistically high, pushing the rates below where they should be).

As a result, expect the levels to stay range-bound even if employment picks up as those that had "dropped out" of the workforce "come back".

Source: BLS

From Unemployed to Out of the Workforce

WSJ reports:

The U.S. economy shed more jobs than expected in July while the unemployment rate held steady at 9.5%, a further sign the economic recovery may be losing momentum.

Nonfarm payrolls fell by 131,000 last month as the rise in private-sector employment was not enough to make up for the government jobs lost, the U.S. Labor Department said Friday. Only 71,000 private-sector jobs were added last month while 143,000 temporary workers on the 2010 census were let go.

As EconomPic has detailed many times before, employment can fall while the unemployment rate stays flat (or in cases drop) because the denominator (i.e. the workforce) has been dropping. As the chart below shows, the duration of unemployment has increased dramatically over the past year and a half AND at a certain point these individuals simply drop out of the workforce.



Note the dip earlier this year and the "rebound" from temporary census hiring. Perhaps we need some new temporary hiring efforts before more yellow rolls to blue.

Source: BLS

Employment Breakdown

Bloomberg details:

Employment fell in June for the first time this year, reflecting a drop in federal census workers and a smaller-than-forecast gain in private hiring.

Payrolls declined by 125,000 last month as the government cut 225,000 temporary workers conducting the 2010 census, Labor Department figures in Washington showed today. Economists projected a decline of 130,000 payrolls, according to the median forecast in a Bloomberg News survey. Employment at companies rose 83,000. The jobless rate fell to 9.5 percent from 9.7 percent as the labor force shrank.

Unemployment / Underemployment Rates



Change in Household Survey (note the HUGE drop in labor force participation)



Hours Worked per Person (this took some work with the limited data the BLS now releases)



Source: BLS

Japanese Recovery Fading?

Bloomberg details:

Japan’s industrial production and household spending slipped in May and the unemployment rate unexpectedly increased, in signs that the recovery of the world’s second-largest economy may slow.

The figures underscore Japan’s reliance on exports to propel its rebound, and follow calls by the U.S. for Japanese policy makers to stimulate domestic demand. For Prime Minister Naoto Kan, facing a mid-term election in less than two weeks, the figures may pose a warning that it’s too soon to tighten fiscal policy to shrink the nation’s debt.

The jobless rate reached 5.2 percent in May, the third straight monthly increase and the highest level since December, the statistics bureau said in Tokyo. Household spending retreated 0.7 percent from May 2009, the office also said, a day after another report showed retail sales slowed last month.

The chart of unemployment by age group also shows the structural issue facing Japan as a slowing economy and aging population makes it more difficult for younger workers to break into the workforce.



Source: Stats.Go.JP

Employment: Higher Among Parents

Yesterday we took a look at the (lack of) employment among teens... today we look at employment of their parents.

The BLS reports:

Forty-four percent of all families included children (sons, daughters, step- children, and adopted children) under age 18. Among the 34.8 million families with children, 87.8 percent had an employed parent in 2009, down from 90.0 per-cent in 2008. The mother was employed in 67.8 percent of families maintained by women with no spouse present in 2009, and the father was employed in 76.6 percent of those maintained by men with no spouse present.

Among married-couple families with children, 95.7 percent had an employed parent in 2009, down from 97.0 percent in 2008. Both the mother and father were employed in 58.9 percent of married-couple families with children in 2009, also lower than a year earlier.

So, do couples with kids tend to be employed more often to support those kids... or do those with secure jobs, tend to be more likely to have kids? Either way... it seems that those with (or without) kids are all feeling the pain of the recent downturn.

Source: BLS

Euro Zone Unemployment Hits 12 Year High

The WSJ reports:

The euro zone's unemployment rate rose to its highest level for almost 12 years in April, while growth in manufacturing output slowed sharply last month as the currency bloc's sovereign-debt crisis deepened, figures showed Tuesday.

The European Union's Eurostat agency said the unemployment rate across the 16 countries that share the euro increased to 10.1% in April from 10.0% in March, the highest level since June 1998. Economists were expecting the rate to hover at 10.0%.

There were 15.9 million unemployed people across the 16 countries that share the euro in April, more than the entire populations of Austria and Ireland combined. But there are signs the jobless rate may be close to peaking after only 25,000 people joined jobless queues in April, the second-smallest increase since March 2008, Eurostat said.

Source: EuroStat

One Size Doesn't Fit All... and Gold

Europe is in a tough situation as all European economies are not in the same situation with regards to debt levels (i.e. solvency risk) or shorter term economic strength.

With all this liquidity being pumped into the system, Europeans must now also deal with potential overheating in those parts of Europe in less need of stimulus. With all this uncertainty over the Euro, it is not a surprise that gold has spiked to a record high in Euros (the chart below is an estimate of this figure using GLD [gold ETF] and FXE [Euro ETF] as approximations - multiply by 100 to get an approximation of Gold in Euros).

Source: Eurostat

Unemployed to Job Openings Remains Elevated

Calculated Risk provides some additional details:

According to the JOLTS report, there were 4.96 million hires in February (SA), and 3.957 million total separations, or 4 thousand net jobs gained. The comparable CES report showed a loss of 14 thousand jobs in February (after revision).

Layoffs and discharges have declined sharply from early 2009 - and that is a good sign.

However, hiring has not picked up - and even though total separations were at a series low, there were few jobs added in February (according to JOLTS). This low turnover rate is another indicator of a weak labor market.

Source: BLS

Back in Black: Jobs Added, Unemployment Rate Stays at 9.7%

WSJ details:

U.S. employers created jobs at the fastest pace in three years in March, but nearly one-third came from temporary hiring for the Census, indicating the labor market has still some way to go to recover.

The Labor Department said in a report Friday that nonfarm payrolls rose by 162,000 in March, the largest gain since March 2007. That compared to a revised 14,000 drop in February, when the number was likely depressed by the blizzards that hit the East Coast.

Economists polled by Dow Jones Newswires were expecting payrolls to rise by an even higher 200,000. The February figure was revised upward from an originally reported 36,000 decline.

Taking into account revisions to prior months, the U.S. economy added an average of 54,000 jobs a month in the first quarter, fueling optimism about the job market's recovery.

However, the 2010 decennial Census accounted for 48,000 of the employment boost. Since those jobs will be lost in the second half of the year, economists cautioned not to read too much into the headline figure.

As a reminder of the labor market's continued weakness, the unemployment rate stayed at 9.7% last month, in line with economists' expectations. The jobless rate is calculated by the Bureau of Labor Statistics using a different, household survey.

Source: BLS

European Unemployment to 11 1/2 Year High

Business and Finance reports:

Euro zone inflation was much higher than expected in March and the unemployment
rate reached 10 percent in February, data showed on Wednesday, highlighting the fragility of economic recovery.

Inflation in the 16-country area was 1.5 percent year-on-year, the highest since December 2008, after 0.9 percent in February, the European Union's statistics office said.

The March figure was lower than the European Central Bank's target of just below 2.0 percent inflation. Analysts believe the bank will leave its interest rates unchanged until late 2010 or 2011.

The euro zone's 10 percent jobless rate in February was the highest since August 1998 and in line with market expectations. A month earlier unemployment was at 9.9 percent.

Source: Eurostat

Unemployment by State = Nowhere to Hide

BLS reports:

Annual average unemployment rates rose in 2009 in all regions, divisions, and states, the U.S. Bureau of Labor Statistics reported today. Employment-population ratios decreased across all of these geographic areas as well. The U.S. jobless rate jumped by 3.5 percentage points from the prior year to 9.3 percent, while the national employment-population ratio fell by 2.9 points to 59.3 percent.

The chart is "squished", but should be legible (click for larger image).



Source: Eurostat

The Death of the Workforce

Traveling ALL week, so posts will be intermittent.

I pointed out yesterday that for the first time in U.S. history, more women are in the workforce than men. Brad DeLong points out that this is due in large part because men are dropping out of the workforce:

Social roles and social pressures in America today are such that if you are male between 25 and 54 in America and you don't have a job, there is a presumption that there is something wrong; One thing that goes wrong is a recession (or a depression), but steadily since 1950 other things have been going wrong for an increasing number of American prime-aged males...

Specifically, a 60 year slide in the male workforce participation rate. So if male participation has gone down, female participation must have gone up... right?

From 1950 through the mid part of this past decade... right.

Now? No more.



So while females were taking the place of their male counterparts in the workforce as the composition of the workforce was changing, the overall workforce had been continuing to grow on a per capita basis.

Now? No more.



Think about this. In January 2010, almost 3 more people out of EVERY 100 that can work, are no longer even looking and more than 6 more people out of EVERY 100 that can work aren't as compared to the workforce in January 2000.

Source: BLS

Comparing U.S. and E.U. Unemployment

Source: Eurostat / BLS

Is 16-19 Year Old Unemployment at 37.1%?

In response to my post on 16-19 year old unemployment, reader MichaelGER asked:

Why not do an EconomPic unemployment rate sugestion for this figure? Might look ugly...

He is "of course" referring to the EconomPic method (a method that accounts for the huge swings in the participation rate) of calculating unemployment. Here it is...



Nothing to add.....

Source: BLS

Unemployment to Job Opening Ratio Jumps Again

BusinessWeek details:

Job openings in the U.S. fell in November to the lowest level in four months, a
sign employers are reluctant to expand staff even as payroll reductions waned from earlier last year.

Openings declined by 156,000 to 2.42 million, the second- lowest level since records began in 2000, the Labor Department said today in Washington. The number of unfilled positions was down 50 percent since peaking in June 2007.

“It confirms the suspicion that most of the improvement in non-farm payroll employment has been due to reduced firing and not renewed hiring,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “This is the last shoe to drop for the recovery in the labor market and we’re still waiting.”

Source: BLS

The "Recession Generation"

Newsweek details:

We all know the type of person who came of age in the Great Depression. They are the grandmothers and grandfathers who can't use a tea bag too many times, yet are enjoying comfortable retirements in warm climates. And we know what the children of the 1950s are all about. They are the optimistic boomers who embodied an age of continual upward mobility and possibility. They have often spent more than they earned, because for them it has been a truism that times can only get better. It's no accident that the psychology of entire generations is shaped by the milieu in which they grew up; economic research tells us that our lifelong behaviors are determined in large part by the seismic events—good or bad—of our youth.

So, given that we have just experienced the worst economic period in 70 years, it's no surprise that people have begun to wonder what sort of consumers, investors, and citizens will be bred by the Great Recession. Will there be, in effect, a "Generation Recession" of young people whose behaviors will be permanently shaped by the downturn?

The below chart details one struggle that this "Recession Generation" is facing... employment.



This is not necessarily a surprise as there really weren't many jobs opening up when this generation was entering the workforce (20+ year olds were the one's losing jobs, this generation never got them), but 27%!?!?!

And this is an artificially reduced rate as a participation has plunged.

Source: BLS

An Alternative Unemployment Rate.... at 11.7%

The labor force has declined at the fastest pace over the last 12 months in more than 50 years.



Which causes the unemployment rate to skew too low as the labor force is the denominator in the unemployment rate.

Lets solve this problem shall we?

The chart below shows the labor participation rate and the rolling five year average of that rate. The key takeaway is that over the past 60 years there has been a huge secular shift as woman entered the workforce (more on that from Calculated Risk here), which effectively ended the "norm" of a single worker household.



As is typical with long term trends, this datapoint appears to have overshot to the upside and is now rolling over (individuals may have entered the workforce at some point that never planned to work because the economy was so good). As such, a more "fair" methodology (in my opinion) is to use the five year average participation rate to account for these ebbs and flows. This also alleviates the issue of believing that 1.8 million people "chose" to leave the work force over the past 6 months (yes, that is what the BLS methodology indicates).

EconomPic Unemployment Rate

Denominator: The methodology for the denominator (based on my logic detailed above) is to use the five year rolling participation rate multiplied by the civilian institutional population (i.e. those that can work) to determine the labor force.

Numerator: The EconomPic methodology is to use the number of employed rather than unemployed (some of those not in the labor force are not countered as unemployed). As a result, the initial equation = the "employed rate". Taking 1 less this employed rate gets us to the unemployed rate.

The result:



Unemployment is reduced at each "low" prior to the low of the late 90's and most recent 2007 period (both of these closely tie) and roughly matches each "peak". That is until the most recent period, indicating that something is just not right.

Whereas the "official" unemployment rate is 10% flat, the EconomPic unemployment rate is 11.7%.

Source: BLS