Summary: It’s the big day for economic stat junkies. Has the economy ended its long flirtation with recession, limping along near the 2% stall speed — supported by years of fiscal and monetary stimulus (now fading)? The last few quarters of GDP numbers suggest yes, but the job numbers have refused to cooperate. Here we look at the November report. It looks good. This is the first of two posts today.
- The big lesson from this report
- The big picture of the economy
- Household survey
- Establishment survey
- The hot sectors for jobs!
- For more information about
(1) The big lesson from this report
What can we learn from the November employment report? First, that one minute spent reading or watching economists predict economic numbers is a minute wasted forever. Most of the numbers are noise (changes withing the error bars; watch the trend instead) — and the forecasts are wild guesses. Life is short; spend it wisely. Here the forecasts of the best for the November gain in non-farm employment from the Establishment survey (CES). They guess because we want guesses.
- JP Morgan 200K
- Goldman Sachs 220K
- Citigroup 225K
- HSBC 230K
- UBS 230K
- Credit Suisse 235K
- Morgan Stanley 235K
- Deutsche Bank 250K
The actual was 321,000 (+2.8% SAAR), plus another 44,000 from revisions to September and October.
(2) The big picture of the economy
This report supported the hopes of those hoping the US economy has returned to “normal” growth. But one swallow does not a summer make. Even with a good November, the YoY NSA growth in jobs is 2.0% by the Household Survey (CPS) and 2.0% by the Establishment Survey (CES) — two methods, same result.
The Bureau of Labor Statistics conducts two surveys: one of households, one of businesses. They are not directly comparable, each giving different perspectives on the US economy. The Current Population survey looks at households. Compared to the survey of businesses it has large error bars; there are no revisions. It’s the basis for the headline unemployment rate, and gives useful data not in the more-accurate business (establishment) survey. Also, some research suggests that the household report shows inflection points before the establishment survey.
Both give identical pictures for the past year (YoY NSA): people employed (CPS) +2.0%, non-farm jobs (CES) +2.0%. They’re also similar for the past two months (SA): +2.3% and +2.5%.
(3) The Household survey (CPS)
The US civilian non-institutional population grew 0.9% YoY NSA. That was two components: the labor force grew only 0.8%, not in the labor force grew 1.1% — so the labor force participation rate was almost unchanged YoY. The numbers look better if we drill down: employment rose 2.0% YoY NSA, unemployed people fell 16%. So the fraction of the population employed employment rose from 58.7% to 59.3%
Despite the critics, this is not a part-time recovery. The number of people with part-time jobs for economic reasons (i.e., who want full-time) dropped 11% YoY NSA.
(4) The establishment survey (CES)
The second survey asks employers to report the number of civilian non-farm jobs. Although it usually shows a similar pattern of growth as the household survey, during the past year it has showed slow improvement — but at a faster rate than the household survey. It has smaller error bars, but gets large (sometimes massive) revisions.
With job growth starting to accelerate (we hope), attention turns to wages. If the inflationistas are right, we’re near accelerating wage growth (which they, oddly, call “wage inflation”) — as employers pay more to attract scarce qualified people. November saw an improvement in the so-far stagnant pay picture, as average hours worked rose 3.5% SAAR, average hourly earnings rose 4.5%, average weekly earnings rose 8.2%.
But — we remain an unequal society: the hours and wages of production and non-supervisory workers didn’t share that bounty. Their average hours were unchanged; hourly earnings only +2.3%; weekly earnings +2.2%. The parasitical finance sector remains vibrant. Total private weekly payrolls in November rose 0.4% SA. For Finance they rose 1.2% (the second faster sector).
- Remember conservatives’ fascination with the birth-death adjustment (for unmeasured small firms)? The bump up in the growth from this model was only 8 thousand jobs.
- 74% of foreign born men are employed (employment-population ratio) vs 67% of native born.
(5) 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 YoY SA in the 4-week moving averages: down 9% (from 329 thousand to 299 thousand).
(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. The broadest (U-6) includes people with part-time jobs who prefer full-time work, and so includes the underemployed. 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 17%; U-6 down only 10% (NSA).
|Metric||November 2013||November 2014|
(6) What are the hot sectors for jobs?
From the BLS Highlights presentation about the December CES.
(a) Everybody wants to work in the Information Sector! Too bad its not generating many jobs.
(b) We hear much about the “manufacturing renaissance”, bring back all those high-paying blue-collar jobs. It’s a slow-mo recovery.
(c) It’s the fault of the Kenyan socialist
Remember the hysteria about the growth in government jobs (Right-wing panic attack CXVIII)? I hope you didn’t count on that to put bread on the table.
(d) Where are the new jobs?
(7) For More Information
(a) See all posts about economics.
(b) Recent posts about this economic cycle:
- Are we following Japan into an era of slow growth, even stagnation?, 18 November 2013
- Has the Fed blown another housing bubble?, 30 January 2014
- Has America’s economy entered the “coffin corner”?, 10 July 2014
- Economists forecast a boom soon. The numbers show slowing. Who is right?, 21 July 2014
- See the true trend of the US economy, hidden in the daily news, 1 August 2014
- It’s not too soon to worry about the US economy. There are things worse than slow growth., 18 September 2014
- Listen to the slowing US economy, hear echoes of Japan, 24 September 2014
- 3 graphs tell the story about the US economy, hidden amidst the noise of the jobs report, 6 October 2014
- Look at the economy. Fight the illusion of normality. Feel the weirdness., 8 October 2014