Exercises for the Reader from the January 2011 Unemployment Report

Remember in school when there was a problem so tough even the Professor couldn't figure it out? Remember how teachers and even textbooks would say this is an exercise left for the reader instead of admitting the problem wasn't easily solved? Such is our employment situation report.

Unemployment came in at 9.0% yet only added 36,000 jobs to the payrolls. For the last 4 years, payrolls were seasonally adjusted downward by 483,000 jobs, cumulatively, with the decline in 2010 previously noted to be -215,000. 2009 nonfarm payrolls was downward adjusted -323,000 jobs. Below is the cumulative effect of the establishment survey revisions to nonfarm payrolls. When you're grabbing at crumbs, 483,000 jobs is a lot, even when it's actually 0.37% of the total payroll jobs amount.

 

 

Payroll revisions come from seasonal adjustments, yearly tax data information, birth and death models and I believe a sprinkle of \pi [sic]. As previously explained, much of the data invalidity problems in comparison of December to January is due to the yearly adjustment in total population, upon which the unemployment rate is derived.

As previously mentioned the CES is the payroll report and counts the actual number of jobs, versus the actual number of people. So, one can have two jobs and be one person, or one can be the so called self-employed, many of whom are simply getting ripped off by being paid as contract workers and per project bids....and they also are not counted in the CES survey.

Firstly due to overall population changes, the United States has to create a certain amount of jobs, per month, just to maintain. Lets assume a 200,000 noninstitutional civilian population increase each month with a civilian population to employment ratio from December 2007, 62.7%. That means a minimum of 125,000 jobs would have to be created just to keep up. Currently the employment to population ratio is 58.4%, which shows how many people have dropped out of the labor force, are unemployed. Believe me, in spite of the stress causing people to kill themselves, choose not to work and baby boomers retiring, one did not have a ratio drop to this magnitude over those elements alone. Even if one maintained that low ratio level of people who could work to those with a job, one still needs 118,000 jobs created each month, just to keep up.

 

 

We are officially down 7.731 million jobs since January 2008. Add to that the above 125,000 jobs per month, multiplied by 36 months (3 years), we get an additional 4.5 million jobs, to a whopping total of 12,231 million jobs needed just to get back with the January 2008 unemployment rate of 5%, assuming the December 2007 civilian population to employment ratio. To achieve this in three years would require an additional 4.5 million jobs created, assuming the same base civilian population growth and employment population ratio above. This means....the United States would need to create 465,000 jobs per month. That simply isn't going to happen. Below are the change in nonfarm payrolls (jobs) per month going back to 1993, you do not see a monthly change of 440k+ jobs per month for 3 years now do ya?

 

 

The above exercise isn't exact, for one, a constant 200,000 monthly growth in civilian population is an approximation. Secondly, there are more people retiring these days. That said, the above walk through should give an idea how various economists are estimating those monthly jobs needed to get back to pre-recession unemployment levels. For example, EPI, shows we need 11.4 million jobs to get back to pre-recession levels. EPI takes different metrics with slightly different assumptions, which is why you see these estimates vary across economists and organizations on how many jobs we really need. Suffice it to say we need gobs of jobs.

In looking over table B1 we can get a little more detail on what kind of jobs were created (and lost) on the permanent jobs front. We had a total of 36,000 jobs, with 50,000 of those being private sector jobs, which means we lost -14,000 government jobs.

Below are the number of nonfarm, classic payroll type jobs added/subtracted each month, for the last year. Sad huh?

 

 

Here is the breakdown by sector for January 2011.

  • Financial: -10,000
  • Information: -1,000
  • Construction: -32,000
  • Manufacturing: +49,000
    • Durable Goods: +62,000
    • Nondurable Goods: -13,000
  • Mining & Logging: +1,000
  • Health and Education: +13,000
  • Leisure and Hospitality: -3,000
    • Food & Drink: +25,00
  • Professional & Business Services: +31,000
    • Temporary: -11,400
  • Trade, Transportation, Utilities: -38,000
  • Retail Trade: +27,500
  • Government: -14,000

We see some good news for durable manufacturing with auto & parts creating 20,400 of those 62,000 jobs.

Onto something cool The BLS is more closely tracking unincorporated self-employed workers. This would be those working as a small business, under contract, paid 1099-misc instead of W-2. W-2 means your paycheck, where the employer has paid FICA taxes, workman's comp., hopefully your health insurance and so on. 1099-misc is like a business sale and that person receiving the payment is responsible for all taxes, including self-employment tax, their health insurance, retirement, disability insurance and so on.

In agricultural work, the ratio is beyond belief. Of the 2,256,000 agriculture workers, only 1,390,000 were employees. 861,000 of them were classified as this unincorporated self-employed worker or 38.2% of all AG workers! What are the odds these people are being paid below minimum wage de facto? The self-employed must provide for their own FICA taxes, their health insurance, their retirement.... In comparison non-agriculture industries, including the government, the ratio is 6.5% of non-incorporated self-employed being paid 1099-misc.

4.9% of those employed are holding down more than 1 job. Onto some statistics which are affected by the population adjustments.

The long term unemployed (> 27 weeks) was 6,210,000 for January 2011, which is 43.8% of the official unemployed and 73.1% of those unemployed 15 weeks or longer. The average duration of unemployment is 36.9 weeks, where the median, or when half of the people have found a job, is 21.8 weeks.

 

 

Next month, we'll go into our usual comparisons to play Where's Unemployed Waldo in the statistics, for then the monthly CPS changes will have more validity.

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Excellent analysis

and commentary. Where is unemployed Waldo? Or, is unemployed Waldo everyman/woman?

Who is that guy John Galt and why does he want us all unemployed?

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Fear Prevents/Causes Action

After reading volumes of information and expert opinions on our recessionary economic state, it appears that the answers and solutions are varied across the political front, as well as in the corporate and Wall Street circles of influence. In Washington, both the executive and legislative branches of government are, for the most part, at odds concerning the correct course of action needed to revive an economy spiraling downward, and mired in astronomical debt. With political futures hanging by a thin thread, many in Washington are tiptoeing around core and root causes for the economic mess presently being felt all across this nation.

Certainly it can't be a big mystery as to the "why and how" we have arrived at this stage, nor can it be a big mystery concerning those responsible for leading us down the path of economic ruin. It's a given that our present situation didn't happen overnight, but rather a process that spanned several decades. Some believe that the process actually began over a half century ago, shortly after the end of the second world war. One of the truisms in life, is that you can't turn back the hands of time and change the past. But, we can determine, to an extent, the path that'll lead us into the future.

Although many factors have contributed to our economic collapse, the top candidates are surely those concerning greed, power, egotism, the drive to climb the political ladder at all cost, and corruption. Since politics and politicians control the events that shape this nation and her well-being, the afore mentioned curses have been our downfall. It is doubtful that "politics as usual" can be changed in time to save what's left our our economic well-being, and restore our economic independence. Political "one-upsmanship" and egos are standing in the way of socioeconomic progress, and keeping us from enjoying the fruits of our labor. It is without a doubt, that it's the "fear factor" that prevents those with the responsibility to act on behave of the citizenry, from doing so. It is the fear of losing wealth, power, influence, political status, and the prestige that comes will the afore mentioned.

The political climate in Washington doesn't allow stabilization and growth of the Middle Class, nor does it allow those living in poverty to better their socioeconomic status. The Middle Class is shrinking, with more falling into the ranks of the poor, than those ascenting to wealth. This gives the impression that The Washington Brotherhood is "pro" Wall Street and "anti" Main Street. The "bailouts" over the past two plus years certainly didn't bailout Main Street. While Main Street is surviving by living off of government assistance programs and unemployment checks, Corporate America is booming and showing record profits. While squeezing the economic life out of the little guys, the big guys are getting wealthier and wealthier. The above mentioned "fear factor" erases all ethical and moral reasoning in the minds of professional politicians, and replaces it with "self".

Now for the good news; that same fear factor could force politicians to actually act on behave of the Middle Class and the poor. Don't misunderstand here, if they do act favorably towards the working class, it certainly won't be because they've had a change of heart. It'll be because the situation and circumstances leave them little choice. They fully understand, and are aware of the importance "jobs" play in the grand scheme of sound economics. They have to create an economic environment that not only generates tax revenue, but also one that greatly decreases the dependency on government assistance programs and unemployment checks. In other words, they must take in more and spend less. The way to do this, is by providing opportunities that will allow citizens a means, whereby they can be self-supporting.

Many suggestions on how to accomplish this have been placed on the table. Among the many, is spending hundreds of $Billons on infrastructure projects, and investing in alternative energy technology. Both would greatly boost employment, as well as being very beneficial to the environment and overall economy. But, would/could these two alone, solve our multitude of economic issues? Given the magnitude and scope of our present economic woes, it's doubtful that these alone, would generate the results needed to put our economy back on solid ground. So then, where would these self-supporting opportunities come from?

Firstly, we have a rapidly growing population, and graduate many high school and college seniors each year. These newly grads become part of our growing workforce. Secondly, senior citizens are working longer into their retirement years. Ideally, employment opportunities would closely equate to the number of workers that make up our workforce. But, since we're now an import and energy dependent economy, and no longer produce the majority of what we use and consume, we have more workers than jobs available. This imbalance grows like a cancer, and the results is bascially what we're seeing today in our economy.

For these reasons, the fear factor will push Washington towards rethinking our foreign trade agreements and policies. This is bascially being forced on them by the failure of all other attempts to employ our rapidly growing workforce. Noone in Washington has a magic wand, and rhetoric doesn't produce living wage opportunities. The fear of rejection by the general public has already caused some to change their rhetoric to a more pro Main Street tone. If positive change does come, it won't be voluntary, but will instead come via fear of rejection. Our present economic status will force change in Congress, as well as in the White House.

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Because you can do wrong, and get away with it, doesn't make it right

since this posts is on the Jan 11 unemployment report

Sticking with the topic at hand, the real question is Where are the Jobs?

We had 3.2% GDP growth in Q4 2010, we see massive trade deficits, we have soaring productivity, so somewhere in these numbers are a host of jobs offshore outsourced. I'm sorry it's just gotta be there, you cannot create economic activity with dead people.

You know it's there, but proving it is a whole other ball game, so maybe I should start another statistical exercise to locate those missing jobs which would enable a 3.2% GDP growth.

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Magic

Robert,

First, I'ld like to say that I'm far from being an expect on economics. In addition, I don't have a four year degree that would qualify me to question those that are experts and experienced. But, I was blessed with good ol' fashioned common sense, which does qualify me to question the obvious BS and propaganda put out to the public by our government. After all, when was the last time our government was completely honest with us?

Now, Back on topic.

You asked, "Where are the jobs?"

(1) Do we manufacture every part and component of every product assembled/produced in the U.S.A.?
(2) Do businesses hire more employees during peak demand, or simply increase the days and hours of those already on their payrolls?
(3) Is it possible that our economy could produce more without adding workers?
(4) Are we to assume that any increases in domestic output, automatically equates to more workers on payrolls?

Consideration has to be given to the fact that increases in payrolls are only jobs replacing a small portion of the jobs lost. Any increases at this time does not address the growing distance between jobs available and jobs needed. During good times and bad times, it's normal to see fluctuations in both domestic output and the employment rate. It's easy to get lost and sidetracked when concentrating on everything between point "A" and point "Z". Where point "A" represents the root causes, and point "Z" represents present circumstances and situations ( results ). Everything in between points "A" and "Z" represents effects and temporary fluctuations.

Should we be impressed and excited because unemployment went from 9.4% down to 9.0%? Should we be impressed and excited because we see an increase in GDP? The obvious answer to both questions is no. Why? Because fluctuations are normal, and doesn't indicate a trend over many months. Another way to look at it is whether we're actually producing more and importing less, or merely producing more with more man-hours working more days per week, yet still importing the same or more. The problem is one of not having a constant to work with. Almost every component concerning domestic output and employment is a variable.

The jobs remain where they've been for several decades now. We've exported our jobs to cheap foreign labor. We're not going to re-open the steel mills, the textile mills, the electronic assembly plants, nor are we going to bring back the furniture, farm equipment, tool, toy, hardware, or any other industry lost through unfair, unjust, and one-sided foreign trade agreements.

Out-sourcing jobs offshore enhances the bottom line on the P&L sheets of businesses, thus the continuing practice. Since out-sourcing basically goes unpenalized, and unrestricted, why hire American workers?

Where would new jobs come from? We're not creating new industries, nor are we developing technology that would require a huge amount of manpower to run and maintain. And, we're certainly not doing anything to bring lost industries back to this country.

Again, until "A" changes dramatically, "Z" will remain the same, or get worse. Everything in between will fluctuate and give a false sense that things are improving; i.e. employment and GDP. The truth is that we're not gaining on the jobs front, nor are we gaining on the amount produced for domestic consumption. It'll be a long long time before we wean ourselves from cheap foreign imports. As it stands now, we don't have the catalyst to narrow the gap between the growing demand for living wage jobs and living wage opportunities.

Of course, we could always drastically reduce our standard of living in order to compete with cheap sweatshop child labor in foreign countries. Remember, "Global Economy" means equalization to the lowest level. We're presently living under "forced economics" via our import and energy dependency. It's all magic, smoke and mirrors, that's presently producing favorable economic numbers. The truth is down on Main Street America.

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Because you can do wrong, and get away with it, doesn't make it right

I meant statistically

This is to everyone, I really do not care if someone does not even have an undergraduate degree, some of this stuff one can understand, I fully expect people to try to learn it. If someone can balance their check book and knows even basic algebra, that should be enough. Pause, stare at a graph, stare at a number then stare at the graph again, then read the surrounding text.

The point is to focus on the data, the statistics, the theory, the numbers.

Like this, no, this is not some "grand conspiracy" by people at the BLS, mandated to "lie to you". They are simply numbers people for the most part.

The problem is the methods themselves and as I point out, that is partly Congress's job as well as the Secretary of Labor, who IS political and will lie to you...

The point being, this post is to talk about the topic at hand, which is this month's unemployment report.

If one did and tried to learn this stuff, then and only then would one see the government economists and regular people are not "out to get you", more we need refinements and improvements in data collection and methodology.

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Thank you Robert

I am not an economist, EP is my source of illumination on such matters, but even a novice can see the facts do not jive with the narrative. I've been at my current job 13yrs. and have been on reduced hrs for 2yrs (32wk/$15hr, ty GOD ), literally since Obama's inauguration day (the owner is conservative and we're in Texas) I only hope Sonny is correct in saying, " that same fear factor could force politicians to actually act on behalf of the Middle Class and the poor." It wasn't supposed to be like this.

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I try to translate this stuff to English and basic math

If I make a mistake, I sure hope some economist or statistician who is an expert does an anonymous drive-by comment to point it out...and all of you government people, I promise to never reveal your IP address if you're too chicken to say something. ;0

But I do try to be accurate. If I made a mistake and find out about it, I will edit and update a post to correct it immediately.

I hate the idea of adding more noise to the stream.

That said, the MTGM just pointed to an ASTOUNDING mistake by the Associated Press, here.....

I think Delong does "why can't we have a better press corps" almost every day..but what do ya want when they try to offshore outsource Journalists who probably majored in writing or communications and odds on probably do not even have an associates in econ or any mathematics past that 3 hr credit class in Algebra or whatever it is.

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You should read my blog

I think youll love it!

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yr-yr payroll increase 984,000

I'm seeing a lot of claims there has been an increase of 1.1 million jobs in the last year. From 01/10 through 01/11 it's 984,000, with the new adjustments.

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weather

The BLS themselves and many others are blaming the weather for the low payrolls numbers.

The BLS doesn't count payroll jobs for anyone who doesn't work for a 2 week period, with the 12th of the month included, that's unpaid, so vacation does not count.

As noted above, the change in payroll is such a small percentage, this maybe true, I'm not sure exactly the BLS time window or have overlaid it with snow storms. We'll see in February I guess.

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