Friday, June 01, 2007
April Personal Income and Outlays was released this morning. The bottom line is that personal income expressed in chained 2000 dollars dropped for the first time this year:
Jan: 0.7; Feb: 0.2; Mar: 0.3; Apr: -0.4Incomes for the first quarter were increased by adjustments for stock options and bonuses. These benefit a small portion of the population, so most persons probably didn't experience rising real incomes in the first quarter.
Personal outlays for the same period expressed in chained 2000 dollars:
Jan: 0.5; Feb: 0.3; Mar: 0.0; Apr: 0.2Once more, dear friends, we spend into the breach.... The swing in wages and salaries was very large between March and April:
Private wage and salary disbursements decreased $30.7 billion in April, in contrast to an increase of $42.0 billion in March. Private wages and salaries had been boosted by $50.0 billion at an annual rate in January, in February, and in March to reflect unusually large bonus payments and the exercise of stock options. These types of irregular payments are not accounted for in the primary monthly source data for wages and salaries. This is an adjustment to the months of the first quarter that has not been carried forward in the estimates of wage and salary disbursements for subsequent months. Goods-producing industries' payrolls increased $4.7 billion in April, compared with an increase of $10.0 billion in March; manufacturing payrolls increased $3.1 billion, compared with an increase of $5.3 billion. Services-producing industries' payrolls decreased $35.3 billion, in contrast to an increase of $32.0 billion.May employment looks good on the surface, but many of the assumptions used to get the actual totals are probably wrong (at least according to the 3rd quarter 2006 BED, which uses actual employment tax receipts as a different way of calculating employment). In a circumstance like this (large postive adjustments from last year which now look to be in error), the best thing to do is look at marginal indicators which are not affected by those assumptions. These come from the household survey. Table A-5 gives part-time workers and self-employed workers:
- From January through May, unwilling part-time workers increased from 4,155,000 to 4,403,000 - almost 250,000 workers.
- May 2007 unwilling part-time workers are 350,000 above May 2006 unwilling part-time workers.
- From January through May, self-employed workers increased from 9,520,000 to 9,716,000 or 196,000.
- Both SA and NSA numbers show that there are more May 2007 self-employed workers than May 2006.
- The high point for self-employed workers this year was reached in March, but self-employed workers increased slightly from April to May.
Other indicators of softness are rapidly rising unemployment rates for the young and for Hispanics. Hispanics, overall, have a higher proportion of recent immigrants belonging to the cohort of unskilled labor on the margin. In the fourth quarter of 2006, the Hispanic unemployment rate was 4.8%. In May of 2007, it is 5.8%. Over the same period, unemployment for teenagers went from 15.1% to 15.7%. Teen unemployment is rapidly rising. In March it was 14.5% and as of May it was 15.7%. This probably relates to weakness in retail and in construction.
Table 7 gives a detailed breakout by age and sex, and year over year, unemployment for persons 55 and older has increased about 80,000. Disturbingly, unemployment in this age group increased by a whopping 48,000 in one month. That's SA, so it is probably overstated, but still!!!!
It is an unfortunate reality that older workers are often laid off to reduce benefit costs in a weaker job market, so I watch this number very carefully. It also correlates well as a leading indicator for the self-employment category, because in a weak job market, older workers have a much, much harder time finding W-2 employment. Many do, however, have skills that allow them to make money as contractors, consultants and job-lotters.
The low insured unemployment rates are hiding some states in which structural unemployment has caused benefits to expire before employment has rebounded. Michigan is one good example. The overall picture is of a labor market which is considerably softer than last year's, especially in construction and retail. Auto jobs are a big structural loss in some areas.
The smaller businesses want the experience, but they have no real group insurance, so if any worker actually develops a health problems their insurance rates can double or triple in the matter of a couple of months.
You are right about government fantasies. Older workers are very much at a disadvantage these days. I don't think government workers understand, because they are not subject to these realities. It is a rare private sector employee that will be allowed to stay at work until full retirement any more.
What makes it worse is that then they will have no insurance at absolutely the worst time.
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