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BLS Jobs Report Covering June 2012: The Best Is Behind Us.

The Dog Days of summer seem to have set in early this year with record breaking temperatures and jobs reports reflecting an economy stalled out at high unemployment levels. The official unemployment rate was unchanged at 8.2%. Job growth remained sluggish with 80,000 jobs seasonally adjusted added in June. Overall, job creation averaged 75,000 in the second quarter as compared with 226,000 in the first quarter of the year.

Both the seasonally adjusted civilian labor force participation rate (the ratio of the actual labor force to the potential labor force) and the employment-population rate (the ratio of employed to the potential labor force) were unchanged at 63.8% and 56.6%, respectively.

The revisions for job growth in April and May were a wash. The April figure was revised down 9,000 from 77,000 to 68,000 and the May number was increased 8,000 from 69,000 to 77,000.

Looking first at population growth, the potential labor force, the Civilian Non-Institutional Population over 16 (NIP) increased 189,000 from 242.966 million to 243.155 million. Multiplying this by the employment-population rate gives 107,000, then number of jobs needed to keep up with population growth. So June fell behind what was needed by 27,000.

From the Household data, in June, the actual labor force increased 156,000 from 155.007 million to 155.163 million seasonally adjusted, and 1.387 million from 154.998 million to 156.385 million seasonally unadjusted. The large increase in the unadjusted number is due to the summer jobs effect.

Employment increased by 128,000 seasonally adjusted from 142.287 million to 142.415 million. Seasonally unadjusted, it grew 475,000 from 142.727 million to 143.202 million.

Unemployment seasonally adjusted grew 29,000 from 12.720 million to 12.749 million. Seasonally, unadjusted it increased 913,000.

In June, the U-6 broader measure of un- and under employment increased from 14.8% to 14.9% seasonally adjusted, and from 14.3% to 15.1% unadjusted (more summer jobs effect).

The seasonally adjusted U-6 rate (14.9%) represents 23.442 million people and reflects the 12.749 million of the U-3 unemployed seasonally adjusted, 8.210 million involuntary part-time workers (up 112,000 from May), and 2.483 million marginally attached to the labor force (up 60,000; these have looked for work in the last year but not in the last month).

The BLS measure of its undercount, those it defines as not in the labor force who want work but have not looked for work in the last month (seasonally unadjusted) increased 322,000 in June from 6.835 million to 7.157 million.

In my alternate calculation of the BLS undercount, 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.

.67(243.155 million) = 162.914 million (where the labor force should be)

162.914 million — 155.163 million = 7.751 million (the BLS undercount)

This is a decrease of 29,000 from the May figure of 7.78 million.

With this number for the BLS undercount, we can now see what the real U-3 and U-6 are, that is what the real unemployment and real disemployment rates are.

Real unemployment: 12.749 million (U-3 unemployment) + 7.751 million (undercount) = 20.500 million (unchanged from May)

Real unemployment rate: 20.500 million / 162.914 million = 12.6% (unchanged from May)

Real disemployment: Real unemployment + involuntary part time workers = 20.500 million + 8.210 million = 28.710 million (up 112,000 from 28.598 million in May)

Real disemployment rate: 28.710 million / 162.914 million = 17.6% (unchanged from April and May)

The June report, being the halfway point in the year, is a good time to make some observations about seasonally unadjusted numbers at the halfway point in the year. In 9 of the last 10 years, the size of the labor force has peaked in July (in 2010, it peaked in August). Taking 2011 as an example, the labor force increased by 2.276 million to its peak in July. The labor force then decreased 1.439 million between July and December. So far this year, the labor force has increased by 2.900 million. Now if you look at the seasonally adjusted numbers for the labor force, the first thing you are struck by is that there is no peak. Indeed in 2011, the high point such as it was for the labor force was in October. In 2010, it was in February.

The labor force is made up of both the employed and those the BLS defines as unemployed (those without work who have looked for a job in the last month). The seasonally unadjusted picture for employment has been variable, in part due to the recession and its aftermath. In general, most employment increases occur January to July. There may be an October or November spike which can even be higher than the July number with the December number being within ± 400,000 of the July figure. So for example, in 2011, employment increased 2.785 million January-July but only 297,000 July-December.

Seasonally unadjusted unemployment tends to be lowest in April or May with another decline in September. This basically reflects conditions before the influx of summer job applicants and their subsequent departure.

Add into this longer term trends from the recession/depression we have been in, like the decline in the participation rate, that is more people defined out of the labor force by the BLS. These are the things that we need to keep in mind when we get these monthly reports with their seasonally adjusted numbers. Adjustment smooths the variations supposedly to expose the underlying trend but in doing so it masks the seasonal patterns of what is actually going on in the economy.

In other Household data, long term unemployed (6 months or longer) decreased 41,000 from 5.411 million to 5.370 million. The long term unemployed account for 42.1% of the unemployed (a 0.4% decline).

By race, white unemployment was unchanged at 7.4%. White teen unemployment declined from 22.0% to 20.9%. African American unemployment rose 0.8% to 14.4%. Unemployment for adult male African Americans was unchanged at 14.2%, among adult female African Americans it jumped 1.3% to 12.7%, and among African American teens it increased 2.8% from 36.5% to 39.3%.

With regard to the Establishment survey of businesses, the private sector added 84,000 jobs, about the same weak performance as last month. The government lost 4,000, netting the 80,000 reported. 47,000 of these were in professional and business services with 25,000 being temp jobs, so another sign of weakness.

Average weekly hours for all private sector employees increased 0.1 hour in June to 34.5 hours, the same level as April. Hourly wages went up 6 cents to $23.50, and with the increase in the work week, weekly wages increased $4.41, actually probably doing slightly better than inflation..

For production and nonsupervisory employees (blue collar workers), the average work week also increased 0.1 hour. Hourly wages increased 5 cents to $19.74 and weekly wages increased $3.66 to $667.21, again not bad.

Finally, a word about seasonally unadjusted jobs numbers. Most jobs are created in the first half of the year January-June with a peak in June and a second usually higher peak in November. In 2011, for example, 4.013 million jobs were created January-June while 625,000 jobs were created June-December. In 2012, 3.819 million jobs were created January-June, 194,000 jobs less than last year. From the viewpoint of the seasonal adjusted numbers, most of the jobs that were going to be created this year, already have been and of those that likely will be created during the rest of the year, not quite half will be created for the Christmas shopping season.

So in conclusion, on the level of the official adjusted numbers and in terms of my calculations for real unemployment and real disemployment which are based on them, nothing happened in June, nothing. On the level of the unadjusted numbers which in some ways reflect better the actual conditions in the country at a particular moment, we are at or nearly at the best part of the year with regard to employment (July), unemployment (April/May), and jobs (January-June). If things have not gotten better where you are by now, the odds are they are not going to get better between now and the end of the year, regardless of what the adjusted figures say. And I should add this is without an exogenous shock, like a collapse in Europe, China, or here in the US.

[You can find PDF and HTML versions of the jobs report at the Bureau of Labor Statistics site, (I prefer the PDF) as well as historical tables there.]

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Valley Girl's picture
Submitted by Valley Girl on

Hugh, in lieu of my trying to go to pdf or html, and look at the data (without your experienced eye) I am interested in knowing more about the averages for hourly wages. Because I haven't a clue.

Average weekly hours for all private sector employees increased 0.1 hour in June to 34.5 hours, the same level as April. Hourly wages went up 6 cents to $23.50, and with the increase in the work week, weekly wages increased $4.41, actually probably doing slightly better than inflation..

For production and nonsupervisory employees (blue collar workers), the average work week also increased 0.1 hour. Hourly wages increased 5 cents to $19.74 and weekly wages increased $3.66 to $667.21, again not bad.

For example, my questions include:

Does "all private sector employees" mean only those who are paid on an hourly wage basis? Or does the calculation of (average) hourly wages include the salaries of those who are not paid on an hourly basis? And, if so, how is that hourly wage calculated? Is there some assumption of a certain number of hours per week/ month/ year?

I am trying to understand the implications of "average" in this context- average hourly wages.

This comment and questions would apply equally to any of the jobs reports.

What prompted me to think about this how statistics might or might not give a total picture. heh! I know you know that. The deal, to my mind, is the difference between "average" and "median". I rather suspect that the jobs reports do not give data to make this distinction, but I could be wrong.

At the most extreme (depending on how hourly rates are calculated, and who is included) it might be that there is an increase in pay for those with "salaried" jobs (reduced to an hourly wage), such as high paid CEOs. That would bump up the "average" overall, but people at the low end, who are actually paid by the hour, might well be getting less per hour.

I know this is getting into the weeds, but any information appreciated.

I haven't read How to Lie with Statistics, but I would guess that it would prove to be familiar territory to me, just because.

Oh, btw, including that link above is NOT in any way meant as a diss on your fine reporting. Actually, "How to Lie with Statistics" is a major part of your critiques.

added on edit- I've never thought about this before, but to drill down my question, are CEOs included as "labor" in the statistics?

Submitted by Hugh on

I don't know that the BLS defines this anywhere. Private sector I take to mean all the categories and subcategories under the heading of Total private in its B-1 table. Production and nonsupervisory I just take to mean all non-managment workers.

It is an interesting question that I don't have an answer to how the hourly rates are calculated to include salaried personnel. Since these numbers come from the business survey, I rather thought that the BLS took the total payroll and divided it by the total hours worked for the private sector, so that should include CEO base salary. It would not, I think, capture capital gains, bonuses, and stock options or anything like that.

For non-management positions, I would assume the BLS asks employers to break this segment out for them.

And yes, it is an average, not a median. There probably is a higher income effect, but nothing .1%ish or even 1%, more likely top 20%, because it seems a fairly common comment I hear is people saying, gee, I wish I could make that much.

CMike's picture
Submitted by CMike on

Earnings:

Data measure usual hourly and weekly earnings of wage and salary workers. All self-employed persons are excluded, regardless of whether their businesses are incorporated. Data represent earnings before taxes and other deductions and include any overtime pay, commissions, or tips usually received. The earnings data are collected from one-fourth of the CPS [Current Population Survey] total sample of approximately 60,000 households. Data are published quarterly.

Here's Median weekly income for hourly and salary full-time employees for everyone, by gender, by race or ethnicity, by education, by age. (Check the boxes you want Valley Girl and then click Retrieve data at the bottom of the list. When you get to the page with the data you can then check the box to see the data graphed and/or you can expand or narrow the default time range to what you want by specifying a different preference at the top of that page and then clicking Go.)

See also, Hours of work

Data measure average hours at work per week and distributions of employed persons by hours at work.

Submitted by Hugh on

Thanks, that's good information, especially about the medians, and not what I use usually in my analysis of the monthly jobs reports.

It is important to remember though that the CPS (Current Population Survey) is the Household survey. The data for earnings and hours in the monthly jobs reports comes from CES (Current Employment Statistics) which is the Establishment survey. Most of your questions about definitions are likely answered here: http://www.bls.gov/web/empsit/cestn1.htm

okanogen's picture
Submitted by okanogen on

There are several actions that the PTB in Washington are delaying till after the election because they don't want the other side to get a "win". These include the stalled energy bill, transportation bill, and funding for other infrastructure projects, like levees, dam rehabilitation, etc.. All of this fiscally stimulative investment is on hold, and the jobs are on hold with it.

If anything, that article on wind energy understates things. When Congress and Obama failed to come up with an agreement last fall, the entire industry saw the hand-writing on the wall and all new wind development projects just completely stopped. These are huge investments, a typical wind project is $200-400M and employs thousands of construction, engineering, and support jobs, injecting about 25% of that into local economies (food, lodging, services, etc..). It's basically a $20B industry, and it is all clean energy. It has bipartisan support and has zero downside. If/when the economy goes back into the tank, they may be frightened enough to do something, but while things are basically crawling along at status quo, they are afraid to actually do something

reslez's picture
Submitted by reslez on

According to a comment by Letsgetitdone, the Daily Treasury Statement of June 21st showed a $656.612 billion difference between the current debt and the debt ceiling with (as of June 21st) a little more than 4 months until the election. The government has been holding down deficit spending over the past 12 months to the tune of a $500B fiscal drag on the economy.

This means Obama has room to increase deficit spending to $150B per month this summer and not hit the debt ceiling until after the election. Letsgetitdone suggested Obama has been holding back deficit spending with the intention of increasing it in July, August and September. This will improve economic indicators and drive UE numbers below 8% this fall, also providing some nice talking points about the recovering economy.

That should guarantee Obama's reelection and set the table for the cat food commission in the lame duck session.

We will know whether this plays out by watching federal outlays over the next couple months.

Submitted by lambert on

... appropriately cynical -- and by cynical, I mean realistic -- comment from lets. I believe you have the right of it.

Would one either or both of you feel comfortable monitoring this and posting on it every so often, like weekly? (Even a null result is a result....)

Remember when webcans were new, and people would do things like train them on coffee pots? Nothing... Nothing... Nothing... Then the red light goes on and Coffee!!!

(The nice thing about this is that it also plays beautifully into the view that the debt is a constraint. In reality the ceiling is in the mind of the body politic....)

Submitted by lambert on

.... I am coming down the home stretch on, I swear, I might be able to make dynamic chart creation reasonably easy. I'll look into it....