About the January jobs report – mildly good news, but bought at great cost

Summary:  Most people focus on the month-to-month changes in the jobs report, which contain a lot of noise.  The 12-month changes are more revealing.  We are in a slow recovery, somewhat faster than in 2010.  We should enjoy it, as it was bought at great cost.

Here we examine the January employment report from the Bureau of Labor Statistics.  They conduct two surveys: one of households, one of businesses.  They are not directly comparable, eaching giving different perspectives on the US economy.  Today we look at the year-over-year changes in data (not seasonally adjusted).  The picture painted is consistent with the many other streams of information about the economy — effective rebuttal to the cultists who insist all the government data is faked to re-elect Obama or benefit the Trilateral Commission.

The important detail to know about the recovery:  during this period the government’s public debt increased one trillion dollars — almost 7% of GDP (source here), one of the higher fiscal deficits in the world.  Our shiny recovery results from massive borrowing and spending.  Without that we’d be in a deep recession, like Greece.

(1)  Household survey

It shows that we had an OK year, with the number employed growing faster than the civilian non-institutionalized population, but the number not in the labor force grew even faster.

Category January 2011 January 2012 Change Change
Civilian non-inst pop 238,704 242,269 3,565 1.5%
— Civilian labor force 152,536 153,485 949 0.6%
—- Employed 137,599 139,944 2,345 1.7%
—- Unemployed 14,937 13,541 – 1,396 -9.3%
— Not in labor force 86,168 88,784 2,616 3.0%
Full-time 110,373 111,879 1,506 1.4%
Part-time 27,226 28,065 839 3.1%

Effective with data for January 2012, updated population estimates which reflect the results of Census 2010 have been used in the household survey; earlier months were not adjusted.  They provide the adjustments so they can be backed out to make the January numbers more comparible with earlier months.  Doing so gives us these results, with employment growth slower — but much slower growth in those not in the labor force:

Category 2011 Adjustment New 2011 2012 Change Change
Civilian non-inst pop 238,704 1,510 240,214 242,269 2,055 0.9%
— Civilian labor force 152,536 258 152,794 153,485 691 0.5%
— Employed 137,599 216 137,815 139,944 2,129 1.5%
— Unemployed 14,937 42 14,979 13,541 – 1,438 -9.6%
— Not in labor force 86,168 1,252 87,420 88,784 1,364 1.6%

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(2)  The establishment survey

The second survey asks employers to report jobs.  Note it shows the same growth as the household survey, giving us more confidence in the result.

 Category 2011 2012 Change Change
Total non-farm 128,327 130,263 1,936 1.5%
Total private 106,199 108,403 2,204 2.1%
Total government 22,128 21,860 – 268 -1.2%

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(3)  Unemployment

The analysts at BLS calculate six measures of unemployment, from narror to broad definitions.  None is more real than the others; most people consider U-3, or U-4, or U-5 as the most useful measure.  U-6 includes people with part-time jobs who prefer full-time work, and so includes underemployment.

Any way you count it, unemployment has decreased during the past year.  Slowly.

Metric Jan-11 Jan-12
U-1 5.6% 4.9%
U-2 6.2% 5.4%
U-3 9.8% 8.8%
U-4 10.4% 9.4%
U-5 11.4% 10.5%
U-6 17.3% 16.2%

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(4)  For more information about US government finances

  1. A certain casualty of the recession: the US Government’s solvency, 25 November 2008
  2. We have been warned. Death of the post-WWII geopolitical regime, 28 November 2008
  3. Beginning of the end of the Republic’s solvency. Soon come the first steps to a reformed regime – or a new regime., 14 August 2009
  4. Update on our government’s deteriorating solvency, 1 October 2009
  5. Another crack in Republic’s foundations: not the size of the debt, but when it’s due, 30 October 2009
  6. A look at our government’s debt – rising because we like to spend, 29 December 2009
  7. See the very essence of the US government’s financial problems (clue:  it’s us), 2 April 2010
  8. Our government’s finances are broken. How do we compare with our peers?, 8 April 2010
  9. Today’s conservative doomster warning (ludicrous but fun), 1 August 2010

11 thoughts on “About the January jobs report – mildly good news, but bought at great cost

  1. Thanks FM, this analysis is exactly what I had been looking for.

    You’ve already touched on this, but there are two main take-aways about this month’s employment numbers from my perspective:
    1. The steady reduction of the size of the workforce relative to the size of the potential workforce.

    2. The slowly increasing percentage of part-time (presumably no-benefit) employees in the workforce.

    Although it would be hard to do, some good research and analysis of why these two trends are occurring and the ramifications of these trends would give us a much better understanding of what is happening in America.

    1. Both are, as you note, important trends.

      The question about the relative size of the workforce is difficult to answer due to the aging of the boombers, which will shift people from the labor force to not in the labor force. I’ve seen analysis, but its complex.

      The increase in part-time — esp “part-time for economic reasons” (they want full-time but cannot find it) — is a decisive trend. Employers rely on part-timers to produce a no benefits, non-union work force. See that many articles about Amazon to learn about an efficient implementation of this strategy. It’s changed the balance of power between workers and employers, a major force re-shaping America. Fortunately for business owners, we’re fools. Arguing about prayer in schools and Obama’s (mythical) “apology tour” keeps us business, while people more engaged with reality build the 21st Century America.

    2. Both are, as you note, important trends.

      The question about the relative size of the workforce is difficult to answer due to the aging of the boomers, which will shift people from the labor force to not in the labor force. I’ve seen analysis, but its complex.

      The increase in part-time — esp “part-time for economic reasons” (they want full-time but cannot find it) — is a decisive trend. Employers rely on part-timers to produce a no benefits, non-union work force. See that many articles about Amazon to learn about an efficient implementation of this strategy. It’s changed the balance of power between workers and employers, a major force re-shaping America. Fortunately for business owners, we’re fools. Arguing about prayer in schools and Obama’s (mythical) “apology tour” keeps us business, while people more engaged with reality build the 21st Century America.

  2. From the size of the relative workforce …
    I was just thinking about disability . Despite US citizens being allegedly the fattest , they are the longest lived . Because of medical advances, more retired people , especially disabled retired people . More disabled people of working age , thanks to medical advances .The numbers may well increase for the same reason ; plus the current crop of youngsters diagnosed with autism, aspergers , ADHD etc .

    Secondly , do you remeber being told how computors and robotics would free us from soul destroying toil ? How we would have shorter hours at work and more free time to hike , paint , make music etc? Well here it is . But unless you are one of fortune’s few favourites , more free time is not compatable with same money . You could have been a full time clerk ; now you can be a part time data-inputter .

  3. The end of the USD as world reserve currency is already inevitable. That’s why european elite created the euro. As Willem F. Duisenberg, President of the European Central Bank has said: “The euro, probably more than any other currency, represents the mutual confidence at the heart of our community. It is the first currency that has not only severed its link to gold, but also its link to the nation-state. It is not backed by the durability of the metal or by the authority of the state.” The fatal flaw of the USD as a world reserve currency is that it is backed by the authority of the US government.

    1. Yes, the US dollar will eventually lose reserve currency status. No, challenging the USD as reserve currency had nothing to do with the creation of the Euro. No, the USD’s flatal flaw is that reserve currency status does us no good — and will end as the rest of the world grows up. Here are some basics from another thread.

      (1) Reserve currency status is called a poisoned chalice — allluring benefits, but at too great a long-term cost. As such its neither sought or to be defended. Other nations, such as Japan, have wisely avoided their currency becoming widely used in reserves.

      (2) The US dollar is held in foreign exchange reserves roughly in propotion to its share of the global government bond market — not because it has some unique properties. As other nations grow, their bonds will displace treasuries in foreign exchange reserves.

      (3) The development of a single currency as the reserve currency is a result of WWII, a historical accident. As other nations grow, the US will inevitably become just another great power. That’s life, and not something we need fear.

      (4) The role of the US dollar as the transaction currency is a convenience, neither necessary or significant. Unlike the often hysterical tales told on the fringes, having computers calculate trade in other currencies probably will have trivial effects.

      (5) The value of a nation’s currency with respect to those of its trading partners must reflect their relative economics. A too-strong currency depresses a nation’s exports and boosts imports — making the nation weaker (showing the astonishing ignorance of many conservatives about simple matters of economics). Following this is a repost of a previous comment about this.

      (6) A financial crash is a stress test for national economies. If the US dollar were unstable, this would have crashed during the 2008-09 crash. In fact the dollar has held up well. As of Jan 21 it was up 24% vs. the Euro since the Euro’s peak on 22 April 2008. More important is the trade-weighted dollar — the important reference point. The US dollar on Jan 21 was where it was on 5 October 2007, before the crisis began.

  4. The employment stats are decent, we can be thankful for that. My main concern is how much of that employment is useful. I saw that manufacturing increased by 50,000 and mining 10,000, those are wealth creating sectors of the economy i.e. extracting (mining) and transforming (manufacturing) those materials into something useful. Leisure and hospitality…not nearly as much.

    1. It’s not a meaningful distinction, useful and not useful. What counts is that we’re running a balanced current account with the rest of the world, and avoiding potentially destabilzing debt accumustion within the various sectors of the US economy.

      Unfortunately we’re running a trade deficit, due to an overvalued currency and other factors. And the US household sector and, to a lesser extent, the government sector (all levels) have too much debt. Combine that with too high unemployment and you have a sick economy. That’s what we should worry about.

    2. If the massive debt and strongly overvalued currency are the problems how do we push for the proper solutions? Like a Value Added Tax on imports that can be rebated on exports or renegotiating our exchange rates with countries that intervene in currency markets. Should we write our members of Congress, tell others, or use social media? I believe you’ll say all of the above.

    1. Good question! I’ll answer if you tell me when the next recession will hit! A reliable answer to that lies beyond the current state of economic science. The best leading indicators show the US economy to be slowing (ie, the OECD composite leading indicators and the Economic Cycle Research Institute; the Conference Board’s system is being revised). But data for the last few months shows an accelleration, although data from Asia and Europe is mixed to darker. It’s confusing, even more so than usual.

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