Summary: Looking at today’s employment report (PDF here) we can draw one big conclusion. The economy continues to growth more slowly than we’d hope given the massive on-going monetary and fiscal stimulus programs (which cannot be continued forever). Oddly enough, this is not obvious to everyone.
Contents
- Good news. Bad news. Take your choice
- The cumulative change 2012 has been small
- This is bad news; worse might lie ahead
- For more information
(1) Good news. Bad news. Take your choice
Compare the July employment report results (seasonally adjusted) to the 90% confidence level for the monthly employment reports using the two metrics the Bureau of Labor Statistics provides. This month they disagree big-time.
(a) The household survey (CPS, source of the unemployment rate): a loss of 195,000 jobs in July, + or – 280,000 (not a statistically significant change). The population increased by 199,000, the labor force dropped by 150,000 and the number not in the labor force increased by 348,000. The report didn’t mention these odd swings.
(b) The establishment survey of non-farm employment (CES): a gain of 163,000 +or – 100,000 (a statistically significant change). Quite an improvement over recent CES monthly changes:
- April: +68,000
- May: +87,000
- June: +64,000
(2) The cumulative change 2012 has been small
The monthly numbers are noisy. More useful are the longer-term trends.
(a) The not seasonally adjusted change over the past 12 months of non-farm jobs per the establishment survey: 1.83 million (1.4%). That’s faster growth than both population and the labor force, both roughly 1%/year.
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 July (in thousands). The two reports have diverged somewhat on the number and per cent change in jobs YTD., with the establishment report showing faster growth than the household report. More important is that both show growth, roughtly steady over the past year.
The establishment survey:
| Jan-12 | July-12 | Change | % Change |
| 132,461 | 133,245 | 784,000 | 0.6% |
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The household survey provides looks at the civilian non-institutionalized population (age 16+):
| Class | Jan-12 | July-12 | Change | % Change | Annualized |
| Population | 242,269 | 243,354 | 1,085 | 0.4% | 0.9% |
| Not in labor force | 87,874 | 88,340 | 466 | 0.5% | 1.1% |
| Labor Force | 154,395 | 155,013 | 618 | 0.4% | 0.8% |
| Employed | 141,637 | 142,220 | 583 | 0.4% | 0.8% |
| Unemployed | 12,758 | 12,794 | 36 | 0.5% | 0.6% |
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(3) The details show continued slow growth
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. These numbers are less accurate than the headline numbers.
- The number of long-term unemployed continue to shrink, down 16% YoY to a still-high 5.2 million.
- The number of discouraged workers (drop-outs from the labor force) continues to shrink, down 24% YoY to 852,000.
- Libertarians rejoice! The number of government employees continues to shrink, down 105,000 YoY (0.5%) to 22 million.
- With so many companies closely managing their workers’ hours, average weekly hours might no longer tell us much. It’s flat YoY at 34.5.
- The number of full-time jobs have risen faster than part-time (2.1% vs. 1.4%, from the Household survey). There are 27 million part-time jobs and 116 million full-time jobs.
- The alternative measures of unemployment (there is no “right” number) als0 improve. The broadest metric (the U-6) has dropped from 16.3% last July to 15.2% now (non-seasonally adjusted).
(4) The big picture
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 — 8.3% of GDP — and we get only a 1.4% increase in jobs. America’s economy is among the strongest in the world lately, but only because of our borrowing. Italy’s deficit is aprox 2.4% of GDP; cut our deficit by 70% and our economy probably would look like Italy’s.
So far 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 our government’s spending (eg, our infrastructure is still rotting away). We have borrowed $6 trillion since the recession began in December 2007 (data here); we cannot keep this up forever.
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.
Really awful would be a US recession. One starting with an 8.3% unemployment rate and an 8%+ fiscal deficit.
But we’re probably not in a recession yet. The most reliable real-time indicators suggest stablity, or slowing growth. If you watch just one indicator, I recommend the weekly new claims for unemployment. It clearly flagged our descent into the 2008-09 crash.
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