Summary: Looking at today’s employment report (PDF here) we can draw three big conclusions. Oddly enough, these are not obvious to all.
Contents
- The change in June was statistically about zero
- The cumulative change over the past year was very small
- This is bad news; worse might lie ahead
- For more information
(1) The change in June was statistically about zero
Compare the June employment report results to the 90% confidence level for the monthly employment reports:
(a) The household survey (CPS, source of the unemployment rate): 128,000 + or – 280,000 (essentially unchanged).
(b) The establishment survey of non-farm employment (CES): 80,000 +or – 100,000 (ditto). This has been the case for quite a while. Looking at the recent CES monthly changes:
- April: +68,000
- May: +77,000
- June: +80,000
(2) The cumulative change over the past year was very small
(a) The not seasonally adjusted change over the past 12 months of non-farm jobs per the establishment survey: 1.8 million (1.3%). Due to revisions to the data, year-over-changes in the household survey are too complex for us to do here.
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(b) Look at the changes this year, the seasonally adjusted change from January to June (in thousands). Note both surveys agree on the change in jobs.
The establishment survey:
| Jan-12 | Jun-12 | Change | % Change |
| 132,461 | 133,088 | 627 | 0.5% |
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The household survey provides a broader context:
| Class | Jan-12 | Jun-12 | Change | % Change | Annualized |
| Population | 242,269 | 243,155 | 886 | 0.4% | 0.9% |
| Not in labor force | 87,874 | 87,992 | 118 | 0.1% | 0.3% |
| Labor Force | 154,395 | 155,163 | 768 | 0.5% | 1.2% |
| Employed | 141,637 | 142,415 | 778 | 0.5% | 1.3% |
| Unemployed | 12,758 | 12,749 | -9 | -0.1% | -0.2% |
Population = civilian, non-institutionalized, age 16+.
(3) This is bad news; worse might lie ahead
Many who look at these numbers debate the tiny details, but ignore the large fact: both measures show slow recovery from the depths of the recovery. Very slow recovery.
We are applying powerful fiscal and monetary stimulus to get this slow recovery. Near-zero interest rates plus borrowing $1.3 trillion dollars over the past 12 months (data here), and we get only a 1.3% increase in jobs. The annualized increase so far this year runs at roughly the same rate — with no evidence of the powerful sustainable recovery the optimists have promised so many times since the trough in Spring 2009. The reason is obvious: the stimulus provided first aid. It stabilized the economy, buying time for measures to rebalance our warped somewhat dysfunctional economy. We wasted that time (as we squandered the stimulus spending).
Now for the bad news: the world economy is slowing. The economic and social stress of a slowly growing world might be heavenly compared to what lies ahead if the world slumps again into recession in its weak condition.
For More Information about the US economy
- A status report about the US economy (we party so hard we cannot hear the alarms ringing), 27 March 2012
- About America’s economic recovery: the good news and the bad, 1 May 2012
- About the May jobs report – a few new jobs, bought at great cost, 1 June 2012
- The Titanic’s lessons for us about the coming economic crisis, 4 June 2012
- America is rich and powerful because we can borrow. Will this debt build a stronger America?, 5 June 2012
- US economic update. Everything that follows is a result of what you see here., 8 June 2012
FM – – –
A minor quibble. Statistically the last three months are slightly above zero. The average for the three months is 75,000. The uncertainty is proportional to the square root of the number of samples so +/- 100,000 for one month becomes +/- 58,000 for three months.
Thus, the three month change in employemnt is +225,000 = +/- 174,000 or between 51,000 and 399,000 with 90% confidence.
All that said, that is not really that much different from zero when we are 5 or 6 million jobs away from “full” employment.
So my point really is a quibble!!!
John Lounsbury
Lounsbury,
That’s a valid point.
But the larger fact to remember is that BLS says (page 9) that their estimate of confidence levels is “is on the order of plus or minus 100,000”. Not even on the close order of 100,000. So they believe the 90% confidence level is between 10,000 and one million. It’s an explicit and powerful reminder that these are only rough estimates by skilled by grossly underfunded experts.
Agencies like BLS are among the first to have their budgets cut when the fever strikes Congress. No lobbyests for good sensors for the USS America.
The elephant was great and powerful but preferred to be blind.
Actually, the biggest problem is that the numbers are subject to future backward revision as the data becomes more complete. There is reason to question the value of publishing the monthly data when they do since it is only partial. Steve Hansen repeatedly makes this point.
“the biggest problem is that the numbers are subject to future backward revision as the data becomes more complete.”
Not exactly. The jobs numbers come in two forms for good reason. The household survey is less accurate, but does not get revised. The establishment survey is more accurate (and provides another perspective), but subject to large revisions.
But your larger point is important. We have an accurate picture of the US economy as it was six months ago. We have a good idea as of three months ago. The real time data (now through last month) is fragmentary and of low accuracy. This is inevitable to some degree, but exacerbated by the gross, insane underfunding of our economic sensors.
I’ll give you a political strategy statement:
We’ll starve the beast and then we’ll prove that the government can’t do anything right.
America’s elites appear to have decided that the new U.S. jobs program will be our limitlessly expanding prison-police-military-surveillance-antiterror complex. Alas, recent studies show that of all the ways money can be spent by the government to create jobs, military/prison/antiterror spending is by far the worst, with the lowest number of jobs created per dollar.
In this respect America appears to be following California off the cliff. California turned from “the science state” with more per capita spending on universities and scientific research in the 1950s and 1960s and 1970s into “the prison state” with more per capita spending on prisons and prison guards from the 1980s and 1990s and 2000s than any other state. The results have been a disaster for California, as this method of job creation doesn’t work in the long run — prisons and cops and prison guards destroy valuable resources and render people unemployable, while universities make people employable and create valuable knowledge and science.
What concerns me most is your reminder that zero growth is occurring at the same time as $1.3 trillion is being injected into the U.S. Economy. Its like trying to save a patient who is bleeding to death by giving them blood transfusions rather than by stopping the bleeding. So if the $1.3 trillion is not circulating and generating jobs in the U.S. economy, where is it going and why is no one focused on that?
Cardillo,
Your metaphor of “bleeding” is reasonable but not accurate. Money does not work like that; there is no “leakage”. The fiscal and monetary stimulus are working, keeping the “patient” stable. They’re not cures; they buy time for effective treatment. Time which we’ve wasted.
FM – – –
Great explanation of the metaphor. I would suggest this could be extended by saying that the transfusions have kept the cancer patient stable but action to excise the tumors has not occurred and the risk of metastisis is increasing as the cancers keep growing.
John Lounsbury
Particularly fascinating? The use of the passive mode and the subjunctive voice whenever we discuss America’s economic policy. John Cardillo says “…zero growth is occurring…” It just happens, like a thunderstorm in nature.
Ah, no, actually, we should recognize that America chooses as a matter of national economic policy to ship millions of jobs overseas at an ever-accelerating rate via offshoring, outsourcing, etc. All these activities receive lavish tax incentives and rich rewards in the tax code. Vultures like Bain Capital which make their money by offshoring American jobs receive their income in the form of capital gains on investment vehicles, which gets taxed at a much much lower rate than regular income. 15% vs 36% for regular income.
If America chose to change its national economic policy so that, for example, investment income from offshored jobs were taxed at, say, a 95% marginal rate for every dollar above (let us say) $100,000 per year, then America might not find itself stuck in a situation in “…zero growth is occurring…” in jobs or aggregate demand or personal income for the bottom 4 quintiles.
We should remember 2 crucial points:
[1] Corporate profits are skyrocketing, reaching new records every day — plenty of growth in corporate profits “is occurring,” that growth in profits simply isn’t making its way down the economy to the income of everyone who works for a living; and
[2] these events don’t “just occurr” in the American economy, they result from deliberate economic policies set by our government. When our government decides it no longer likes the results of such policies, it can easily change America’s economic policies to produce different results.
All good points. These things — outsourcing jobs, high corporate profits, tax cuts — all benefit America’s stakeholders. Unfortunately the stakeholders doing include most of us.