Highlights of the jobs report, the good news & the bad.

Summary:  Yesterday we looked at leading indicators for the US economy. Today we look at one of the best coincident indicators: jobs. Today we’ll do it differently, seeking answers to the hot questions in the blizzard of numbers provided by the BLS. We’ll examine the good news, and the bad.  Also see the additional info in the comments. {1st of 2 posts today.}

Economy

Contents

  1. About the collapse of the oil industry.
  2. Has Obama’s recovery helped the middle class?
  3. The bottom line.
  4. Bad news about wage growth.
  5. Making sense of this numbers blizzard.
  6. About ZH’s accusations of fraud.
  7. For More Information.

(1) About the collapse of the oil industry.

The resource sector lost 9,000 jobs, a dot among America’s 148 million workers (one thousand of those were in oil & gas extraction; 7 thousand were in “support activities”). Weekly wages of their non-supervisory workers continue to slowly drop, down 3% to $1,230.

YoY the number of unemployed in the sector dropped 1.4 million, taking the sector’s unemployment rate from 7.0 to 5.7.  The oil bust is too small to have more than a regional impact.  See the BLS Highlights for more info about the growth in jobs by sector.

Feburary jobs by sector

(2) Has Obama’s recovery helped the middle class?

 

The confident “no” you hear on Fox has no basis in reality. Wages, hours, part vs full-time employment — they’ve all improved, albeit only slowly (and less than the bounty enjoyed by the 1%).

The number of long-term unemployed continues to drop, down almost 30% YoY to 2.7 million. Job growth continues at a moderately strong rate — and has accelerated during the past year from +1.6% YoY to +2.4% YoY. Part-time for economic reasons continues to fall, down 8% NSA over the past year. The broadest measure of unemployment (U-6) has fallen from 13.1% to 11.4% during the past year (NSA). The number of full-time workers has risen 2.6% YoY NSA; the number of part-time is almost unchanged.

The weakest progress is in hours and wages. Hours remain stalled for the 5th month at 34.6/week, as employers keep people at less-than full time and avoid overtime (both showing the surplus of workers over demand). Average hourly earning is up only 2% YoY, slightly ahead of inflation but less than we should get in a recovery — and far less than the fantastic boom in profits. Look further down to see more about this bad news.

(3) The bottom line.

Here’s one version of the bottom line (at the end is a more accurate version) of the numbers in the Febuary employment report: job growth continues at roughly the same rate as during the past ten months. Not slowing, as some feared. It might even be breaking out, as some hoped. Employment is a coincident indicator, unlike the leading indicators examined yesterday.

Employment Summary thru February 2015

The following graphs show the numbers on on a Year-over-Year NSA basis, smoothing the lines but losing resolution on recent change. The numbers are too noisy and too revised to see the pattern otherwise.

Is this rate fast or slow? The monthly numbers don’t say, especially since population growth means that the same number of new jobs represents slower growth over time. Let’s look at job growth as a percent change. We see a slow — very slow — acceleration, perhaps even the start of a break-out: 2.4% YoY  NSA (2.1% YoY using the Household survey data, a second survey confirming the results). That’s the fastest since May 2000 — at the peak of the tech bubble.

Percent Nonfarm job growth YoY NSA

Here’s good news: the number of jobs is growing faster than the working age population!

Job growth vs working age population

(4) Bad news about wage growth.

Wage growth is slowing. High profits plus a tightening labor market should produce rising wages for the average worker.  It’s not happening — although for several years we’ve been told that it’s going to happen real soon. Wage growth peaked in August 2014, and has rolled over.

Average hourly wages of non-supervisory workers

This is an important change, perhaps one of the most important structural changes of the past few decades. A strong recovery should bring strong wage growth. Corporations have learned how to break this relationship, what economists thought was a “law”. They’ve broken the unions, developed tacit (or even explicit) agreements to suppress wages, and many other means to shift money from wages to profits. See this example of these methods: firing your American workers, replacing them with cheap young foreign workers imported under H1-B visas. They’ve grown so powerful they no longer need to disguise these illegal actions.

Update: for a brief but powerful analysis showing why wage growth should be higher at this point in the cycle see Benn Zipperer at Equitable Growth: “U.S. wage growth remains sluggish despite employment gains.” Especially note the graph.

(5) How do we make sense of this numbers blizzard?

To help us the Fed produces a Labor Market Conditions Index, using a model fed by 19 indicators. It paints a picture of job conditions consistent with the slow growth of most economic indicators since Summer 2012. Like most indicators it shows no acceleration. No signs of the coming boom predicted by so many during the past 3 years. It’s growth even slower than during the previous cycle.

Fed Labor market conditions index

(6)  Update: About ZH’s accusations of fraud.

Today from that popular engine of misinformation, Zero Hedge (bold in original):

Today we ask again: did the BLS once more forget to add the now tens of thousands of jobs lost in the US energy sector? We ask because the divergence is getting, frankly, ridiculous. In the February NFP report, the establishment survey reported that just 1.1K jobs were lost in the “Oil and Gas Extraction” industry: this is lower than the downward revised number of 1.8K in January, and adds up to only 2900 jobs lost in 2015. As a reminder, this is what Challenger said just yesterday:  “Once again, the energy sector saw the heaviest job cutting in February, with these firms announcing 16,339 job cuts, due primarily to oil prices.” … As a result, this is what the job losses in the energy sector look like based on the calculation of the BLS and of Challenger, which actively counts the layoffs, and has no White House-driven agenda to paint a rosier than reality picture.

Back on Earth, the BLS explains the process: “For both surveys, the data for a given month relate to a particular week or pay period. … In the establishment survey, the reference period is the pay period including the 12th…”.

Challenger reports announcements in the month of February. BLS tracks employment as of the 12th of February. Announcements precede firings by weeks or even months. Also, Zero Hedge just makes up these accusations of White House interference with the government statistics. Perhaps they get them from Fox.

(7)  For More Information.

(a)  See all posts about economics. Especially see this: Dreams of a boom fade & attention turns to secular stagnation. Also see these posts about “stall speed”: The dilemma of the US economy: can’t take off & too close to the brink and Has America’s economy entered the “coffin corner”?

(b)  Recent posts about this cycle:

  1. Dreams of a boom fade & attention turns to secular stagnation., 4 February 2015.
  2. Listen to the slowing US economy, hear echoes of Japan, 6 February
  3. How close are we to the next recession? — More indicators.

 

 

10 thoughts on “Highlights of the jobs report, the good news & the bad.

  1. Thanks for the update, FM. The only question left on the table, which is outside of the scope of this report and cannot be accurately answered at this time, is “What will happen when interest rates finally rise?”

    1. Pluto,

      “What will happen when interest rates finally rise?”

      That’s an important question. It’s the question the financial media have obsessed about for the past two years. But it seems more pertinent to ask why are rates still falling?

      Negative rates — nominal, not just real — are not just the elephant in the room. We know elephants exist. They’re the dragon in the living room. We’d seen pictures, but thought they were myths. I find it odd that people either ignore the dragon, or pretend its as normal as my cat (sleeping on the couch).

      Big picture note

      As I have said so many times during the past several years. these extraordinary events are tells that we’ve entered a new world. Our experts have expended great effort since the crash assuring us that they understand these events, despite the repeated arrival of the unexpected. And increasingly mind-bendingly unexpected.

      I’m writing a post, going up today or tomorrow, about what we’re attempting to do at the FM website. It’s some journalism about undercovered but important subjects. Some analysis about widely misunderstood things — like pointing to the new world we’ve entered. And most of all, agitating for Americans to work together and regain control of the Republic (while we still can).

      I’ll ask for a report card on these things. We’ve tried very hard (“A” for effort?), but I give us a “D-” for effect. Ideas welcomed on how we can do better; especially how to get a bigger audience.

    2. “They’re the dragon in the living room.”

      In truth, when as a student, many years ago, I attended courses of what was still called “political economy”, the lecturers clearly stated that although the real interest rate could become negative, in practice the nominal interest rate itself could not go below zero, and never had. It was considered just a theoretical possibility, with only perverse effects, and of no practical macroeconomic use whatsoever.

      Now financial institutes get nominal interest rates ranging from -0.10% to -0.75% at the Danish, Swedish, Swiss central banks… We entered truly uncharted waters in 2007 with Northern Rock and Bear Stearns, and many of those formerly “evidently sane” assumptions are out of the window.

    3. guest,

      Yes. Since 2007 I’ve been writing that a new era is coming, as the post-WWII world crumbles away. Since the crash I’ve written that future has arrived, a break with our past (here are posts about this from 2014).

      But it remains a minority opinion, as experts assure us that this is just a momentary patch of rough air — but nothing has changed. I remember see this story as a child: “The Odyssey of Flight 33” as it travels in The Twilight Zone.

      [youtube=http://youtu.be/HlYzU0kAVSk]

  2. Today’s conspiracy mongering

    An example of the Right’s ongoing effort to delegitimize the government (in this case, gov’t statisticans) and conceal from the public the job growth since 2009 (see more on that in the following comment).

     

    This is silly, as is most conspiracy-mongering on the fringes of the investment and economics fields.

    1. Decommissioning a rig is not like turning off a car. You don’t fire everyone & walk away as the rig count drops. There are lags between the rig count and jobs.
    2. The overall level of employment in the oil & natural gas exploration and production industry depends on the level of production as well as exploration (rigs). Production of oil is still increasing.
  3. More about those working to conceal the jobs growth

    Also note that at last people are calling out the ongoing stupidity and propaganda that is Zero Hedge. “Here Come the Employment Truthers“, Paul Krugman, NYT, 7 March 2015:

    Ben Casselman reads an op-ed in the Wall Street Journal and declares,

    It is, without exaggeration, one of the dumbest things I’ve ever read. And I read Zero Hedge.

    I’d say that he doesn’t get out enough — you can get much, much dumber. Still, the piece in question is a diatribe against seasonal adjustment, and is so amazingly ignorant that you might wonder how it got published in the Journal. You might wonder, that is, if you didn’t understand what’s happening: we’re witnessing the coming of the employment truthers.

    When Obama and the Fed began their efforts to rescue the economy from the worst financial crisis since the 1930s, the right knew, just knew, what was going to happen. Inflation was going to soar thanks to money-printing and deficits; private employment would stagnate because of Obamacare, and also because Obama was hurting the feelings of job creators.

    When inflation failed to take off, in came the inflation truthers, insisting that the official numbers were wrong and probably a deliberate fake. Now, how’s that employment prediction doing? Witness the terrible effect of a socialist who trash-talks capitalism:

    {graph of rising employment since late 2009 trough}

    Hence the eagerness to publish any argument claiming that the numbers are somehow fake. Expect more dumbness.

    1. Jordan,

      “I believe that job numbers present the bad economic situation much more clearly then all those charts put together…”

      The “one number to rule them all” fallacy at work. These are complex matters, and silly simplifications tell us little. It’s too silly a statement to discuss. You prefer to keep your eyes closed, which is your right as an American. Others will attempt to understand what’s happening.

      “…not unemployment level that is squed with worker participation.”

      More evidence that, as I have long suspected, you don’t read posts before commenting. There are six charts here; none are of unemployment. Of the dozens of numbers given, unemployment is mentioned only twice — neither is the headline unemployment rate (i.e., unemployment in the mining sector & of long-term unemployed).

    2. Editor
      Since you had to pull insults as a last resort i would say that your inferiority complex is showing.
      If you are writing for investor important info, i gave you much better info for investors but you refuse to see it.

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