Mike Shedlock

Initial Reaction

The establishment survey showed a gain of 148,000 jobs. July was revised lower, from +104,000 to +89,000. August was revised higher, from +169,000 to +193,000. The net effect was +9,000 more than previously reported.

This was the third straight month of revisions. The previous two revisions were significantly lower. Perhaps the BLS has numbers they are happy with now.

The unemployment rate dropped 0.1 to 7.2%. It's the household survey that determines the unemployment rate, not the establishment survey. So let's take a look at the factors.

Explaining the Unemployment Rate Drop

  • Employment rose by 133,000
  • Those in the labor force rose by 73,000
  • The civilian population rose by 209,000.
  • The Participation Rate (The labor force as a percent of the civilian noninstitutional population) was flat at 63.3%, a low dating back to 1979.


Employment rose more than the labor force, so the unemployment rate declined.

September BLS Jobs Statistics at a Glance

  • Payrolls +148,000 - Establishment Survey
  • US Employment +133,000 - Household Survey
  • US Unemployment -61,000 - Household Survey
  • Involuntary Part-Time Work +15,000 - Household Survey
  • Voluntary Part-Time Work -372,000 - Household Survey
  • Baseline Unemployment Rate -0.1 to 7.2% - Household Survey
  • U-6 unemployment -0.3 to 13.7% - Household Survey
  • Civilian Labor Force +73,000 - Household Survey
  • Not in Labor Force +136,000 - Household Survey
  • Participation Rate +0.0 at 63.2 - Household Survey



Quick Notes About the Unemployment Rate

  • 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.
  • In the last year, those "not" in the labor force rose by 1,893,000
  • Over the course of the last year, the number of people employed rose by 1,429,000 (an average of 110,000 a month)
  • In the last year the number of unemployed fell from 12,082,000 to 11,255,000 (a drop of 827,000)
  • Percentage of long-term unemployment (27 weeks or more) is 36.9%, a decrease of 1.0 from last month.
  • The mean duration of unemployment is 36.9 weeks, a decline of 0.1.
  • Once someone loses a job it is still very difficult to find another.
  • 7,926,000 workers who are working part-time but want full-time work. A year ago there were 8,607,000. This is a volatile series.



September 2013 Jobs Report

Please consider the Bureau of Labor Statistics (BLS) September 2013 Employment Report.

Total nonfarm payroll employment rose by 148,000 in September, and the unemployment rate was little changed at 7.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in construction, wholesale trade, and transportation and warehousing.

Click on Any Chart in this Report to See a Sharper Image

Unemployment Rate - Seasonally Adjusted



Employment History Since January 2009



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Change from Previous Month by Job Type



Hours and Wages

Average weekly hours of all private employees remained at 34.5 hours. Average weekly hours of all private service-providing employees was flat at 33.3 hours. Average hourly earnings of all private workers rose $0.04 to $20.24. Average hourly earnings of private service-providing employees rose $0.05 to $20.02.

Real wages have been declining. Add in increases in state taxes and the average Joe has been hammered pretty badly. For 2013, one needs to factor in the increase in payroll taxes for Social Security.

For further discussion of income distribution, please see What's "Really" Behind Gross Inequalities In Income Distribution?

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 up 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 2012



Birth Death Model Adjustments For 2013


Birth-Death Notes

Once again: Do NOT subtract the Birth-Death number from the reported headline number. That approach is statistically invalid.

In general, analysts attribute much more to birth-death numbers than they should. Except at economic turns, BLS Birth/Death errors are reasonably small.

For a discussion of how little birth-death numbers affect actual monthly reporting, please see BLS Birth/Death Model Yet Again.

Table 15 BLS Alternate Measures of Unemployment



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Table A-15 is where one can find a better approximation of what the unemployment rate really is.

Notice I said "better" approximation not to be confused with "good" approximation.

The official unemployment rate is 7.2%. However, if you start counting all the people who 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 13.6%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Labor Force Factors

  1. Discouraged workers stop looking for jobs
  2. People retire because they cannot find jobs
  3. People go back to school hoping it will improve their chances of getting a job
  4. People stay in school longer because they cannot find a job
  5. Disability and disability fraud


Were it not for people dropping out of the labor force, the unemployment rate would be over 9%. In addition, there are 7,926,000 people who are working part-time but want full-time work.

Grossly Distorted Statistics

Digging under the surface, much of the drop in the unemployment rate over the past two years is nothing but a statistical mirage coupled with a massive increase in part-time jobs starting in October 2012 as a result of Obamacare legislation.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Read more at http://globaleconomicanalysis.blogspot.com/2013/10/establishment-survey-148k-jobs.html#aZJDelT4Pvr6wIaS.99


Mike Shedlock

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