The September jobs report: more too-slow growth, no signs of the expected acceleration

Summary: Employment is the weak link in the recovery. 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 (jobs and wages growing only slowly) — supported only (like the other developed nations) by massive multi-year fiscal and monetary stimulus (now fading). Here we look at the September report, which contains many useful insights. The key point: it gives no evidence that the widely expected second half growth acceleration has begun.

Economy

Contents

  1. The big picture
  2. Household survey
  3. Establishment survey
  4. Unemployment
  5. Other important metrics
  6. Other posts in this series
  7. For more information about US economy

(1) The big picture

Here we examine the September 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.

The theme of this report, the words most often used, is little change. It paints a picture consistent with the many other streams of information about the economy: continued slow growth. No signs of the long-awaited acceleration back to average growth rates.  This is a major factor in the Fed’s decision when to taper.

We should also consider the price paid for this slow growth. Not just the $707 billion in debt the USA accumulated during the past 12 months (4.5% of GDP), but also the not-yet-known results of five years of zero-interest rates and three rounds of quantitative easing (the third and largest still running).   This does not show that economists know nothing, or that these stimulus programs do not work. It shows that the economy remains weak, or even sick.

(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; there are 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 September, in thousands, seasonally adjusted. Highlights:

  • Continued slow growth in employment; steady drop in the number unemployed.
  • Continued shift of employment from part-time to full-time (disproving one of the many false claims about ObamaCare).
  • No progress in the key ratio: employment is growing at the same rate as the population — so we’re not getting stronger, in this sense.
Description August 2013   September 2013   Change   Change
Employed 144,170 144,303 133 0.1%
…Employment-population ratio 58.6% 58.6% 0 0%
Full-time 116,208 116,899 691 0.6%
Part-time 27,999 27,405  -594 -2.1%
Unemployed 11,316 11,255  -61 -0.5%
…Unemployment rate 7.3% 7.2%  -0.1 -1.4%

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For the bigger picture here are the YoY numbers, in thousands, not seasonally adjusted. Slow but steady improvement.

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Description September 2012 September 2013   Change   Change
Employed 143,333 144,651 1,318 0.9%
…Employment-population ratio 58.8% 58.8% -0 0%
Full-time 115,678 117,306 1,628 1.4%
Part-time 27,655 27,343 -312 -1.1%
Unemployed 11,742 10,885 -857 -7.3%
…Unemployment rate 7.6% 7.0% -0.6 -7.9%

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(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 at a slightly faster rate than the household survey.

Attention conservatives: under the Kenyan socialist the number of government employees continues to shrink; time to apologize for your failed predictions.

Highlights for September:

  • The September gain of 148 thousand jobs (SA) is 20% less than the average of the past 12 months (185 thousand, SA).
  • The manufacturing boom that so obsesses business journalists and Wall Street added 27 thousand jobs in the past 12 months (+0.2%) — party on!
  • The fearsome sequester at work: Federal employment (ex-Postal)  down 76 thousand YoY (-3.4%) NSA.

Here is the YoY picture, in thousands, not seasonally adjusted:

Description September 2012   September 2013   Change   Change
Total nonfarm 134,374 135,988 1,614 1.2%
Total private 112,581 114,829 2,248 2.0%
Total government 21,793 21,771 -22 -0.1%

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(4) Measures of Unemployment

(a)  New claims for unemployment insurance are one of the most accurate and useful real-time measures of the job market.

Compare the change in the 4-week moving averages (source here) of September 2012 and 2013 (seasonally adjusted).

  • A year ago:             368 thousand
  • 12 October 2013:  336 thousand (-8.7%)

(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 12%; U-6 down 8% (NSA).

Metric  September 2012  September 2013
U-1 4.2% 3.7%
U-2 4.0% 3.5%
U-3 7.6% 7.0%
U-4 8.0% 7.5%
U-5 9.0% 8.4%
U-6 14.2% 13.1%

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(5) Another important metric: wages and hours worked

Looking at nonfarm private workers in September 2012 vs. 2013 (seasonally adjusted), from the Establishment Report:

  • Average hours worked per week: 34.5 vs. 34.5 (no change)
  • Average hourly earnings: $23.60 vs. $24.09 (up 2.1%, +0.6% over the CPI)
  • Average weekly earnings: $814.20 vs. $831.11 (up 2.1%, +0.6% over the CPI)

The August-September increase in hourly and weekly wages was at a slower rate than that of the past year — only +1.5% (SAAR), roughly at the rate of inflation.  No signs of acceleration after a generation of stagnation, the Wage Inflation so dreaded by corporations and economists.

Better days are coming, for some of us.
Better days coming, for some of us.

(6) Other posts looking at the economy today

  1. A look at the state of the US economy. Join me in confusion!, 13 July 2013
  2. The US economy is slowing. Things might get exciting if this continues.,
    17 July 2013
  3. About today’s jobs report: mixed news. No prize in this box.,
    6 September 2013
  4. Look at the economy to see why today’s jobs report is so important!,
    6 September 2013
  5. Warnings about the economy from people you should listen to, 13 September 2013
  6. Let’s reflect on the course of the course of the US economy. Not a pretty picture., 8 September 2013
  7. Do you look at our economy and see a world of wonders? If not, look here for a clearer picture…, 21 September 2013

(7) 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. America’s strength is an illusion created by foolish borrowing, 10 October 2012

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