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. In fact 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 (now fading). Here we look at the August report. Lots of conflicting numbers. The key point: nothing in it suggests that the widely expected second half growth acceleration has begun.
- The big picture
- Household survey
- Establishment survey
- Other important metrics
- Other posts in this series
- For more information about US economy
(1) The big picture
Here we examine the August 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: continued slow growth.
(2) The Household survey
The Current Population survey is a simple survey of households. Compared to the survey of businesses it has large error bars but no revisions. It’s worth watching because it’s the basis for the headline unemployment rate, it gives 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 for August, in thousands, seasonally adjusted. An ugly drop in employment, but a large drop in the number unemployed. How? Because the third category of people — the number not in the labor force — increased by 516 thousand (+0.6%). Also, last month’s odd surge in part-time workers reversed itself.
|Description||July 2013||August 2013||Change||Change|
For the bigger picture here are the YoY numbers, in thousands, not seasonally adjusted. Slow but steady improvement.
|Description||August 2012||August 2013||Change||Change|
(3) The establishment survey
The second survey asks employers to report the number of jobs. Over one or more quarters 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 (+1.7%), but at a faster rate than the household survey (+1.4%). Attention conservatives: under the Keynian socialist the number of government employees continues to shrink. Time to apologize for your failed predictions.
Highlights for August:
- The August gain of 169 thousand jobs (SA) is slightly less than the average of the past 12 months (184 thousand, SA).
- The birth-death model produced 24% of the total August job gain (90,000 of 378,000, not seasonally adjusted).
- Revisions to June and July subtracted 74 thousand jobs (21% of the originally reported total, SA). The gain in the past 3 months was only 148 thousand/month.
- The fearsome sequester continues to be a dud in terms of Federal jobs (ex-Postal): a total of only 8,700 jobs lost in July & August (0.4%, SA).
Here is the YoY picture, in thousands, not seasonally adjusted:
|Description||August 2012||August 2013||Change||Change|
(4) Measures of Unemployment
(a) New claims for unemployment insurance are one of the most accurate and useful real-time meaures of the job market.
Compare the change in the 4-week moving averages (source here) of August 2012 and 2013 (not seasonally adjusted).
- A year ago: 310 thousand
- 28 August 2013: 269 thousand (-13%)
(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. These below numbers are not seasonally adjusted.
Any way you count it, unemployment has decreased during the past year. But the broader the measure, the slower the decline. U-1 down 14%; U-6 down 7%. These are not seasonally adjusted.
|Metric||August 2012||August 2013|
(5) Another important metric: wages and hours worked
Looking at nonfarm private workers in August 2012 vs. 2013 (seasonally adjusted), from the Establishment Report:
- Average hours worked per week: 34.4 vs. 34.5 (no significant change)
- Average hourly earnings: $23.53 vs. 24.05 (up 2.2%, +0.2% over the CPI) — whoopee!
- Average weekly earnings: $809.43 vs. $829.73 (up 2.5%, +0.5% after inflation) — whoopee!
No signs of the Wage Inflation so dreaded by corporations and economists.
(6) Other posts looking at the economy today
- The greatest monetary experiment, ever, 20 June 2013
- Is there a recession looming in our future? Let’s review the evidence., 2 August 2013
- How strong is the US economy? Let’s look at drivers of growth!, 5 August 2013
- Status report on the US economy: where we are, where we’re going, 27 August 2013
- Look at the economy to see why today’s jobs report is so important!, 6 September 2013
(7) For more information about the US economy
- A certain casualty of the recession: the US Government’s solvency, 25 November 2008
- 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
- The Robot Revolution arrives, and the world changes, 20 April 2012 — about structural unemployment
- America is rich and powerful because we can borrow. Will this debt build a stronger America?, 5 June 2012
- America’s strength is an illusion created by foolish borrowing, 10 October 2012