About the March jobs report – a few jobs bought at great cost

Summary:  Most people focus on the month-to-month changes in the jobs report, which consists mostly of noise.  The 12-month changes are more revealing.  We remain in a slow recovery, somewhat faster than in 2010.  We should enjoy it, as it was bought at great cost. A cost we cannot long continue to pay.

Contents

  1. Conclusions
  2. Household survey
  3. Establishment survey
  4. Unemployment
  5. Other important metrics
  6. For more information about US government finances

(1)  Conclusions

Here we examine the March employment report from the Bureau of Labor Statistics.  They conduct two surveys: one of households, one of businesses.  They are not directly comparable, each giving different perspectives on the US economy.  Today we look at the year-over-year changes in data in order the avoid seasonal adjustments distorted by the warm winter.  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 $1.3 trillions — aprox 8.4% of GDP (source here), one of the higher fiscal deficits in the world.  Our shiny recovery results from massive borrowing and spending, without which we’d be in a deep recession, like Italy or even Spain.

In other words, organic growth has not yet resumed.  The US economy has stabilized and slowly improves due to the massive “drugs”  of monetary and fiscal stimulus.  Both have severe side-effects, which at some unknown point in the future will become problematic or untenable.  But the worst side effect was unexpected:  the stimulus has eliminated the pressure for reform.  We have had the New Deal stimulus without the New Deal reforms (some of which failed, but some setup the great post-war boom).

(2)  The Household survey

The survey of households shows slow improvement, with the number employed growing at the same rate as the civilian non-institutionalized population.  But the number not in the labor force grew even faster.  These are the non-seasonally adjusted numbers.

Description March 2011 March 2012 Change Change
Civilian non-instit population 239,000 242,604 3,604 2%
         
Civilian labor force 153,392 154,916 1,524 1%
…Participation rate in the labor force 0.640 0.696 0.056 9%
Not in the labor force 85,977 88,266 2,289 3%
         
Employed 138,962 141,412 2,450 2%
…Employment-population ratio 0.581 0.589 0.008 1%
Full-time 111,186 113,916 2,730 2%
Part-time 27,776 28,096 320 1%
         
Unemployed 14,060 12,904 -1,156 -8%
…Unemployment rate 9.2% 8.4% -0.008 -9%

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(3)  The establishment survey

The second survey asks employers to report jobs.  It shows a similar pattern of growth as the household survey, giving us confidence in the result.  Slow improvement. These are the non-seasonally adjusted numbers.

Description March 2011 March 2012 Change Change
Total nonfarm 130,061 132,010 1,949 1%
Total private 107,466 108,888 1,422 1%
Total government 22,595 22,416 -179 -1%

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(4)  Measures of Unemployment

(a)  New claims for unemployment insurance – one of the most accurate and useful real-time metrics

Comparing the year over year change in the non-seasonally adjusted numbers (source here):

  • week of 12 March 2011: 371,721
  • week of 10 March 2012: 340,077 (-8% YoY)  — likely to be revised up slightly

(b)  The unemployment rate – a complex metric that gets far too much attention

The analysts at BLS calculate six measures of unemployment, from narrow to broad definitions.  None is more real than the others; none are easily comparable to the rough estimates of unemployment during the 1930s (the first reliable surveys were in the early 1940s).  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 March-11 Mar-12
U-1 5.7% 4.9%
U-2 5.8% 4.8%
U-3 9.2% 8.4%
U-4 9.7% 8.9%
U-5 10.6% 9.7%
U-6 16.2% 14.8%

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(5)  Other important metrics

(a)  Better results for wages and hours worked than number of jobs

March 2011 vs. March 2012 (seasonally adjusted):

  • Average private nonfarm hours worked per week:  34.3 vs. 34.5 (up 3.5%)
  • Average hourly earnings of nonfarm private workers:  $22.92 vs. $23.39 (up 2.0%)

(b)  The employment-population ratio among Americans 25 – 54 years of age

Note the small upturn in 2012 that’s got so many people so excited about the recovery. (from the Bureau of Labor Statistics)

Click on image to enlarge

(c)  Ugly structural changes during the recession

Under the stress of the recession many employers took another step  from the standard post-WWII model to the new one of contract labor:  temporary help, independent contractors, and (as shown to the right) part-time labor.

The new model has continued after the downturn because it offers many advantages to employers:

  • no need to pay benefits,
  • training costs are paid by workers,
  • workers are difficult to unionize.

The graph is from the website of Gregor Macdonald.
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(6)  For more information about the US economy

  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
  10. About the January jobs report – mildly good news, but bought at great cost, 4 February 2012
  11. A status report about the US economy (we party so hard we cannot hear the alarms ringing), 27 March 2012

9 thoughts on “About the March jobs report – a few jobs bought at great cost

  1. This is the kind of post that keeps me coming back here.

    There’s a lot of hysteria about the amount of federal spending, but I see relatively little attention paid to cost-benefit ratios, as you have here. Keeping people from a despairing idleness was and is essential. But something broadly useful and enduring should have been built for all that money. There’s no shortage of public works projects that would make life much easier and safer for a huge swath of Americans.

    But that’s not what we got. And of course there was NO change at all to the power structures that got us into our current state.

    1. Our trillions in spending have been wastefully spent. These dollar stabilized the economy but created no long-term benefit to the US economy. Especially valuable would have been infrastructure spending that generated an economic return to help payback the debt.

      I and many others proposed this, and expected the government to do so. We were wrong.

      The only one who correctly predicted this, so far as I know, was Richard Koo of Nomura Research. See this post from February 2010 for details.

  2. What do you think about the employment information presented by John Hussman in his most recent weekly analysis report? “Is the Fed Promoting Recovery or Desperation?“, 9 April 2012

    Is he is right? Are all of the employment gains in the over 55 year old group while the uner-55 group employment rate is shrinking?

    I’m trying to figure out the implications and am not coming up anything logical that I can test but I’m very uncomfortable with some of the potential outcomes if this is true.

    1. While I basically agree with the wisdom of your statement about market advisors not usually being reliable sources of insight, I’m not sure that Joe Weisenthal is any better. I’m speak from a lack of facts here, not from doubt about Joe Weisenthal.

    2. Pluto,

      I don’t understand the substance of your objection. Weisenthal is referencing a long-standing question about the difference between Bernanke (pre-Fed Chairman) and Bernanke (Fed Chair). He supports it by citing one of Bernanke’s most powerful and famous speeches (about policy under deft deflation), and contrasting with what Bernanke did when we experienced debt deflation. Furthermore he referenced one of the many economists citing the need for more aggressive Fed policy (here’s another: “Targets, Instruments, and the Zero Bound (Wonks Only)“, Paul Krugman, op-ed in the New York Times, 31 March 2012 — who cites Larry Ball’s analysis).

      It’s not a complex case. Not everything viewpoint requires a thousand pages.

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