Inside the December Jobs Report

False Positives Revisited
by JACK RASMUS


In a blog post this past November 2013, this writer offered a contrarian analysis of the October 2013 government jobs report. That report indicated a jobs gain of 204,000 for October. While others heralded the number, claiming it was evidence that the US jobs market had (yet again) ‘turned the corner’, this writer forewarned the October job gains would prove temporary. My contrarian view was that the October job gains reflected a temporary surge in 3rd quarter U.S. GDP, which was itself based largely on a short term surge in business inventory accumulation that Qtr., with a lagged October hiring effect. The October jobs numbers were therefore “nothing to get excited about” and “can disappear quickly from the economy and may in fact do so by December should consumer spending come in well below expectations.” (see my ‘False Positives’ piece on this blog, of November 12, 2013).

It appears that ‘disappearance’ is what has happened, as last week’s December jobs report showed a net job gain of only 74,000. So what’s going on?

Last month’s jobs report shows not only that job creation has relapsed once again, but that weak job creation is not the only problem with the US labor market. While only 74,000 jobs were created, the labor force in the US shrunk by a further 347,000 workers in December as well. Hundreds of thousands of workers have been dropping out of the labor force in recent months. Both indicators—weak job creation and massive labor force exiting—reflect a labor market in deep trouble still, after nearly five years of so-called recovery.

The 347,000 exits from the labor force in December follow another, even greater exodus of 700,000 in October. Even if half of that number may be due to the government shutdown event of that month, it’s still another 350,000 exits. What the last three months shows, therefore, is that at least as many workers are leaving the labor force, as there are jobs are being created. A kind of a ‘churn’ is therefore taking place.

During the first six months of 2013, about two thirds of all the jobs created were ‘contingent’ jobs—i.e. part time and temp jobs—paying well below the average hourly rate. So in the first half of 2013 another kind of ‘churn’ was also taking place: full time jobs were being lost while part time and contingent jobs were being created. That also meant that higher paying jobs were being replaced by lower paying—a trend that has been going on for several years now.

That contingent hiring trend in the first half of the year has moderated somewhat in the second half of 2013, and replaced by the new trend of an accelerating exodus of workers from the labor force.

So it is not just stop-go, month to month job creation , but low-paid contingent job creation, and the massive number of workers leaving the labor force that together represent the major defining characteristics of the US labor market over the past year. It’s not a pretty picture.

The fact that between 700,000 and 1 million workers have left the labor force in just the last three months makes the unemployment rate as an indicator of the health of the jobs market an irrelevant statistic. Because of the way the US erroneously calculates the unemployment rate, a massive drop in the labor force results in a convenient fall in the unemployment rate. Those who leave the labor force are not included in the determination of the unemployment rate. They may be jobless, but aren’t included as unemployed in the government’s oxymoronic method for calculating unemployment. Consequently it is the mass exodus—not a big increase in actual jobs—that is lowering the unemployment rate.
Most serious economists know the unemployment rate is misleading, and don’t put much trust in the unemployment rate as an indicator. They supplement it by looking at other indicators: job openings, turnovers, quit rates, average work week, jobless claims, duration of unemployment, etc. But most of these are short term indicators, and can be volatile and unpredictable month to month.

A better indicator of the long term declining health of the US labor market is the labor force participation rate, and the related employment-to-population ratio. They show how well the US economy has been producing jobs longer term and as the population grows. And both these indicators continue to show a deep malaise in the US job market.

The labor force participation rate has steadily declined for years in the US, starting before 2008 and accelerating after. In June 2009, the declared official ‘end’ of the current continuing recession for the bottom 95% of us, the civilian labor force in the US totaled 154,926,000 workers. This past December 2013 the total labor force was 154,408,000. At first this appears as if there’s been no change in the labor force. However, one must include in this the estimate that, on average, about 100,000 to 150,000 new workers enter the labor force each month. Taking the low end 100,000 figure, it means in the four and a half years since June 2009, no less than 5.4 million workers have left the labor force. (100,000 x 12 months x 4.5 yrs). That’s about the same number of jobs created in the 4.5 year period.

In June 2009 approximately 139,800,000 workers were employed in the nonfarm labor force in the US. In December 2013, that number had risen to 144,400,000. So about 5 million new jobs have been created in the past 4.5 years, averaging 93,000 a month, while about 100,000 a month on average have also been leaving the labor force. (Numbers for both the labor force and nonfarm jobs above are from the US Labor Department’s ‘Current Population Survey’).

What we have therefore is a ‘great jobs churn’ going on in the US labor market since 2010—new entrants coming in at low pay, often contingent, service jobs while roughly the same number of workers leave the labor force who were once higher paid. And because the labor force drop outs aren’t counted as unemployed, it appears as if the labor market is improving since the unemployment rate is declining.

The December picture is even more dismal than the numbers above indicate. Both the 74,000 jobs and -347,000 drop in labor force that occurred in December 2013 are ‘statistics’. That is, they are not the actual numbers. Statistics are manipulations on raw data and actual numbers. They are ‘operations’ on the data, in most cased designed to smooth out the swings and fluctuations in the raw data that occur due to seasonality and other factors.

The raw data on jobs created and labor force exits for December show an even worse picture than that reported by the ‘stats’. The raw data show total nonfarm jobs actually fell by -246,000 instead of growing by 74,000, and the labor force declined by -502,000.

Whether statistically smoothed or the actual raw data, the jobs numbers for December were disastrous. Some argue the abysmal December numbers reflect a correction to the excessively high, 200,000 plus numbers for October and November. Others argue that the bad December numbers result from bad weather. But weather metaphors aren’t an explanation; they are an excuse for those without an explanation for what’s going on. And if the US government is consistently that inaccurate estimating jobs month to month—i.e. widely over-reporting one month and under-reporting another—then that should raise red flags about its methods to being with.

It may very well be that the Labor Department’s established methodologies for estimating jobs are today out of whack and unable to account for the fundamental changes in the labor markets that the recent deep recession has caused—such as the accelerating rise of contingent labor, the massive swings and exits from the labor force, the shift of millions from employment to disability insurance, a growing urban shadow economy that is misestimated in terms of jobs, methods for accounting for new business formation effects on job creation, the diversion of job creating investment from the US to offshore emerging markets and/or into financial asset speculation, the hoarding of trillions in cash by big multinational corporations, the increasing job displacement effect of capital investment, the negative effects of expanding free trade on jobs, and so on.

All this is not to say the December job statistics are purposely ‘falsified’ by the government in some conspiratorial fashion. The methods are perhaps just outdated. The Labor Department does report the raw data for jobs, for example. It is just that the capitalist media simply chooses to report the less severe statistical data as the sole ‘truth’, ignoring the raw data, and saying nothing about how changes in the real economy may be undermining the accuracy of the old statistical methodologies. Or the press hypes the weather as the cause of the poor job numbers, or suggests temporary technical factors are responsible.

However, neither technical factors nor bad weather are necessary to explain the poor December jobs numbers. In my initial ‘False Positives’ piece written in early November, it was suggested that the big surge in 3rd quarter 2013 GDP in business inventory accumulation likely explains much of the lagged big surge in October-November jobs. Business bulked up on inventories in the 3rd quarter, in what has proven to be an erroneous expectation of a big consumer spending surge over the recent holiday season. The production of those inventories, and expectations of follow-on retail sales in the closing months of 2013, explain the brief hiring surge in October-November—as well as the subsequent sharp slowdown (seasonally adjusted) or actual decline (raw data) in December jobs. The ‘False Positives’ piece predicted that the anticipated retail sales at year end would not follow the 3rd quarter inventory buildup—and that would all result in a major reduction in job creation by December.

Data for December just reported show an overall growth of retail sales of only 0.2%–which is a decline from a prior, already weakening, November number of 0.4%. In fact, retail sales have been consistently weak since the September ‘back to school’ event. Sales have slipped ever since. Sales this past holiday season were the worst since 2009, according to a ‘Market Watch’ business research review of the data, as of the week ending December 28.

At the heart of the December slowdown in retail were auto sales. Autos have been the major force holding up consumer spending throughout the past year. However now it appears the US auto market, after several years of historic discounting to boost auto sales, is now becoming relatively saturated. For example, GM’s auto sales declined 6% in December from the prior year and its truck sales even more.

While others note that non-auto retail sales rose in December, non-auto sales also reflected weak economic conditions as retailers introduced large discounts in the final weeks of the monthas it appeared consumers were reducing their expenditures. Those discounts will soon result in lower retail profits, and in turn therefore disappear in January-February 2014. Thus both autos and non-auto retail are therefore set to slow or even decline in coming months. In turn, the job creation picture could weaken still further in early 2014.

To summarize, what lies behind the December jobs slowdown, and the accelerating exodus of jobless workers from the labor force, is the likely pullback in business inventory spending at year end and the weak prospects for retail sales. Hiring slowed significantly at year end, and many of those that were hired in the fall—as inventories bulked up and big retail sales were anticipated—will soon be laid off once again.

Entering 2014, the picture will likely be one of further retreat in business inventory accumulation, more softness in retail sales, fewer hires, and a continuing slowdown in auto sales, and in turn fewer hires and more layoffs.

But the raw jobs numbers for early 2014 may be ‘smoothed out’ once again by the statistical changes forthcoming in early 2014, as the government is scheduled to change its ‘benchmarks’ for estimating jobs that could ‘statistically’ boost jobs by several hundred thousand. That statistical adjustment could effectively ‘drown out’ a continuing weak jobs creation picture when measured by the actual raw jobs data. It may appear the jobs picture is not as bad as it actually is in fact—when the raw data will show otherwise. But you won’t hear that from the mainstream press.

Profits Just Hit Another All-Time High, Wages Just Hit Another All-Time Low

Henry Blodget | Apr. 11, 2013 | Business Insider


In case you need more confirmation that the US economy is out of balance, here are three charts for you.

1) Corporate profit margins just hit another all-time high. Companies are making more per dollar of sales than they ever have before. (And some people are still saying that companies are suffering from "too much regulation" and "too many taxes." Maybe little companies are, but big ones certainly aren't. What they're suffering from is a myopic obsession with short-term profits at the expense of long-term value creation).

Business Insider, St. Louis Fed

2) Wages as a percent of the economy just hit another all-time low. Why are corporate profits so high? One reason is that companies are paying employees less than they ever have as a share of GDP. And that, in turn, is one reason the economy is so weak: Those "wages" represent spending power for consumers. And consumer spending is "revenue" for other companies. So the profit obsession is actually starving the rest of the economy of revenue growth.

Business Insider, St. Louis Fed

3) Fewer Americans are working than at any time in the past three decades. The other reason corporations are so profitable is that they don't employ as many Americans as they used to. As a result, the employment-to-population ratio has collapsed. We're back at 1980s levels now.

Business Insider, St. Louis Fed

In short, our current obsessed-with-profits philosophy is creating a country of a few million overlords and 300+ million serfs.

That's not what has made America a great country. It's also not what most people think America is supposed to be about.

So we might want to rethink that.

Specifically, we might want to have the goal of our corporations be to create long-term value for all of their constituencies (customers, employees, and shareholders), not just short-term profit for their shareholders.

Meanwhile, if you want to know more about what's wrong with the economy, and why our current obsession with short-term-profit is hurting all of us, flip through these charts:

AMERICA TODAY: 3 Million Overlords, 300 Million Serfs

How to Reduce Unemployment

Lessons From Germany
by DEAN BAKER


Many of the pundits are once again celebrating the pick-up of the U.S. economy. Unfortunately this upturn, like prior ones, seems to exist more in their heads than in the data. The big bright spot being highlighted is the 200,000 monthly rate of job creation since October. This only sounds like good news for those who don’t remember that we created 240,000 jobs a month in the same five months last year.

While the economy is not about to slip into recession, there is little reason to think we will see a marked upturn from last year’s 1.7 percent growth rate. In fact, with the end of the payroll tax cut pulling money out of people’s pockets and the sequester leading to layoffs and further cutbacks, we are at least as likely to see the economy slowing as picking up steam.

This is bad news for tens of millions of people who are unemployed, underemployed, or have dropped out of the workforce altogether. There is little prospect that the economy will grow enough to substantially improve their employment prospects any time soon. Nor is there much hope for any policy shift that will provide a boost to the rate of growth. This is why it is a good time to look to Germany.

The unemployment rate in Germany is 5.4 percent, more than two full percentage points below its pre-recession level. By contrast, even with the recent decline to 7.7 percent, the U3 unemployment rate in the United States is still more than three full percentage points above its pre-recession level.

The difference in labor market performance is even more striking if we look at the employment-to-population ratio (EPOP), which measures the percent of the population that is employed. Before the recession the EPOP for people between age 16 and 64 was roughly 5 percentage points higher in the United States than in Germany. In 2012 the EPOP for this age group in Germany was more than 5 percentage points higher than in the United States, making a total shift in Germany’s favor of more than 10 percentage points.

If you think this difference is explained by a booming German economy then you haven’t looked at the data. Growth since the beginning of the downturn has been almost identical in the two countries. From 2007 to 2012 Germany’s economy grew a bit more than 3.0 percent. The U.S. economy grew a hair less than 3.0 percent. The difference can’t come close to explaining the gap in labor market outcomes.

It is true that the United States has a more rapidly growing working-age population than Germany and therefore needs more growth to keep its unemployment rate stable. However this gap would still only explain a small portion of the difference in labor market outcomes.

The secret to Germany’s better outcomes is that the country has an explicit policy of pushing employers toward shortening work hours rather than laying off workers. A key part of this picture is the short work program, which is an alternative to unemployment insurance. With traditional unemployment insurance, when a worker gets laid off the government pays roughly half of the workers’ wages.

Under work sharing, if firms cut back a worker’s hours by 20 percent, the government makes up roughly half of the lost wages (10 percent of the total wage in this case). That leaves the worker putting in 20 percent fewer hours and getting 10 percent less pay. This is likely a much better alternative to being unemployed.

In addition to its formal short-work program, Germany also has a system of hour banks where workers put in extra hours during good times. During a downturn they can draw on these hours to maintain their pay even if they are putting in fewer hours. There are also many agreements between unions and management to reduce work hours to address a drop in demand. These can be more easily negotiated in a country like Germany, where the unionization rate is more than twice that of the United States.

This institutional structure makes it much easier for Germany to deal with a reduction in labor demand by cutting work hours rather than laying people off. Of course even before the downturn Germany had a much shorter average work year than in the United States. Under the law workers are guaranteed more than four weeks of paid vacation every year in addition to 10 statutory holidays, paid family leave, and paid sick days.

As a result, the average work year in Germany is almost 20 percent less than in the United States. As a matter of simple arithmetic, if everyone in the United States worked 20 percent fewer hours we would need 25 percent more workers to provide the same amount of labor. While the picture is more complicated in the real world, there is no escaping the logic that more workers and more hours per worker are alternative ways to meet a growing demand for labor. There are good reasons for preferring the more worker route to the longer hour route.

It is worth noting that the Congress and the Obama Administration did try to encourage work sharing when they passed a provision of the bill extending the payroll tax cut that has the federal government picking up the cost of state short work programs. Twenty-five states have short work programs as part of their unemployment insurance systems, including several large ones such as California and New York.

Unfortunately, the take-up rate continues to be very low. Apparently governors and legislators would rather make cutbacks in areas like education or raise taxes than try to encourage businesses to switch from layoffs to short-work so that they can take advantage of free money from the federal government. A little prodding from the public may go a long way in this area.

The Bad News About Jobs

The Coming Contraction
by DEAN BAKER


More than five years into the downturn it doesn’t take much to get people excited about the state of the economy. The Labor Department’s February employment report showing the economy generated a better-than-expected 236,000 jobs and the unemployment rate had fallen 0.2 percentage points to 7.7 percent was sufficient to get the optimists’ blood flowing. Unfortunately, they are likely to be disappointed.

First off, if the 236,000 jobs number sounds good to you than you probably are not old enough to remember 271,000 number reported last February or the 311,000 number reported in January of 2012. The strong winter job growth was followed by a dismal spring in which job growth slowed to a trickle.

While most economic measures implied that the economy suddenly shifted from hot to cold, the more obvious explanation was that unusually good winter weather in the Northeast and the Midwest pulled hiring forward, as some of us warned at the time. This is likely part of the story this year as well.

While few people in the northern part of the country have been sunbathing in January and February, we did not see the sort of severe snowstorms or sub-zero weather that typically leads to a few days without work in at least part of the region. This likely explains the 48,000 job growth reported for construction in February, as well as higher-than-expected growth in retail and temporary employment.

The drop in the unemployment rate is also not as good news as it may initially seem. The Labor Department reported that 130,000 people left the labor force in the month so they are no longer counted as unemployed. The percentage of the adult population that is employed—the employment-to-population ratio (EPOP) – was unchanged at 58.6 percent. This is just 0.4 percentage points above the low hit in the summer of 2011 and is unchanged over the last year.

While the unemployment rate has fallen back by 2.3 percentage points from its peak, reversing more than 40 percent of its increase, the EPOP is still down by 4.5 percentage points from its pre-recession level. The drop in unemployment is much more the result of people giving up the search for employment and leaving the labor force than workers finding new jobs.

The one genuinely encouraging piece of news in the February employment data is an uptick in wage growth. Over the last three months, average hourly earnings rose at a 2.85 percent annual rate compared with the prior three months. If this continues it would imply that workers are actually seeing real wage gains. Unfortunately, this increase was likely driven by some state minimum wage increases and the sort of random movements that causes these data to fluctuate erratically, but this is an item that the optimists can look to for hope.

Looking beyond this report, there is not much reason for optimism. Housing construction is rising but from a very low base. It had fallen back to just 2.0 percent of GDP, so even a 20 percent growth rate would add just 0.4 percentage points to GDP growth. The most recent data on investment shows a sharp drop, albeit after 3 months of good growth. We will be fortunate if this category grows at more than a 10 percent annual rate in 2013.

While an upward revision to the 4th quarter GDP data turned a negative 0.1 percent into a positive 0.1 percent, the economy still only grew at a 1.6 percent annual rate in the second half of 2012. Apart from the uptick in construction, there are few good reasons to expect much of an acceleration from this growth rate. On the other hand, the ending of the payroll tax cut will pull more than $100 billion a year out of the economy. The impact of this tax increase was just being felt when the February jobs survey was taken in the middle of the month.

The other big hit to the economy will be from the sequester, which will pull roughly $80 billion in federal spending out of the economy. The forecasts from the Congressional Budget Office and others show the sequester slowing growth by 0.5-0.6 percentage points. The economy has not even begun to feel the impact of these cuts, most of which will not start to effect until April.

In short, we have an economy that had been growing at a not very healthy pace through the second half of 2012 that is virtually certain to be slowed by contractionary fiscal policy through the rest of 2013. Unless there is a rapid reversal of policy, the 7.7 percent unemployment rate is likely to represent a low that we may not see again for some time. While the economy is not likely to fall into a recession and send the unemployment rate soaring, the economy is not growing fast enough to meet the need for jobs from a growing labor force. As a result unemployment will be going in the wrong direction for the rest of the year.

Gloomy Jobs Report Shows between 12.5 Million to 26 Million+ Unemployed (6 stories)

Friday, May 4, 2012 by Common Dreams

Employment data released today from the Bureau of Labor Statistics show that 12.5 million people were "officially" unemployed in April (while more accurate, "unofficial" totals reach figures of 26 million+--even as high as 85 million).
 
The U3 "official" unemployment rate was at 8.1 percent, barely down from March's 8.2%. The more accurate but still incomplete U6 unemployment rate was at 14.5%.

Economist Dean Baker notes that the fall in unemployment is due entirely to people leaving the workforce and adds: "It is virtually certain that the unemployment rate will rise in coming months."

41.3 percent of the unemployed in April have been jobless for 27 weeks or more.

Economist Chad Stone of the Center on Budget and Policy Priorities writes:

 "Though unemployed and underemployed workers bear the brunt of a long economic slump like the one we‘re experiencing, the economy’s long-term growth prospects are hurt as well. That should weigh more heavily than it apparently does in policymakers’ deliberations over how quickly to reduce budget deficits and how to achieve the Federal Reserve’s dual mandate to keep inflation in check (it is right now) and to promote strong economic growth and employment (both of which are weak)."

* * *

Dean Baker: Job Slowdown Continues into April, but Unemployment Still Edges Downward

It is virtually certain that the unemployment rate will rise in coming months.

The economy added just 115,000 jobs in April. While the March number was revised up to 154,000, the 135,000 two-month average is well below the 252,000 average for the prior three months. Clearly much of this story is bounce back, where the unusually good winter weather brought much hiring forward.

In spite of the slower job growth, the unemployment rate edged down again to 8.1 percent. However, this is not a case of the household survey showing a different picture than the establishment survey. As was the case last month, the drop in unemployment was entirely attributable to people leaving the labor force. The employment-to-population ratio (EPOP) fell by 0.1 percentage points for the second consecutive month, to 58.4 percent. This is just 0.3 percentage points above the low for the downturn.

There are few sectors in the establishment survey that have shown much strength over the last two months. In the clearest case of a weather effect, construction employment has edged down by 6,000 since January after increasing 44,000 from November to January. The general trend may be upward here, but very slowly. It is worth noting that unemployment among workers in the construction industry fell to 14.5 percent in April, implying they added just 0.2 percentage points to overall unemployment.

Manufacturing added 16,000 jobs in April, almost all in durable goods. Over the last five months, job growth in the sector has averaged 35,000 per month. The health care sector added 19,000 jobs in April, slightly less than its 27,000 average over the last year. The restaurant sector added 19,700 jobs, slightly higher than the 15,000 average over the last year.

The employment services sector added 21,100 jobs in April, but much of this was reversing a loss of 9,400 jobs in March. There was a similar story in retail, which added 29,300 jobs in April after losing 20,900 (both mostly in department stores) in March. Both sectors are showing erratic movements, but not much growth.

The government sector lost 15,000 jobs in April, slightly less than the 18,000 average loss over the last year. (The March gain was revised to show a loss of 12,000 jobs.) Local education accounted for 10,700 of the lost jobs. There was an anomalous decline of 11,000 jobs in passenger and ground transportation. This will likely be reversed.

It's worth noting that 93.1 percent of the private sector jobs created over the last year were classified as production non-supervisory jobs. This compares to 82.4 percent of jobs falling in this category last year. These are generally thought to be less-skilled positions. This implies that job growth is most rapid at the middle and bottom of the labor force right now, rather than at the top, as many have claimed.

There is not much positive in the household survey. The survey shows a drop in employment of 200,000 since February. This is almost certainly just an erratic movement in the data, but the pattern in EPOPs is more consistent with the job growth numbers in the establishment survey than the sharp drop in the unemployment rate. The economy needs 125,000 jobs a month to keep pace with labor force growth; the 1.8 million jobs created last year would not be expected to lead to a fall of 0.9 percentage points in the unemployment rate.

By demographic group, the worst story is among black men and black teens. The former has an EPOP that is 6.5 percentage points below its pre-recession level.

Black teens have an EPOP of 15.5 percent, down 9.0 percentage points from the 2006 level. The EPOP for black women is down 3.7 percentage points from its pre-recession level, but has risen 3.2 percentage points from lows hit last summer.

The EPOP for white men is 4.8 percentage points below the pre-recession level, but up 0.6 percentage points from last summer's low. The EPOP for white women is 3.0 percentage points below its pre-recession level, but hit a new low in April.

The economy is not growing fast enough to bring unemployment down quickly or to any real positive effect.

* * *

CBPP Statement: Chad Stone, Chief Economist, on the April Employment Report

Today’s employment report shows that April’s job growth was disappointing for the second straight month and that the economic costs in terms of fewer jobs, less income, and lower growth remain very high. In particular, the number of workers in the Labor Department’s broadest measure of labor market underutilization — comprising the unemployed, discouraged workers and others “marginally attached” to the labor force who nonetheless have indicated they want to work, and people working part-time for economic reasons — stands at roughly 23 million. That’s much higher than at the start of the recession or, before that, than any time for which we have available data, dating back to 1994 (see chart). [...]

The economy is operating well below its full productive capacity, with a substantial shortfall in jobs, production, and income. And, as the Congressional Budget Office (CBO) notes, the costs “fall disproportionately on people who lose their jobs, who are displaced from their homes, or who own businesses that fail.”

* * *

Critics of the BLS labor market data argue that the extent of unemployment is understated in the BLS announcements.  To fully understand the current "employment situation," you have to look at the history.

• Many people who were once in the labor force are no longer seeking work.  The BLS reported, "The civilian labor force participation rate (63.8 percent) and the employment-population ratio (58.5 percent) were little changed in March."   Until the end of 2008, the labor force participation rate had consistently been over 66 percent for the previous 20 years. The employment-population ratio had been between 62 and 64 percent since 1993.
• The BLS also reported, "The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) fell from 8.1 to 7.7 million over the month. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job."
• Some people have simply given-up looking for jobs. The BLS reported, "In March, 2.4 million persons were marginally attached to the labor force, essentially unchanged from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

A note about the marginally attached, workers "Among the marginally attached, there were 865,000 discouraged workers in March, about the same as a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.5 million persons marginally attached to the labor force in March had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities."

* * *

Alternative Unemployment Rate is 16.6% and Other Scary Unemployment Statistics

Submitted by Robert Oak on Fri, 05/04/2012

 April brings showers and yet another sad employment report. The new official unemployed tally is 12,500,000 with an unemployment rate of 8.1%. We calculate below an alternative unemployment rate of 16.62%, which shows 26.72 million people need a full-time, real job.
 
First, the average length of unemployment is still very high, 39.1 weeks, even while dropping 0.3 percentage points from last month.

People unemployed for 27 weeks or more is now 41.3% of the total unemployed, or 5,101,000 million and a seasonally adjusted drop of -207,000 from last month. This percentage has barely budged as a percentage of total unemployed in comparison to pre-recession and historical levels.

The above drop in long term unemployed by -207,000 appears to imply these people just dropped off of the count. Those not counted, or people in the civilian, non-instutionalized, adult population who are considered not in the labor force, increased by over half a million in a month, or 522,000, to stand at 88,419,000. The civilian non-institutional population is currently 242,784,000. Below is the monthly change of those considered not in the labor force. This is a statistically noisy figure on a month to month basis and that super large spike in January 2012 are the 2010 Census adjustments. See this post for details on those adjustments and this one for affects and data continuity.

Some people are in part-time jobs because they want to be, others because they cannot find anything else. Some are stuck in part-time because their hours were cut by their employer. These part-timers due to slack work now number 5,187,000, an uptick of 106,000 from March.

Below is a graph of forced part-time because they got their hours cut as a percentage of the total employed. If you want to see a recession economic indicator, this looks like a pretty damn strong one. See how closely the percentage increase matches recessions, the gray bars? The percentage of people in part-time jobs due to slack economic conditions has stayed extremely high since the start of the Great Recession, even while declining. An uptick of any size is simply something we do not want to see.

U-6 is a broader measure of unemployment, includes the official unemployed, people stuck in part-time jobs and a subgroup not counted in the labor force but are available for work and looked in the last 12 months. U-6 has also remained consistently high. In February U-6 was 14.5%, the same as March's U-6 alternative unemployment rate.

The real number of people wanting a job for April is 26.72 million, over double the official counted as unemployed of 12.5 million. One needs to add up the official unemployed, people stuck in part-time who need full-time jobs, and all of those people not in the labor force, but who report they actually want a job, currently at 6.366 million.

This gives an unemployment rate of 16.62%, calculated following the methods from this article on estimating the real unemployment numbers. March's alternative unemployment rate was 16.55%.

Another indicator things are not so rosy is the number of discouraged workers remains highly elevated. Discouraged workers are people, not counted as part of the civilian labor force, who not only want a job, but also looked for one in the last year. These people aren't job hunting now because they believe there are no jobs out there. Below is the graph of discouraged workers, currently at 0.968 million.

A final area of contention is figuring out how many jobs are needed each month to keep up with population growth. Seems many in the press just throw out a number. We just don't know due to civilian non-institutional population fluctuation. We do know that overall population monthly growth has been hovering around 200,000 a month, this month the change was 180,000. We also know the civilian non-institutional population is roughly 75% of the total population. We also know the labor participation rates and employment to population ratios are artificially low. Therefore, it's safe to say we need about 100,000 jobs per month to keep up with population growth at these same record low labor participation rates. The Atlanta Fed got sick of the debate it seems and put up a monthly jobs calculator. Appears 100,000 is right on the money for the monthly jobs needed to keep up with population growth, 101,169 in fact. We've checked the Atlanta Fed's job calculator, it is correct, using the same methods we have done on this site, by hand.

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Long-Term Unemployment a Problem That Won't Go Away
Even groups with relatively low unemployment rates have high levels of long-term joblessness.

By Danielle Kurtzleben ~ May 2, 2012 ~ US News & World Report

The U.S. economy has added jobs for 18 straight months, but those jobs continue to bypass some of the people who need them most, according to new research.
 
In the first quarter of 2012, nearly 30 percent of the 13.3 million unemployed Americans had been jobless for over a year, according to a Pew Charitable Trusts analysis of Labor Department data. That figure is starting to tick downward but remains remarkably high. At its peak in the third quarter of 2011, 31.8 percent of workers had been jobless for a year or more. However, the figure was much lower at the start of the recession.

"When you look at the overall long-term unemployment rate in early 2008, it was about 9.5 percent," says Ingrid Schroeder, director of the Pew Fiscal Analysis Initiative at the Pew Charitable Trusts. "And when you look at where we are today, at 29.5 percent, you expect it to be worse [than where it was at the beginning of the recession], but it's more than triple where it was at the beginning of the Great Recession."

The data complicates the picture of joblessness in the U.S. It is by now widely known that younger people are less employed than older people and that higher education levels correlate with lower jobless rates. While that remains true, the patterns for longer-term unemployment don't follow those patterns.

For example, while unemployment for older workers is far lower than for younger age groups—6.8 percent of the labor force over 55 was unemployed in the first quarter, compared to 23.5 percent for people under 20 and 14.2 percent for those age 20-24—those older workers who are out of work are less likely than younger workers to be rehired, and therefore can stay on the unemployment rolls far longer.
 
As of the first quarter of 2012, nearly 44 percent of unemployed workers over 55 had been jobless for a year or longer. That share of longer-term unemployed people shrinks as one moves further down the age spectrum. Among workers aged 20 to 24, only 21.4 percent had been unemployed for a year or more, and among workers under 20, that share is 12.1 percent.

Likewise, while education can reduce the risk of joblessness, it does not protect against long-term unemployment, notes Schroeder.

"Although people with higher degrees are less likely to become unemployed in the first place, they're just as likely as other education groups to stay unemployed for a long period of time," she says.

More education makes for less unemployment—14.1 percent of the labor force with less than a high school diploma was unemployed last quarter, compared to 3.3 percent for people with an advanced degree. However, in both of those categories, as well as for high school and college grads and people with some college, roughly one-third of the jobless had been unemployed for more than a year, ranging from 29.7 percent for those with less than a high school education to 35.6 percent for those with some college.
 
For those who have been out of work for over a year, the ramifications of prolonged unemployment can be profound. Being out of work for an extended period of time causes what some call "unemployment scarring," making a candidate less attractive to an employer, who may fear a loss of job skills. Likewise, it can make for depressed future wages for that worker, says Schroeder.

And the problem will take a long time to heal. While the unemployment rate is a lagging indicator, the recovery in long-term unemployment is lagging even further behind.

"Long-term unemployment numbers are showing some slight improvement, but it's persistent," says Schroeder. "This problem is not recovering as quickly even as the regular unemployment numbers are. Long-term unemployment is this nagging thing that's still there."