Everything You Need to Know about Friday's Unemployment Numbers

Townhall.com ^ | July 6, 2013 | Mike Shedlock

[Kaslin]

Initial Reaction 

The establishment survey showed a gain of 195,000 and that is a very respectable number. However, the household survey shows a more modest gain of 160,000 jobs.

The civilian labor force rose by 177,000 thus the unemployment rate was steady at 7.6%. Digging beneath the surface, the numbers do not look so good. 

326,000 Full-Time Jobs Lost

Involuntary part-time jobs increased by 322,000 while voluntary part-time jobs increased by another 110,000. Thus, of the 160,000 household survey gain, 486,000 of them were part-time jobs, a loss of 326,000 full-time jobs. This caused a spike of 0.5 percentage points in U6 (alternative unemployment) to 14.3%.

The Participation Rate rose 0.1 to 63.5%, 0.2 higher than the low of 63.3% dating back to 1979.

Obamacare Effect 

Last month there was no jump in part-time employment which had me wondering if the the bulk of the Obamacare effect (employers reducing hours from 32 to 25 and hiring hundreds of thousands of new employees to make up the hours) had mostly played out.

This month, the trend of huge part-time employment resumed, and in a major way.

June BLS Jobs Statistics at a Glance 
 

• Payrolls +195,000 - Establishment Survey
• US Employment +160,000 - Household Survey
• US Unemployment +17,000 - Household Survey
• Involuntary Part-Time Work +322,000 - Household Survey
• Voluntary Part-Time Work +110,000 - Household Survey
• Baseline Unemployment Rate +0.0 - Household Survey
• U-6 unemployment +0.5 to 14.3% - Household Survey
• Civilian Labor Force +177,000 - Household Survey
• Not in Labor Force +12,000 - Household Survey
• Participation Rate +0.1 at 63.5 - Household Survey

Quick Notes About the Unemployment Rate 
 

• 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.
• In the last year, those "not" in the labor force rose by 1,711,000
• Over the course of the last year, the number of people employed rose by 1,610,000 (an average of 134,000 a month)
• In the last year the number of unemployed fell from 12,695,000 to 11,760,000 (a drop of 924,000)
• Percentage of long-term unemployment (27 weeks or more) is 36.7%. Once someone loses a job it is still very difficult to find another.
• 8,226,000 workers who are working part-time but want full-time work. A year ago there were 8,210,000. There has been little improvement in a year. This is a volatile series.

June 2013 Jobs Report

Please consider the Bureau of Labor Statistics (BLS) June 2013 Employment Report.

Total nonfarm payroll employment increased by 195,000 in June, and the unemployment rate was unchanged at 7.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in leisure and hospitality, professional and business services, retail trade, health care, and financial activities. 

Click on Any Chart in this Report to See a Sharper Image

Unemployment Rate - Seasonally Adjusted

 

Month to Month Changes

 

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Hours and Wages

Private average weekly hours of production and non-supervisory workers were flat at 33.7 hours. Average weekly hours of all employees was flat at 34.5 hours. Average hourly earnings of all private workers rose $0.10 to $24.01. Average hourly earnings of private-sector production and non-supervisory employees was up $0.05 to $20.14.

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.

Table 15 BLS Alternate Measures of Unemployment

 

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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 7.6%. 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.

Labor Force Factors
 

1. Discouraged workers stop looking for jobs
2. People retire because they cannot find jobs
3. People go back to school hoping it will improve their chances of getting a job
4. People stay in school longer because they cannot find a job

Were it not for people dropping out of the labor force, the unemployment rate would be over 10%. In addition, there are 8,226,000 people who are working part-time but want full-time work. 

Grossly Distorted Statistics

Digging under the surface, much of the drop in the unemployment rate over the past two years is nothing but a statistical mirage coupled with a massive increase in part-time jobs starting in October 2012 as a result of Obamacare legislation.

[NonValueAdded]

Re: people stay in school longer because they cannot find a job.

Living expenses are now incorporated into a student loan so some are going to school as an unemployment alternative. The classes are a distant second to funding their life.

[The Sons of Liberty]

Grossly Distorted Statistics

Thanks for the REAL facts. I'm sure those on this forum put no stock in the government's "NEWSPEAK", but it did supply the propaganda outlets (SeeBS, MSNBC, NBC, ABC) fodder.

[Vaduz]

Massive increase in part-time jobs starting in October 2012 as a result of Obamacare legislation.

53% with out a full time job must be Obama’s idea of improvement?.

[EternalVigilance]

The Obama Depression deepens.

[SkyPilot]

Add 650,000 DoD civilians to the numbers who are no longer full time.

http://www.spokesman.com/stories/2013/jul/06/dod-civilians-prepare-for-beginning-of-furloughs/

[TADSLOS]

You know what will solve all this unemployment/underemployment? 25 million freshly minted “citizens”. George and Jeb Bush, McCain and Rubio all approve.

[JohnnyP]

They’ve been telling us there are 11 or 12 million illegals for twenty years.

[TADSLOS]

SURPRISE!!!

[4Liberty]

unexpected!

[Pearls Before Swine]

They’ve been telling us there are 11 or 12 million illegals for twenty years.

ZPG (zero population growth)? With free medical care and welfare thrown in--I think not.