The March jobs report shows continued slow growth, bought at great cost

Summary:  The news media focuses on the month-to-month changes in the jobs report, which consist mostly of noise. Strong months confirm the optimists; weak months confirm the pessimists. The trend of growth remains the real story, with the US economy near stall speed — supported only (like the other developed nations) by massive multi-year fiscal and monetary stimulus. Slow growth bought at great cost. A cost we cannot long continue to pay, borrowing and squandering the money ($ which instead could be rebuilding America). Just like Japan since 1989.

Contents

  1. Conclusions
  2. About the recovery
  3. Household survey
  4. Establishment survey
  5. Unemployment
  6. Other important metrics
  7. For more information about US economy

(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.  This report paints a picture consistent with the many other streams of information about the economy: slow growth. Slowing slow growth, as shown by this from ECRI:

From ECRI, 5 April 2013
From ECRI, 5 April 2013

(2)  About the recovery

To understand the jobs report one must first understand the recovery of which it is one aspect:  during this period the government’s public debt increased $1.1 trillion — 6.8% of GDP (see debt here and GDP here), one of the higher fiscal deficits in the world.  Our shiny recovery results from massive borrowing and spending.

In other words, organic growth has not yet resumed.  The US economy has stabilized and slowly improves only due to the massive “drugs”  of monetary and fiscal stimulus (the former boosted with QE3 as the latter winds down).  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 eliminated pressure for reform.  We have had the New Deal stimulus without the New Deal reforms (some of which failed, but the others laid the foundation for the great post-war boom).

(3)  The Household survey

The Current Population survey is a simple survey of households, with large error bars but no revisions.  It’s worth watching because it’s the basis for the headline unemployment rate, it gives some useful data not in the more-accurate business (establishment) survey, and because some research suggests that the household report shows inflection points before the establishment survey.

Here are the numbers, in thousands, not seasonally adjusted. Note that 1/3 of the new jobs during the past year are part-time jobs.

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Description March 2012   March 2013   Change   Change
Employed 141,412 142,698 1,286 0.9%
…Employment-population ratio 58.3% 58.2% -0.1 0.0%
Full-time 113,916 114,796 880 0.8%
Part-time 27,497 27,902 405 1.5%
Unemployed 12,904 11,815 -1,089 -8.4%
…Unemployment rate 8.4% 7.6% -0.8 -2.5%

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(3)  The establishment survey

The second survey asks employers to report the number of jobs.  It usually shows a similar pattern of growth as the household survey, giving us confidence in the results.  During the past year it shows slow improvement at the same rate as the household report (as usual). These are in thousands, not seasonally adjusted numbers.

Description March 2012   March 2013   Change   Change
Total nonfarm 132,505 133,726 1,2219 0.9%
Total private 110,157 111,521 1,364 1.2%
Total government 22,348 22,205 -143 -0.6%

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From the BLS, April 2013
From the BLS, April 2013

(4)  Measures of Unemployment

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

Compare the change in the seasonally adjusted numbers of the 4-week moving averages (source here) of March 2012 and 2013. Faster decline than either the CPS and CES surveys.

  • March 2012: 365,750
  • March 2013: 354,250  (-3.1% — weak improvement)

(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.  These are non-seasonally adjusted.

Metric March 2012 March 2013
U-1 4.9% 4.3%
U-2 4.8% 4.3%
U-3 8.4% 7.6%
U-4 8.9% 8.1%
U-5 9.7% 9.0%
U-6 14.8% 13.9%

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(5)  Another important metric:  wages and hours worked

March 2012 vs. 2013 (seasonally adjusted), from the Establishment Report:

  • Average private nonfarm hours worked per week:  34.5 vs. 34.6  (no significant change)
  • Average weekly earnings of nonfarm private workers:  $807 vs. $824 (up 2.1% vs 2.0% inflation = no real change)

(6)  For more information about the US economy

  1. A certain casualty of the recession: the US Government’s solvency, 25 November 2008
  2. 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
  3. The Robot Revolution arrives, and the world changes, 20 April 2012 — about structural unemployment
  4. America is rich and powerful because we can borrow. Will this debt build a stronger America?, 5 June 2012
  5. US economic update. Everything that follows is a result of what you see here., 8 June 2012
  6. America’s strength is an illusion created by foolish borrowing, 10 October 2012
  7. Did the US fall into recession during 2012? Are we in recession today?, 6 March 2013

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3 thoughts on “The March jobs report shows continued slow growth, bought at great cost

  1. Always good to see the big picture on these numbers. The one thing you don’t show is change in the pool of potential workers. This would help us understand whether or not the economy is creating enough jobs to tread water.

    My gut feel is that it is not.

    By the way, it is good to see comments working again. I know you find them to be a terrible pain but you do have some good commentors with some interesting points of view.

  2. Owing to imperfect marketing and banking mechanisms, the stimulus liquidity takes as long as three months to find its way to the financial markets. The Dow has just broken through its all-time high and will continue to do so, until the QE stimulus is stopped and for roughly three months thereafter. A small percentage of canny investors is profiting from the stimulus. It’s harder to see how the general populace has benefited.

  3. Meanwhile the Civilian Participation Rate continues it’s continuous decline since around 1998. The Civilian Employment to Population Ratio remains stuck around 58% where it’s been since the recession ended in 2009 – down from it’s peak around 1998 of about 67.4% So only an approximate 60% of the population is working, give or take, and the monthly trend has been continuously downwards since the Great Recession “ended.”

    Another way to look at it is that the number for the “Working-age Population in the United States” minus “All Employees: Total nonfarm” continues to trend upwards – the number of working age people increasing more rapidly than the number of employed (unless there’s a lot more farmers recently). But it’s been doing that since 1970.

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