Tag Archives: unemployment

Are government unemployment numbers a “big lie”?

Summary: Today we look at an example of a recurring myth on the Right, that nothing the government does can be trusted. It’s part of their long and highly successful program to delegitimatize our government (and unions too). These are the major institutions through which we can collectively resist the power of the 1%; without them we’re powerless atoms. Now the CEO of Gallup pitches dust in our eyes. {1st of 2 posts today}

Myth busted!

A hot story on the Right about about a sad number: “The Big Lie: 5.6% Unemployment” by Jim Clifton (CEO of Gallup), 3 February 2015. It’s a disgraceful article for a CEO of a major company — and ironical for the CEO of Gallup. Red emphasis added. Excerpt:

Right now, we’re hearing much celebrating from the media, the White House and Wall Street about how unemployment is “down” to 5.6%. The cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market.

None of them will tell you this: If you, a family member or anyone is unemployed and has subsequently given up on finding a job — if you are so hopelessly out of work that you’ve stopped looking over the past four weeks — the Department of Labor doesn’t count you as unemployed. That’s right. While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news — currently 5.6%. Right now, as many as 30 million Americans are either out of work or severely underemployed. Trust me, the vast majority of them aren’t throwing parties to toast “falling” unemployment.

There’s another reason why the official rate is misleading. Say you’re an out-of-work engineer or healthcare worker or construction worker or retail manager: If you perform a minimum of one hour of work in a week and are paid at least $20 — maybe someone pays you to mow their lawn — you’re not officially counted as unemployed in the much-reported 5.6%. Few Americans know this.

… There’s no other way to say this. The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie.

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The jobs report shows the beating heart of the economy. See the good news, & the bad.

Summary: Today we examine the very beating heart of the US economy, where all the arteries converge — the jobs report. The picture it shows is clear, although most commentary obscures this beneath analysts’ hopes and fears. Also, the data warns that the US economy has changed in an important but ominous way.

“Unless you expect the unexpected you will never find truth, for it is hard to discover and hard to attain.”
— Heraclitus, the pre-Socratic “Weeping Philosopher” of Ionia

The bottom line

Here’s one version of the bottom line (at the end is a more accurate version) of the numbers in the January employment report: job growth continues at the same rate as during the past ten months. Not slowing, as some feared. No breakout, as some hoped.

Employment-January

The following graphs show the numbers on on a Year-over-Year basis, smoothing the lines but losing resolution of recent change. The numbers are too noisy and too revised to see the pattern otherwise.

Is this rate fast or slow? The monthly numbers don’t say, especially since population growth means that the same number of new jobs represents slower growth over time. Let’s look at job growth as a percent change. We see a slow — very slow — acceleration, perhaps even the start of a break-out: 2.3% YoY  (2.1% YoY using the Household survey data, a second survey confirming the results). That’s fast, the fastest since May 2000 — at the peak of the tech bubble.

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For Japan there is no road but to an economic recovery

Summary: the most contrarian thing you’ll read today.

Japan was a big story in 2014. The hopes for its rise — quickly crushed — created ripples around the world. Today’s post features an article by an expert asking if a new phase in its recovery story will unfold in 2015. A recovery in Japan would give the world economy another locomotive. The data looks provocative and the reasoning seems profound. (This is the 2nd of today’s two posts.)

“If something cannot go on forever, it will stop.”
— Herbert Stein’s Law (US economist, 1916-1999)

Japan: setting sun

A setting or rising sun?

Keiki Kaifuku, Kono Michi Shika Nai
“Economic Recovery,
There Is No Road But This”
—  LDP Campaign Slogan, December 2014

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By Peter Karmin of Fort Sheridan Advisors

From the Drobny Global Monitor, 11 December 2014

Posted with the generous permission of the author and Drobny Global Advisors.

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For years – if not decades – Japan’s shrinking demographics have been a primary cause for that country’s lackluster economic growth. However, Japan is now reaching a point in its cycle where the population shortage — combined with a scarcity in natural resources and the effects of “Abenomics” – will cause stagflation rather than deflation. This is a structural rather than cyclical change resulting from a shortage in labor and natural resources. The former is a result of declining population/workforce along with stringent immigration laws and the latter is a result of the closing of nuclear power plants following the 2011 Tohoku earthquake and tsunami.

During the past few years, Japan’s unemployment rate has gradually dropped and is now at 3.5% which is the lowest since 1997.

Japan's unemployment rate

Drobny Global Advisors, 11 December 2014

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Additional signs of improvement within the labor sector are seen in other surveys. For example, the “Jobs-To-Applicants Ratio” is now at a level (1.1 job openings/applicants) not seen since June 1992 when 10-year Japanese Government Bonds (JGBs) yielded 5% (we have only had to move the decimal over to the left one place during the past 22 years):

Japan: job to applicants ratio

Drobny Global Advisors, 11 December 2014

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Recent Bank of Japan Tankan Surveys show that both the manufacturing and non-manufacturing sectors are finding a shortage of available workers {DI: diffusion index}:

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Here’s help to see the truth through the narratives in the news: looking at the jobs numbers

Summary: We’re flooded with news from the gross over-capacity of that industry, so finding a full balanced story has become difficult. This post takes something that should be simple — the monthly jobs report — and shows how it’s spun to gibberish by Left and Right, and one way to find its core meaning.

“Unless you expect the unexpected you will never find truth, for it is hard to discover and hard to attain.”
— Heraclitus, the pre-Socratic “Weeping Philosopher” of Ionia

Magnify to see

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The news consists largely of narratives dressed up with tidbits from the endless stream of data washing over us. Among its many functions is to assure us that this data has meaning (beyond itself) and can be understood.

Unfortunately, American information sources often divide us into tribes by carefully selecting what to show members, and spinning what they show. So even intelligent well-informed Americans often display amazing ignorance about basic aspects of politicized issues (e.g., that skeptics deny the existence of climate change, or that Obama is not an American citizen). These trends combine to blind us to the complexity and changing nature of our world. Two politicized topics show this clearly: climate change and economics. For a change, let’s look at the latter. Conservatives seek to convince us that the economy remains stagnant, liberals (and Wall Street) that it’s begun to boom. Both have little interest in the boring reality of slow stable growth since the crash.

The first principle of stockbroker economics is that all news is good. … The second principle is that the stock market is always cheap.
— Andrew Smithers, Financial Times, 4 January 2006

The Right points to the weak numbers in the Household report.  Zero Hedge trumpets “Full-Time Jobs Down 150K“!  True, and nice clickbait. But the highly volatile household data tells us little in this form.
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FRED: full-time jobs
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Instead let’s look at it as percent change (which adjusts for the growing population) on a Year-over-Year basis (smoothing the line, but losing resolution of recent change). We see steady but slow growth (but at 119,482,00 still under the Nov 2007 peak of 121,875,000):

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November brought us good news about jobs and wages. Here are the details.

Summary: It’s the big day for economic stat junkies. Has the economy ended its long flirtation with recession, limping along near the 2% stall speed — supported by years of fiscal and monetary stimulus (now fading)? The last few quarters of GDP numbers suggest yes, but the job numbers have refused to cooperate. Here we look at the November report. It looks good.  This is the first of two posts today.

Economy

Contents

  1. The big lesson from this report
  2. The big picture of the economy
  3. Household survey
  4. Establishment survey
  5. Unemployment
  6. The hot sectors for jobs!
  7. For more information about

(1) The big lesson from this report

What can we learn from the November employment report? First, that one minute spent reading or watching economists predict economic numbers is a minute wasted forever. Most of the numbers are noise (changes withing the error bars; watch the trend instead) — and the forecasts are wild guesses. Life is short; spend it wisely. Here the forecasts of the best for the November gain in non-farm employment from the Establishment survey (CES). They guess because we want guesses. Guessing

  • JP Morgan 200K
  • Goldman Sachs 220K
  • Citigroup 225K
  • HSBC 230K
  • UBS 230K
  • Credit Suisse 235K
  • Morgan Stanley 235K
  • Deutsche Bank 250K

The actual was 321,000 (+2.8% SAAR), plus another 44,000 from revisions to September and October.

(2)  The big picture of the economy

This report supported the hopes of those hoping the US economy has returned to “normal” growth. But one swallow does not a summer make. Even with a good November, the YoY NSA growth in jobs is 2.0% by the Household Survey (CPS) and 2.0% by the Establishment Survey (CES) — two methods, same result.

The Bureau of Labor Statistics conducts two surveys: one of households, one of businesses. They are not directly comparable, each giving different perspectives on the US economy. The Current Population survey looks at households. Compared to the survey of businesses it has large error bars; there are no revisions. It’s the basis for the headline unemployment rate, and gives useful data not in the more-accurate business (establishment) survey. Also, some research suggests that the household report shows inflection points before the establishment survey.

Both give identical pictures for the past year (YoY NSA): people employed (CPS) +2.0%, non-farm jobs (CES) +2.0%.  They’re also similar for the past two months (SA): +2.3% and +2.5%.

(3) The Household survey (CPS)

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The hidden truth about job growth, lost amidst the statistical noise & optimists’ hopes

Summary: The key thing to know about the latest job report is the same thing to know about all 2014’s job reports: there has been no change to the trend. No sign of the acceleration so confidently forecast by so many. This confirms the other economic indicators, amidst the slowing world economy. Leave the analysis of the minutia to specialists; the big picture is important and easy to see. Because the expansion grows old, and the next recession approaches (especially with the Fed determined, for good reason, to normalize interests beginning next year).

“Significant monetary stimulus, the end of fiscal austerity, a booming housing market, a cheap dollar, record corporate cash balances — if the US economy does not significantly accelerate in the coming quarters, it never will. We assume it will …”

— Michael Hartnett (Chief Strategist, Bank of America), 12 September 2013 (red emphasis added)

Slow Economic Growth

The core economic statistics for the US are jobs and wages (these are coincident indicators, showing where we were in the last few months). As I (and others) have reported, the predictions of optimists and pessimists alike have been wrong during the past 5 years. The US has grown steadily by most metrics at roughly 2% per year. Slow, especially with the gains going largely to the 1% (hence the GOP wins, bringing them control of most elements of the US Federal and State government machinery).

Here is the monthly nonfarm jobs growth (SA). Do you see a boom in 2014? The second half of 2014 (after an unexpected winter slowed Q1 growth)? This month’s “strong” report resulted from “America’s Sudden Fascination With Hiring Young Women” as waitresses.
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Non-farm jobs, SA.

Let’s smooth out those wiggles. Here is the same data, but the year-over-year changes, NSA, during the past 10 years. Looks like we’re at peak job growth. Is that good or bad?

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The jobs report: another opportunity to shake our confidence in the government

Summary: Today we look at lies about the jobs report from Zero Hedge. These are part of a larger campaign to destroy our confidence in the government as a means of collective action, leaving us isolated and weak.

WW2 propaganda

True then and now

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Conservatives have long waged a campaign to weaken our confidence in unions and government, the only organizations that can resist the 1%. Alone, as individuals, we’re pawns So they’re using their agents to separate us, as shepherds’ dogs work sheep, with a propaganda barrage on us of immense size. Instead of explosives, it consists of ideas — myths and misinformation. Too overwhelming for rebuttals, our only hope lies in skepticism.

Our gullibility is their greatest advantage, but we can do better

These stories comes from sources providing an artfully arranged combination of information and misinformation (like worms on fishhooks). Few do it better than Zero Hedge, which mixes information from valuable sources with misinformation and outright fiction. Today we look at one example, Zero Hedge’s myths about the Bureau of Labor Statistics.

4 Million Fewer Jobs: How The BLS Massively Overestimated US Job Creation
Zero Hedge, 5 August 2014 — Opening:

“When it comes to the all-important monthly payrolls number which sets the tone for risk over the next month, one of the biggest variables in the BLS’ “estimate” (because all jobs numbers are that: statistical estimates) of US jobs is the monthly birth-death adjustment. What this monthly fudge factor is, in a nutshell, is the BLS’ estimation for how many new businesses are created over the period offset by older “dying” businesses, leading to incremental jobs that are only polled by the BLS with a substantial lag. Here is how the BLS explains this adjustment: …”

This is correct, as is the following excerpt they provide from the BLS website. They then add their special mixture of fact and fiction.

The latest proof of just how broken the economy has become, and serves as a big flashing red question mark about just how massively overestimated job creation is due to a wildly erroneous birth/death estimator, comes from a research report by the Brookings Institution titled: “The Other Aging of America: The Increasing Dominance of Older Firms.”

This study, one of several by Brookings about this important trend, shows the decline in entrepreneurship in the US economy. ZH quotes:

Perhaps more striking, our research showed that the decline in new firm formation rates had occurred in every U.S. state and nearly every metropolitan area, in each broad industry group, and in all firm size classes … the rate of new firm formations fell significantly during this period — occurring because the number of new firms being formed each year (numerator) didn’t keep pace with the growth in the stock of total firms in the economy (denominator).

Zero Hedge then assumes the BLS has not accounted for this (guessing), and draws a dramatic conclusion (their bold):

… if indeed this declining dynamism is “contributing to the decline in entrepreneurship as well” then the whole premise behind the birth/death adjustment, or rather the “Birth” contribution … goes out of the window.

…  here is the bottom line: since Lehman, or starting in 2009, the Birth/Death adjustment alone has added over 3.5 million jobs. Or rather “jobs”, because these are not actual jobs – these are BLS estimates for how many jobs newly-formed businesses have created based purely on statistical estimations and hypotheses that the US economy in 2014 is as it was in 1960. Which means that the traditional dynamics used behind the Birth and Death adjustment are now merely Dead, and US employment is overestimated by as much as three and a half million jobs!

This also means that any boasts by Obama about “solid US economic growth” under his regime, and that all those jobs lost since Lehman have allegedly since been recovered, are nothing but even more lies.

From Zero Hedge: Birth Death model

Zero Hedge, 5 August 2014

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This is big news. They even added the standard GOP refrain of “Obama lies”. But false; it’s ignorance on stilts. Note the last sentence from the BLS page about the birth/death adjustment, from which ZH quoted at the start of their article:

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