BLS Jobs Report Covering April 2012: Nothing or Worse than Nothing, That is the Question
In the April BLS jobs report, the big numbers are: 115,000 jobs showing poor job growth and the unemployment rate dropping a tenth of a percent to 8.1% mainly from those exited from the labor force by the BLS. Jobs for February were revised up 19,000 from 240,000 to 259,000 and for March 34,000 from 120,000 to 154,000, a total upward revision of 53,000.
Jobs are really a story of two tales. Each year the seasonally adjusted and unadjusted numbers diverge wildly from each other from October to March. Basically, the unadjusted numbers surge reflecting a lot of hiring in the fall due to the approaching holidays. This is followed by an astronomical cliff dive in January, around 2.5 million jobs lost, and then a fast rebuild to April. April-September the seasonally adjusted and unadjusted job numbers, although not the same, track more closely. The BLS' seasonal adjustments smooth out the rapid rise and fall in the fall-winter unadjusted numbers. Note: we are talking jobs and the Establishment, or business, survey, not people, i.e. employment and unemployment, which are covered in the Household survey.
This smoothing is an effort to find the underlying trend and April when the seasonally adjusted and unadjusted number come back more into synch is a particularly good month to look for it. So this month's 115,000 jobs is important. It is just not a very good number.
The potential labor force, the non-institutional population over 16 (NIP), increased 180,000 from 242.604 million to 242.784 million. Multiplying the monthly increase in this potential labor force by the employment-population ratio .584(180,000) or 105,000 gives us a rough estimate of how many jobs were needed in April to keep up with population growth. By this measure, there was little real job growth in April.
Diving into the numbers, the labor force decreased 342,000 (seasonally adjusted), 411,000 (unadjusted). Again you can see here how the adjusted and unadjusted numbers converge. For the adjusted numbers, which I will be primarily using because of this convergence, the labor force declined from 154.707 million to 154.365 million.
This brings up what is for me the most important number in this report. The participation rate. The participation rate is the ratio of the potential labor force to the actual labor force (employed plus unemployed as defined by the BLS). It declined two-tenths of a percent to 63.6%. The last time the participation rate was this low was in December 1981, during the worst of the 1981-1982 recession, a particularly nasty recession where unemployment hit 10.8%.
In April, the number of employed declined 169,000 from 142.034 million to 141.865 million (seasonally adjusted). And the number of unemployed fell 173,000 from 12.673 million to to 12.500 million. In other words, the fall in both numbers reflect those the BLS defined out of the labor force in April and represent the 342,000 decline in the labor force mentioned above. Overall, the unemployment rate dropped a tenth of a percent to 8.1%.
The unadjusted numbers, although they look different, tell a similar story. Employment increased 583,000 from 141.412 million to 141.995 million. Unemployment fell 994,000 from 12.904 million to 11.910 million. Now what you have to keep in mind with these numbers is that, while dramatic, the unadjusted employment numbers are only just coming back into line with the adjusted numbers, and, as I just mentioned, 411,000 of the drop in the number of unemployed represent those the BLS defined out of the labor force.
In April, the U-6, the BLS measure of un- and under employment, what I call disemployment, was unchanged at 14.5%. The components of this are the unemployed 12.500 million (a decrease of 169,000 from March, seasonally adjusted), involuntary part-time workers 7.853 million (an increase of 181,000, also seasonally adjusted), and the marginally attached 2.363 million (an increase of 11,000, seasonally unadjusted). Taken together, the U-6 represents 22.716 million Americans.
The BLS measure of those it defines out of the labor force (its undercount) is the category Not in Labor Force Want a Job Now (unadjusted). In April, this increased 287,000 from 6.041 million to 6.328 million. If we add this to what the U-6 rate represents (minus the overlap of the marginally attached which is part of both figures), we can come up with a more realistic BLS based number for disemployment: 26.681 million.
However, as I state each month, I have problems with the BLS undercount because it does not track with economic events. So I have developed a different way to measure it. I compare the current labor force to where we would expect it to be in a solid economic expansion: labor participation rate of 67%. The difference between these two is my measure of the undercount.I calculate an alternate number for the BLS undercount.
.67(242.784 million) = 162.665 million
162.665 million – 154.365 million = 8.300 million
This is an increase of 462,000 from the March figure of 7.838 million. Using these numbers, we can calculate more accurate numbers for both unemployment and disemployment.
Real unemployment: 12.500 million (U-3 unemployment) + 8.300 million (undercount) = 20.800 million (up 289,000 from 20.511 million in March)
Real unemployment rate: 20.800 million / 162.665 million = 12.8% (up from 12.6% in March)
Real disemployment: Real unemployment + involuntary part time workers = 20.800 million + 7.853 million = 28.653 million (up 470,000 from 28.183 million in March)
Real disemployment rate: 28.653 million / 162.665 million = 17.6% (up from 17.3% in March)
While the BLS report presents an employment picture little changed from March or even slightly improved due to the reduction in the unemployment rate, my calculations show a clearly worsening unemployment/disemployment one.
By race, white unemployment edged up a tenth percent to 7.4% African-American unemployment, which tends to be fairly volatile, dropped a full percentage point to 13.0%.
Turning to the Establishment survey, the private sector added 130,000 jobs and government lost 15,000 producing the net 115,000 figure. Professional and business services increased by 62,000, of which 21,000 were temp jobs; retail added 29,000; healthcare 19,000; food and drinking places 20,000, and manufacturing 16,000. Short form: not all that many jobs were created and most of those that were were not quality ones.
The average workweek remained unchanged at 34.5 hours. Average hourly wages increased by a penny to $23.38. Average weekly wages increased 34 cents to $806.61. In other words, wages continue to lose ground to inflation.
On the surface, April was a static month, but this was because so many Americans were counted out of the labor force by the BLS. Add these back in and you have a decidedly gloomier picture. Real unemployment and disemployment are tracking back up. Real wages, that is wages with inflation taken into account, are falling. What jobs that are created are of poor quality. Put simply, there is no recovery here, none. I hate to sound like a broken record on this, but that is just the way it is.