Fun with unemployment numbers

The deeper and longer the recession goes on, the more questionable the numbers get.
Today the headline number was a loss of 85,000 jobs in December and a steady unemployment rate of 10%.
The market only expected to lose 3,000 jobs, so this was a negative report. However, like most unemployment reports, the Devil is in the details.

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By far the largest change in the employment numbers was the number of people no longer in the workforce. Using the non-seasonally adjusted numbers 1,027,000 people stopped being counted as part of the labor force last month even though 321,000 of them say they still want a job.
Even the seasonally adjusted numbers show an increase of 843,000 people no longer counted as part of the labor force.

These numbers completely dwarf the headline numbers. That's how the seasonally-adjusted number of unemployed people could drop by 73,000, but the unemployment rate doesn't move.
If these people who wanted a job were still counted as part of the labor force then the unemployment rate would rise to 10.2%. If all of the them were counted as part of the labor force then the unemployment rate would rise to 10.5%.

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The number of unemployed people actually collecting unemployment benefits has never been higher.
The more broad U-6 unemployment number rose from 16.4% to 17.1%.

The silver-lining in this report was that companies were adding temporary workers.

Temporary help services added 47,000 jobs in December. Since reaching a low point in July, temporary help services employment has risen by 166,000.

The thinking is that when business starts picking up companies will add temporary workers before they add permanent workers. This is correct, but with one big caveat - before companies add temporary workers they will add work to their current workers.
Average weekly hourly earnings declined again. Hours worked was flat.

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U6 - 17.3% up from 17.2%

You've got a slight error in U6. You're quoting the not seasonally adjusted numbers vs. the seasonally adjusted ones.

We need to stick with SA (which is yet another interesting story, a lot of people are noticing a divergence this year, so it better all "come out in the wash" which is about February where the yr-to-yr have to cancel each other out on not seasonally adjusted vs. seasonally.

I was just working on this report, sifting through the devil, but you're seeing one of the major items I was pointing out, the labor participation rate is dropping.

So, I think I'll work on more analysis and put it as a blog post for later.

This is really bad news, although I think all of us on this site are not surprised!

There were some claiming we'd see +100k in NFP....oopsy,

so the Fed. "advisory" on low interest rates appears to me more just a warning to banks (ha ha), because they cannot raise the funds rate with such dire employment statistics.

(Can we get the term offshore outsourcing mentioned yet? ;))

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Something that's been bugging me

Reading some good posts tonight. I heard that it was 660k that were not longer counted, but I suspect that this report is closer to the number. This brought me to something that's been racking my brain. If we add all those who are no longer counted as part of the labor force because of a change of how they define "discouraged or marginal", wouldn't the numbers be bigger?  

The reason I got to thinking this was when I was working on a piece, and needed to look up stuff from the BLS. Back in 1994, they changed who they counted as what. Then I came across this (please note the bolded areas, I have also truncated a part of the passage for space sake):

 

Who is counted as unemployed?

Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Actively looking for work may consist of any of the following activities:

  • Contacting:

    • An employer directly or having a job interview

    • A public or private employment agency

    • Friends or relatives

    • A school or university employment center

  • Sending out resumes or filling out applications

  • Placing or answering advertisements

  • Checking union or professional registers

  • Some other means of active job search

Passive methods of job search do not have the potential to result in a job offer and therefore do not qualify as active job search methods. Examples of passive methods include attending a job training program or course, or merely reading about job openings that are posted in newspapers or on the Internet.

Workers expecting to be recalled from temporary layoff are counted as unemployed, whether or not they have engaged in a specific jobseeking activity. In all other cases, the individual must have been engaged in at least one active job search activity in the 4 weeks preceding the interview and be available for work (except for temporary illness).

 

Now as many of you are aware, in some townships, all there is are those job training programs. How many folks who are in those, yet not getting a paycheck, are not being counted? We've lost a lot of industrial jobs here in Illinois, tens of thousands have probably gone through these programs.  

There's something else as well, which I know many of you may think I'm nuts for bringing up.  This is about discouragement, which to me may be measured.  The government tends to think "ok, he's discouraged, he's stopped looking, he isn't part of the labor force." Case closed.  But what if you're discouraged but want to work but cannot find anything remotely that you can do? 

Here again is a part from the BLS about this:

 

These questions form the basis for estimating the number of persons who are not in the labor force but who are considered to be "marginally attached to the labor force." These are persons without jobs who are not currently looking for work (and therefore are not counted as unemployed), but who nevertheless have demonstrated some degree of labor force attachment. Specifically, to be counted as "marginally attached to the labor force," individuals must indicate that they currently want a job, have looked for work in the last 12 months (or since they last worked if they worked within the last 12 months), and are available for work. "Discouraged workers" are a subset of the marginally attached. Discouraged workers report they are not currently looking for work for one of four reasons:

  1. They believe no job is available to them in their line of work or area.

  2. They had previously been unable to find work.

  3. They lack the necessary schooling, training, skills, or experience.

  4. Employers think they are too young or too old, or they face some other type of discrimination.

 

Frankly I think they are making a big mistake. Because you can have situations where you simply stop looking because the economy not only in your town but region has hit horrible levels. 

Imagine these following scenarios:

1) William Jenowski worked at a tool & die shop for the past 22 years, and is approaching 50, earning a decent income. He has a wife who works at the local grocery store part time, and they have a teenage son. Things were good for them, but then William's IRA took a severe hit when the market tanked, the value of his portfolio is a fraction of what it was before. On their home which they purchased a decade ago for $140k, they still owe $75k, yet the value of their home has dropped from an all-time high of $300k to $155k. The family also owes $15k in credit card debt. The tool & die shop mainly served companies that made components for the auto industry.  As things deteriorated, the owners of the business decide to close up.  Now William is out of work but begins his search immediately.  For the next 12 months he looks for jobs in the tool & die or other similar industrial fields. Nothing, in fact where they live, is now part of America's "rust belt." After a year, and a more depressing regional economy, William gives up.  He wants to work, but cannot find a job. The last job he interviewed for wasn't even an industrial job, but as a cashier at his wife's grocery store 15 months ago.

2. Agnes Stornello and her husband Eugene both retired early at the same time from the same place they worked, their own bakery which made Italian pastries and cookies. They opted for retirement despite both being under 60, because Eugene was facing mild health problems.  The two had saved up a small sum and had invested conservatively, including two rental properties at the height of the market in '07. Two years later, the properties are "upside down", and his retirement portfolio is a fraction of what it used to be. Following Eugene's sudden stroke has left him hospitalized, and Agnes with cash flow issues (both just turned 60). Health costs force her into a short sale with their two rental properties (worth less than half they paid for). Agnes attempts to look for work, first at two nearby bakeries. There is a dry spell for jobs, but Agnes still wants to work to bring in some cash. She learned that a training program for seniors may lead to job openings, desperate she signs up for several courses.

3. Patrick Jung has had a hell of a time at his job as a sales rep for small boutique back office software company targeting financial firms. He earns a commission but no salary, and for the past three years until last year, he was one of the top sales rep for the company he worked at.  His largest client was a bank that went belly up and seized by the FDIC. On a good year, Jung could earn 60-80k per year, but for the past year he has earned narily $10k.  A young man, he blew through a lot of that money on a BMW and living it up a bit; though he does send money back to his brother Jamie in Ohio and his parents in Florida when he can. It should be noted that Jaime owes a total of $40k on his credit cards. For the past 8 months he hasn't been able to make a sale, his days attempting to find a client but with no luck as the potential client list deminishes as the financial sector weakens.

I have used the criteria listed by the BLS as to whom they either counted as not in the labor pool (discouraged or "retired") or employed.  I had several other examples, but this is already a long reply for a blog piece. The bottom line is I don't think the BLS is being realistic as to whom they count as truly employed in terms of making a living. Nor folks who can work, but cannot for lack of opportunities or some fact that still does not exclude their abilities if given the chance. How many do you know, that worked in one of those "rust belt" industries who want to work but can't because of something out of their control? They're either too old to learn new skills, or they cannot move out of the region to get a new job, or the jobs available simply pay too low to even make it to retirement.

We have a whole swath of people who should be counted as STILL part of the labor pool, but we don't. Conversely, we have folks out there who are technically employed, but aren't earning enough to be considered a "living." I always wondered, if we used the federal poverty levels and used it as a filter against earning brackets of the various employment segments to weed out those who are earning a living versus those who arent, if the rates of true unemployment would be much higher. 

According to the 2009 Federal Poverty Levels, the bottom of the list for a single household in the District of Columbia and Continuous 48 States is $10,830. If that were used as the bar, say anything above such is considered "employed", what would the real rate be? Because you do have folks working for minimum wage, and just one job because nothing..I mean nothing, is available in some cases. 

 

 

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the hidden and the missing

I just went through a calculation exercise in this post. Now on the 661k, that's the drop, seasonally adjusted, of the civilian labor force for December 2009.

The labor participation rate is calculated from civilian labor force divided by the total non-institutional civilian population.

Midtowng is using not seasonally adjusted numbers for his post (the entire thing).

Where he is getting these numbers is table A-1 and looking at the not seasonally adjusted change for the category not in the labor force, which is 1,027,000 and seasonally adjusted 843k.

The definition of not in the labor force is
a catch-all for anyone who is not counted as employed or as unemployed.

This includes anyone who does not qualify to be counted in the civilian labor force. Who is dumped into this category?

  • Military
  • Homemakers
  • Elderly (retired)
  • Students
  • Seasonal workers

The civilian labor force is defined as those who are considered employed or not employed. It excludes military personnel.

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