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)

(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