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Friday, November 04, 2011

Pretty Good Employment

Release here. Headline unemployment is at 9.0%, but that is misleading.

I still believe that the Census/household survey portion is more accurate at this time. That survey showed over 270K more employed this month and, better yet, the not-in-labor-force number hardly increased. The employment-population ratio increased from 58.3 to 58.4%. It is off its cycle low of 58.2%. Employed persons at work part time for economic reason dropped hard - over 370K persons.

We still have two decent months to come as seasonal hiring helps us along, even if the flux of auto employment drops, which I think it will.

All of this is coming from small businesses and autos. Large businesses and governments are net laying off or sitting stagnant. There are major ongoing consolidations still in government, financial services, pharmaceuticals, some services, consumer electronics and so forth.

I think at this point there is increased participation from "liberated" older workers with much experience who are not going to get rehired and are scratching a living by setting up their own business enterprises. I have been looking carefully at the ADP employment report and hunting around for all the data I could find to impute this, and although I can't prove it, I believe it. This is one reason why the establishment survey can miss so hard at times - they have to impute this type of activity and they impute it from data gathered considerably earlier, so their imputation is off-cycle.

There is some support in Table A-8 for my hypothesis, because wage and salary workers SA didn't increase this month - the unincorporated self-employed workers did. There should be a reasonable number of skilled construction workers picking up some employment from storms and household maintenance, and in this environment skilled professions such as engineering etc can usually find some contract work in the better areas if they want to scratch around for it. The expiration of unemployment benefits will have some effect on this activity, but a somewhat better business environment also does.

Temporary help services increased this month, which is a comforting sign.

I am waiting with some anxiety to see how NFIB looks. I believe that the "scavenge" economy is now picking up, and that generates a surprising amount of activity. Also US manufacturing is still on the slow upswing.

The problem for the US economy is that we need to raise FICA taxes next year to get back to some reasonable pretense of funding the economy, and real incomes are still down, so it is hard to play this through and see a vibrant economy in 2012.

One major help for the US economy is just timing. The huge peak in auto purchases occurred over a decade ago, and at this point, more and more people will have to buy cars. But listening to the radio, I hear more and more "everyone drives" ads for auto dealers, so I know that a lot of people just can't afford to buy. A lot of people can't afford to heat (my editors have struck again) their homes this winter. In this environment, small jobs abound - if you have the basic skills. Unfortunately a lot of people don't. It is the dirty jobs people who will carry us through.

Update: Canadian unemployment up - mostly on private sector losses. That squares with my expectations on auto production, but there's more to this. North America only seems to be a few months behind Europe, which seems to be in a rapid and accelerating downturn.


"A lot of people can't afford to hit their homes this winter."

Freudian slip and/or pun? ;)
I hope you're right about older workers going independent. That's what has to happen, and the regulatory structure is going to have to bend to accommodate them. Watch out for the tax blip, though. Figure they'll start to make real money in 2013 (after a year of pounding the pavement), mess up their taxes due in April of 2014, and be in hock to the IRS come 2015.

Happened to almost every consultant I know, which is why the first thing I did was find a CPA.
Plain ol' illiteracy, Mark. Sometimes a type is just a typo!
Neil - I tell people they have to reserve 50% for taxes. It's hard when they start financially behind, that's what happens to most people.

Yes, it has to happen. I sure wish we had not gotten so fancy with the health care reform, and had just concentrated on getting older people access to basic insurance. Some coverage is better than none, and I'm guessing that in 2014 some are going to find out that not earning money will earn them money, if you know what I mean. When some of these 58 year olds figure out that between taxes and insurance, under ACA earning 22K nets them more than earning 50K, I doubt the Puritan work ethic will prevail.

So far (through Sept) I have not seen anything in self-employment HI taxes to indicate that they are actually earning money, though. We were down YoY in September.
what about the birth/death model?
would the use of this make it look like jobs were created?
Anon - the B/D model is used to generate Establishment survey numbers, not the Census/Household survey numbers. So the numbers I reported here are real.

Two month figures on the Household Survey are much more reliable, but those also confirm more jobs.

But if you look at the comments on the next post up, and follow Ron's link, you'll see that all is not well in Babylon. We are about to entire another weakening cycle - I'm not sure whether slow or fast.
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