Mike Shedlock

Here is an overview of October Jobs Report.

  • US Payrolls +80,000
  • US Unemployment Rate 9.0%
  • Unemployment rate in narrow range from 9.0 to 9.2 percent since April.
  • Participation Rate steady at 64.2%
  • Actual number of Employed (by Household Survey) rose by 277,000
  • Unemployment fell by 95,000
  • Those not in the labor force increased by 17,000
  • Civilian population rose by 198,000,
  • Civilian Labor Force rose by 181,000
  • Average Weekly Workweek was unchanged 34.3 hours
  • Average Private Hourly Earnings rose 5 Cents to $23.19
  • Government employment decreased by 24,000


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.

For the second month the labor force rose. This is a welcome sign. However, were it not for people dropping out of the labor force for the past two years, the unemployment rate would be well over 11%.

October 2011 Jobs Report

Please consider the Bureau of Labor Statistics (BLS) October 2011 Employment Report.

Nonfarm payroll employment continued to trend up in October (+80,000), and the unemployment rate was little changed at 9.0 percent, the U.S. Bureau of Labor Statistics reported today. Employment in the private sector rose, with modest job growth continuing in professional and businesses services, leisure and hospitality, health care, and mining. Government employment continued to trend down.

Unemployment Rate - Seasonally Adjusted



Nonfarm Employment - Payroll Survey - Annual Look - Seasonally Adjusted



Notice that employment is lower than it was 10 years ago.

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.

In the last year of the weakest recovery on record, 2+ years old, the economy averaged about 125,000 jobs a month.

Statistically, 127,000 jobs a month is enough to keep the unemployment rate flat.

Nonfarm Employment - Payroll Survey Details - Seasonally Adjusted



Average Weekly Hours



Index of Aggregate Weekly Hours



Average Hourly Earnings vs. CPI



"Success" of QE2

Over the past 12 months, average hourly earnings have increased by 1.8 percent. The consumer price index for all urban consumers (CPI-U) was up 3.9 percent over the year ending in August.

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 BLS has moved to quarterly rather than annual adjustments to smooth out the numbers.

For more details please see Introduction of Quarterly Birth/Death Model Updates in the Establishment Survey

In recent years Birth/Death methodology has been so screwed up and there have been so many revisions that it has been painful to watch.

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 Notes

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 1,739,000. Yet the labor force rose by a mere 238,000. Those not in the labor force rose by 1,501,000.

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 is essentially right where it was 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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Distorted Statistics

Given the total distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is hard to discuss the numbers.

The official unemployment rate is 9.0%. 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.

While the "official" unemployment rate is an unacceptable 9.0%, U-6 is much higher at 16.2%. The jump in U-6 this month is from part-time workers.

Things are much worse than the reported numbers would have you believe.

Encouraging Signs

The one encouraging factor is that for the second consecutive month the household survey was significantly stronger than the payroll survey.

A significant number of workers are looking for and finding jobs. Also for the second consecutive month, the labor force rose a significant amount, this month by 181,000.

However, I wonder how much of this increase is "forced employment" fueled by expiring unemployment benefits. Regardless, the jobs still have to come from somewhere.

Yet, the entire setup is on very thin ice given the clear slowdown in the global economy.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com


Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.