- In the last year, the civilian population rose by 3,565,000. Yet the labor force only rose by 1,145,000. Those not in the labor force rose by 2,420,000.
- In January, the Civilian Labor Force rose by 508,000.
- In January, those "Not in Labor Force" rose by an amazing 1,177,000. If you are not in the labor force, you are not counted as unemployed.
- Participation Rate fell .3 to 63.7%, taking out a 1984 low
- Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.
Some of those labor force numbers are due to annual revisions. However, the point remains: People are dropping out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low.
Jobs Report at a Glance
Here is an overview of today's release.
- US Payrolls +243,000 - Establishment Survey
- US Unemployment Rate Declined .2 - Household Survey
- Average workweek for all employees on private nonfarm payrolls was +.1 to 34.4 hours
- The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged higher 0.1 hour to 33.7 hours in November.
- Average hourly earnings for all employees in the private sector rose by 4 cents to $23.24
Recall that the unemployment rate varies in accordance with the Household Survey not the reported headline jobs number, and not in accordance with the weekly claims data.
January 2012 Jobs Report
Please consider the Bureau of Labor Statistics (BLS) January 2012 Employment Report.
Total nonfarm payroll employment rose by 243,000 in January, and the unemployment rate decreased to 8.3 percent, the U.S. Bureau of Labor Statistics reported today. Job growth was widespread in the private sector, with large employment gains in professional and business services, leisure and hospitality, and manufacturing. Government employment changed little over the month.
Unemployment Rate - Seasonally Adjusted
Nonfarm Employment - Payroll Survey - Annual Look - Seasonally Adjusted
Actual employment is about where it was in 2001.
Nonfarm Employment - Payroll Survey - Monthly Look - Seasonally Adjusted
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Between January 2008 and February 2010, the U.S. economy lost 8.8 million jobs.
The January employment gained in total nonfarm brings the number of net jobs recovered since a trough in February 2010 to 3.2 million jobs, or 36 percent of the 8.8 million jobs lost between January 2008 and February 2010.
Statistically, 127,000 jobs a month is enough to keep the unemployment rate flat. The average increase in 2011 was of 152,000 per month, barely enough make a dent in the unemployment rate.
Nonfarm Employment - Payroll Survey Monthly Details - Seasonally Adjusted
Average Weekly Hours
Index of Aggregate Weekly Hours
In January 2012 the index of aggregate weekly hours stood 4.8 percent below its peak in January 2008.
Average Hourly Earnings vs. CPI
"Success" of QE2 and Operation Twist
- Over the past 12 months, average hourly earnings has increased by 1.9 percent; while in December, the CPI-U had a 12-month percent change of 3.0 percent.
- Not only are wages rising slower than the CPI, there is also a concern as to how those wage gains are distributed.
BLS Birth-Death Model Black Box
The BLS Birth/Death Model is an estimation by the BLS as to how many jobs the economy created that were not picked up in the payroll survey.
The Birth-Death numbers are not seasonally adjusted while the reported headline number is. In the black box the BLS combines the two coming out with a total.
The Birth Death number influences the overall totals, but the math is not as simple as it appears. Moreover, the effect is nowhere near as big as it might logically appear at first glance.
Do not add or subtract the Birth-Death numbers from the reported headline totals. It does not work that way.
Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another as noted by numerous recent revisions.
Birth Death Model Adjustments For 2011
Birth Death Model Adjustments For 2012
Birth-Death Notes
Once again: Do NOT subtract the Birth-Death number from the reported headline number. That is statistically invalid.
Household Survey Data
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In the last year, the civilian population rose by 3,565,000. Yet the labor force only rose by 1,145,000. Those not in the labor force rose by 2,420,000.
That is an amazing "achievement" to say the least.
Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.
Table A-8 Part Time Status
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Part-time status shows little improvement vs. a year ago.
Table A-15
Table A-15 is where one can find a better approximation of what the unemployment rate really is.
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The official unemployment rate is 8.3%. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.
U-6 is much higher at 15.1%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.
Grossly Distorted Statistics
Given the complete distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is easy to misrepresent the headline numbers. Digging under the surface, the drop in the unemployment rate is nothing but a statistical mirage.
In January, those "Not in Labor Force" rose by a staggering 1,177,000. Things are much worse than the reported numbers indicate.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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