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.]