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Friday, December 02, 2011

US Employment: The Wood Stove Economy Kicks In

There are a number of ways to describe what is happening. The scavenge economy, the wood stove economy, the scratching-a-living economy. Nonetheless, it is here and it is providing some much-needed economic strength.

Note that the Fed would have to be nearly insane to launch another QE program right now - if it did, the bad effects would be rather destructive to this trend. The biggest surge in activity right now is in low-margin stuff that is acutely affected by inflation.

As I pointed out several times recently, in 2011 the Establishment Survey was not going to be a very good guide to what was happening in employment. A lot of activity is in self, casual and small business, and the Establishment survey cannot pick up those changes in real time.

Unfortunately, next month the Census changes show up in the Household survey, and the survey will be discontinuous. It will take several months before we can really look at trend again. So whatever trend we postulate from the current release, it will be March until we can pick up and compare.

Now to the release and the numbers. Retirements continue to pick up pace. That's hardly a surprise given our demographics. The Household Survey reported a seasonally adjusted 278,000 more people working. This is consistent with ADP, and the fact that it is higher than ADP is internally consistent as well. This brings our employment/population back to 58.5%. Last year at this time it was 58.2%.

From September to November, the Household Survey picked up 555,000 new jobs. It's important to look at where they are, however. Going to Table A8, we see that almost 300,000 new jobs showed up in the "self-employed, unincorporated" bracket from September to November. On a YoY (non-seasonally adjusted basis) for wage and salary workers, we show almost exactly 2 million more private wage and salary jobs (this November compared to last November).

The number of persons employed part-time because of economic reasons dropped over 750,000 from September to November. Admittedly a lot of that is in retail, and seasonal. Still, it shows more life on the ground.

But there's more to this than meets the eye - let's go back to Table A-1, and look at men vs women. From September to November, employment in men over 20 increased by 534,000, seasonally adjusted. For women over 20 for the same period, employment decreased by 43,000. On a YoY, NSA basis, the employment/population ratio for men over 20 has increased from 66.7 to 67.6%, which is a very healthy move. For women over 20 during the same period, the emp/pop ratio fell from 55.6 to 55.1.

Teens are still doing very badly. Over the year the 16-19 NSA emp/pop ratio rose only from 24.8 to 25%. That's really poor.

The real ugliness comes in Table A-2, which splits by race. The Nov NSA emp/pop ratio for whites is 59.7, having increased over the year from 59.3. For blacks, it is 52.1, having fallen from 52.7% over the previous year. Because the black population is smaller, the error bar is much higher, but on a seasonally adjusted basis, the emp/pop ratio has fallen from 52.1% in September to 51.7% in November. This is not good. It may be partly attributable to declining local government employment and population concentrations in metro areas, but any way you look at it, not good. Table A-3 gives you Hispanic rates and ratios. The Hispanic emp/pop ratio on an NSA basis rose from 58.8 to 59.4% over the year.

These remarkable divergences suggest that high-tech/skilled employment is still pretty strong, that the open labor force is still pushing teens out of the labor market, and that job growth is really limited to skilled blue-and-white collar workers. Probably many of them are working for themselves or doing contracting.

One striking difference in the US is access to casual capital (usually in-group savings). Hispanics and whites tend to have more. Metro populations are generally the least "handy", with trade occupations being concentrated in traditionally unionized populations. It's very hard to account for the black/ white-hispanic-asian divergence in employment ratios without such an effect.

You can, if you have skills, probably pick up maintenance-scavenge type work in a number of areas right now. If you have the capital and you have the skills, you can probably make something buying old cars, fixing them and reselling them, because there are a ton of people who need better transportation and don't have the money to get it. But if you have no capital and no such "dirty" type skills, you are at the mercy of the private/government labor market right now, and in some areas, it is still pretty grim.

Tyler Durden has some good charts at Zero Hedge.
This is the kind of thing I always come back to when people say that Americans cannot, or will not, manufacture anything. There's three homes I've seen within a five-mile radius of my house that are probably capable of assembling an entire vehicle from components, starting by welding a tube frame, starting from an existing well-known design so they don't (for example) have to understand kinematics in order to get the suspension geometry. Those three are just the ones I know about. Not to mention the 4x4 and performance shops.
A lot of start up are using 401k money, that may
explain why the employment ratios are moving in
different directions.
And, some of those folks are just managing to put a roof over their heads. I'm always amazed at the difference between people that are capable of doing some sort of work to make a living, versus the folks that just seem unable to do anything well.

The 22 year old stepson seems to be hacking together a living. He's going to community college next quarter. I keep trying to talk him into doing something that doesn't require a 4 year college. We'll see.
I have been laid off due to lack of work and funds in the current economic situation. I have nothing tying me to this location now that I do not have a job.
Hcg Ultra
Just wanted to thank you for the way you break apart the data and put it in context. I always learn things from you and appreciate the effort it takes you.
is the 67% employment/ population employed out of the whole population, or the population of those wanting work?
if it is the latter, that means the true unemployment figure is 33%.....depression era numbers..
i was going to ask why no one is reporting this number...then i remembered who would be doing the reporting...and what the public realizing what this ment would do....
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