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Friday, October 08, 2010

This Was The Employment Report No One Wanted

Update - and a follow up to yesterday's post - Brian sent me this link to ZeroHedge on QE2. End update

The worst thing about this one is that it contains the preliminary adjustment backward, which comes in at -366,000 nonfarm. Total private -371,000, with the major overcount in manufacturing (-114,000) and trade, transport & utilities (-144,000), but hospitality took a whack also (-91,000). Government +5,000. These are the revisions to the establishment survey. To take a look at the table go here and scroll all the way down.

Table A summary. This is not as bad as the whole report sounds. Total employment rose by 141,000, although the workforce grew. We are not gaining jobs quickly enough to ratchet down the unemployment rate even though a lot of people are retiring.

Table B summary. The headline is -95,000 jobs, but private sector is reported up 64,000. Government lost 159,000 jobs. In contrast to the summer, quite a bit of the government job loss came from localities (teachers and education, I would expect). In July government job losses were reported at -183,000, and in August they were reported at -150,000. Over the next two years I am expecting substantial further state and local job losses.

U-6 rose to 17.1%. That is a pretty sharp increase from August's 16.7%, and yes, that is seasonally adjusted. However, U-5 has been flat at 11.0% since May. U-6 bottomed at 16.5% in June and July, and has since risen over half a percentage point. The difference between U-5 and U-6 is that U-6 includes involuntary part-time workers, so this is more related to the inventory cycle than anything else. U-4 also hit its floor of 10.2% in June and July and came in at 10.3% in August and September. U-4 is standard unemployment plus discouraged workers. So while the standard unemployment has just edged up 0.1% in August and September, we are definitely not making any progress on the long-term unemployed problem. U-2 (job losers and people who completed temporary jobs) has risen 0.2% since the summer, Its low was June-July at 5.9%. In August, 6.0%, and in September it rose to 6.1%. That is almost surely the state and local government.

The old folks (scroll down and look at the right column) continue to increase their labor force participation. Currently 22.7% of the 65 and older crowd are in the workforce (employed or actively seeking employment). That is a very high number, because obviously the 75 and over crowd have very low participation rates. Over the course of the year, this population gained over 300,00 jobs. But this comes at a cost to teens. (Scroll down and look at the first column and the third column.) Teens have lost more jobs than the oldsters have gained.

Last, but not least, my favorite Household Survey Table A-8. This table shows a sharp seasonally-adjusted rise in part-time employment (+612,000) for economic reasons (i.e. involuntary) from August to September. It is hard to argue with that due to the figures on some industries we have been seeing. What has me going however is the sampling of government/private wage and salary workers. In contradiction to the Establishment Survey, the Household Survey showed a GAIN of over 350,000 government wage and salary workers between August and September, and a LOSS of 279,000 private sector wage and salary workers.

Here is where I sometimes resort to the ADP employment report. Although I think there are some seasonal adjustment problems in these numbers, in fact ADP is showing a similar trend. The definition of "employment" used in the Household Survey is very broad (basically any work done for pay that week), and sometimes when you ratchet it down to the wage and salary workers you get a clearer picture. I think perhaps this month Gallup and ADP are telling us something - that private sector employment is weaker than we thought.

Retail hiring intention surveys are strong, so maybe we'll get better numbers in December and January.

The Establishment Survey really isn't reliable at times like these over a couple of months. However, the one thing I think I can safely say is that we haven't reached the point at which the B/D adjustment is undercounting substantially in Establishment yet. Establishment is always lagging trend with those adjustments. Another thing to watch to catch the Establishment survey lag (when it happens) is the NFIB Small Business Survey. When that turns up sharply in the early stages, usually Establishment is lagging.

Wait until those that still have jobs, fully realize
that their standard of living is dropping with no
end in sight due to QE. After a decade and more
of running on the hamster wheel and using credit
to mask over the lack of savings, I don't think the energy is there to produce productivity gains that
would help their employers. Demographics, the
tax structure, "free trade ", and debasement are
all working against us.

Only slightly off topic: the Wall Street Journal had an article on middle-class consumer spending. Nice to see the Journal publish this kind of information, even if it is two years behind M-O-M.
Some good point written.
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