About today’s jobs report: mixed news. No prize in this box.

Larry Kummer, Editor

12 years ago

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.

Contents

The big picture
Household survey
Establishment survey
Unemployment
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

Employed	144,285	144,170	-115	1.4%
…Employment-population ratio	58.7%	58.6%	-0.1	0.5%
Full-time	116,090	116,208	118	1.4%
Part-time	28,233	27,999	-234	1.1%

Unemployed	11,514	11,316	-198	-9.7%
…Unemployment rate	7.4%	7.3%	-0.1	-11%

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

Employed	142,164	144,509	1,951	1.4%
…Employment-population ratio	58.5%	58.8%	+0.3	0.5%
Full-time	116,214	117,868	1,654	1.4%
Part-time	26,334	26,641	297	1.1%

Unemployed	12,696	11,462	-1,234	-9.7%
…Unemployment rate	8.2%	7.3%	-0.9%	-11.0%

(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
Total nonfarm	133,753	135,961	2,208	1.7%
Total private	112,927	115,218	2,291	2.0%
Total government	20,826	20,743	-83	-0.4%

(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
U-1	4.3%	3.7%
U-2	4.4%	3.8%
U-3	8.2%	7.3%
U-4	8.7%	7.9%
U-5	9.7%	8.7%
U-6	14.6%	13.6%

.
(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.