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 [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.