The July 2012 BLS unemployment report shows total nonfarm payroll jobs gained were 163,000. Don't get too excited, while above expectations this is still a mediocre report. June's payrolls were revised down, from 80,000 to 64,000. May's payrolls were revised up, from 77,000 to 87,000. The below graph shows the monthly change in nonfarm payrolls employment.
July shows 172,000 private sector jobs gained while government payrolls shrank another -9,000. In addition, at least 14,100 of those private jobs were temporary.
The start of the great recession was declared by the NBER to be December 2007. The United States is now down -4.737 million jobs from December 2007, 4 years and 7 months ago.
The below graph is a running tally of how many official jobs are permanently lost, from the establishment survey, since the official start of this past recession. Increased population growth, implies the United States needs to create at least 10.4 million jobs or self-employment, using the population survey statistics. This estimate assume a 62.7% civilian non-institutional population to employment ratio, as it was in December 2007. This implies an additional 5.63 million jobs were needed over a 55 month time period beyond the ones already lost. This is just taking into account increased population against the payroll jobs gap, the actual number of jobs needed is much higher, in part because payrolls or CES, and population, i.e. CPS, are two separate employment surveys from the BLS.
Another problem with the employment market is the gross number of part-time jobs generally. There is a huge number of people who need full-time jobs with benefits who can't get decent jobs. Those forced in part time jobs increased by 36 thousand to 8.25 million. That's a hell of a lot of people stuck in part-time jobs who need full-time work.
The official unemployment rate ticked up a 10th of a percentage point to 8.3% with 12,794,000 officially unemployed.
U-6 is a broader measure of unemployment and 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. Believe this or not, U-6 still leaves out some people wanting a job who are not considered part of the labor force. U-6 ticked up 0.1 percentage points to 15.0%.
The labor participation rate, dropped a 10th of a percentage point to 63.7%. If we go back to December 2007, the labor participation rate was 66%. The highest civilian labor participation rate was in January 2000, at 67.3%. What a low labor participation rate means is there are over 5.6 million people not be accounted for in the official unemployment rate, in other words counted as employed or unemployed, many who probably need a job and can't find one, in comparison to 2007. That's in addition to the official 12.794 million unemployed.
The employment to population ratio dropped -0.2 percentage points to 58.4%. In January 2008 the employment to population ratio was 62.9%. You have to go back to the severe recession of 1983, October to find such low ratios, but in the 1983 case, the low ratios were short lived, unlike the past few years.
The low employment to population ratios clearly show people dropping out of the labor count. We can see this by the cliff dive employment to population ratio during 2008-2010. There is no way magically, suddenly, a huge increase of population volunteered to drop out of the labor force, turned 65 at once, or magically all went to school. These are mostly people plain out of a job. The cliff dive in employment to population ratio represents about 11 million people, which is around the same amount of jobs really needed to keep up with population growth calculated above.
The official unemployment rate is a ratio, a percentage during a limited time period to calculate the number of people actively looking for a job and counted. Many people are not counted in the official unemployment statistics. Truth is America has more potential workers and less jobs in this so called recovery than any other period past the Great Depression.
How did the U.S. add 163,000 jobs yet the unemployment rate actually increased? The BLS employment report is actually two separate surveys. The jobs number comes from the CES, or establishment survey where the unemployment ratios comes from a different survey, the CPS, otherwise known as the Household survey. The unemployment rate is a ratio of those officially unemployed to those officially counted as part of the labor force.
Less people were considered part of the labor force in July. Those not in the labor force increased by 348,000 while the overall non-institutional population rose by 199,000. The civilian labor force decreased by -150,000, whereas those officially unemployed increased by 45,000. Yet those officially employed also decreased by -195,000. In other words, the payrolls survey says something different from the population survey which shows jobs actually declined. The population survey also shows a huge number of people dropped out of the labor force. In other words, by the CPS, we actually lost jobs for the month and more people were added to the unemployment rolls.
Going off of the monthly changes of the CPS survey is statistically risky. The monthly changes are highly noisy and the CES, or payrolls survey is deemed more accurate and stable. We'll have more analysis on why that is, plus take a look at half a year of data instead, in upcoming articles.
For more information on how the BLS tabulates non-farm payroll jobs, see this article, Under the Hood of the Employment report.
Here is last month's overview, only some graphs revised.