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BLS Jobs Report Covering September 2012: The Curious Case of the Part Time Worker:

In September's report, we are presented with two contradictory numbers. An uninspiring 114,000 jobs were created versus a stellar three-tenths of a percent decline in unemployment to 7.8%. Basically, what we had was an anomalous spike in employment in September of 873,000. This was made up of 456,000 unemployed. A tenth percent change in unemployment represents about 150,000 people. Three-tenths would come to about 450,000. So that checks. The September employment spike also includes some 418,000 people entering the labor force. The main driver of the spike appears to be a 582,000 increase in involuntary part time workers.

Turning to the report, revisions in the number of jobs for the last two months were larger than normal. Jobs in July increased 40,000 (28%) from 141,000 to 181,000. This was unusual in that they were originally revised down 22,000 last month from 163,000. August's disappointing number of 96,000 (48% increase) was adjusted up to a more respectably mediocre 142,000. In all, revisions added 86,000 jobs. This is on top of the 114,000 reported for September.

In September the potential labor force of the non-institutional population over 16 increased 206,000 from 243.566 million to 243.772 million. The employment-population ratio increased an impressive 0.4% to 58.7. So multiplying these two gives us 121,000 or the number of jobs needed in September to keep up with population growth.

From the Household survey, seasonally adjusted, the labor force increased 418,000 from 154.645 million to 155.063 million. Seasonally unadjusted, it decreased 180,000 from 155.255 to 155.075 million. This decrease reflects the tailing off of the end-of-summer, going-back-to-school trend begun in August. The seasonal adjustment is a smoothing of this trough. Note the similarity in the sizes of the labor force between the two. This marks their Fall convergence.

Since the labor force is essentially the same, we would expect that the adjusted and unadjusted participation rates (the ratio of the labor force to the non-institutional population) also to be the same, and they are (63.6).

Seasonally adjusted, employment rose 873,000 from 142.101 million to 142.974 million in September. Unadjusted, it increased 775,000 from 142.558 million to 143.333 million. Both these numbers are anomalous. They aren't just at odds with the (114,000) jobs number, but we have simply not seen an increase of this size August to September in the last 10 years. Pre-recession, there were often declines. Last year there was an increase of 353,000 adjusted and 167,000 unadjusted.

The labor force is comprised of the employed plus those defined by the BLS as unemployed, i.e. without a job and looked for one in the 4 weeks preceding the survey. So while the labor force, adjusted and unadjusted, was nearly the same. We see some difference in the distribution between employed and unemployed. The unadjusted numbers actually show more employed and consequently will show fewer unemployed. That is the current employment-unemployment picture is somewhat better than the seasonally (official) adjusted numbers suggest.

Seasonally unadjusted, unemployment declined 954,000 from 12.696 million to 11.742 million. Seasonally adjusted, it declined 456,000 from 12.544 million to 12.088 million.

The unemployment rate fell a large 0.3% adjusted to 7.8%, and and an even larger 0.6% unadjusted to 7.6%.

The adjusted U-6 measure of un- and under employment remained unchanged at 14.7% while seasonally unadjusted it decreased by 0.4% to 14.2%.

The adjusted U-6 was made up of 12.088 million unemployed, 8.613 million involuntary part time workers (up 582,000), and 2.517 million of the marginally attached (down 44,000). This totals 23.218 million, up 82,000 from last month.

The BLS' measure of its undercount, those who do not have a job, want one, but have not looked for one in the last month, declined 604,000 from 7.031 million to 6.427 million.

Because this measure does not reflect well changes in the economy, I have developed an alternative to it. In my alternate calculation, 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(243.772 million) = 163.327 million (where the labor force should be)
163.327 million — 155.063 million = 8.264 million (the real undercount)

This is a decline of 280,000 from the August figure of 8.544 million. This is the capture of the undercount that the BLS misses.

With this number we can now go back and calculate where the U-3 and U-6 really are, that is the real unemployment and real disemployment rates.

Real unemployment: 12.088 million (U-3 unemployment) + 8.264 million (undercount) = 20.352 million (down 736,000 from August)

Real unemployment rate: 20.352 million / 163.327 million = 12.5% (down from 12.9% in August)

Real disemployment: Real unemployment + involuntary part time workers = 20.352 million + 8.613 million = 28.965 million (down 154,000 from 29.119 million in August)

Real disemployment rate: 28.965 / 163.327 million = 17.7% (down from 17.8% in August)

By duration, the number of long term unemployed (6 months or more) decreased by 189,000 to 4.844 million (41% of all unemployed, up from 40% last month). Again this figure is vastly understated because it does not take into account millions long term out of a job in the undercount.

By race, employment among whites increased 652,000 to 114.992 million and among African Americans 84,000 to 15.881 million. The unemployment rate among whites was 7% and among African Americans 13.4%.

Turning now to the Establishment survey of jobs, seasonally adjusted total nonfarm jobs increased 114,000 to 133.500 million. The largest gainer was in healthcare at 44,000. Unadjusted, they increased 574,000 to 133.797 million.

Private employment increased seasonally adjusted, 104,000 to 111.499 million and unadjusted decreased 377,000.

Seasonally adjusted, government gained 10,000 jobs to 22.001 million; unadjusted, it gained 951,000 to 21.808 million.

Basically, the large changes in the unadjusted private and government jobs numbers reflect shifts from teachers, staff, and students going back to school. Unadjusted, education at the state level increased 311,500 and at the local level 850,000.

The average work week for all employees increase 0.1 hour to 34.4 hours. Average hourly earnings for all workers increased 7 cents to $23.58. Average weekly earnings for all workers appear to be incorrectly stated. They should show an increase of $2.41 to $811.15.

The average work week for blue collar employees was unchanged at 33.7 hours. Their average weekly earnings increased 5 cents to $19.81 and weekly $1.69 to $667.60.

The big question in this month's report is where did those 582,000 part time jobs come from? They seem to have had no impact on weekly hours. Of course, part time is defined as 1 to 34 hours per week, and if you notice, the average for all workers is only slightly better than that. More surprising is that these did not drag on earnings. Earnings increased, even beat inflation, and all this despite what is generally considered to be a slowing economy. Perhaps there will be more clarity next month.

Household data (Employment/unemployment)
Statistical significance: +/ - 400,000
The A tables: http://www.bls.gov/cps/cpsatabs.htm
A 1 for most information and categories
A 2 Unemployment by race
A 8 Part time workers
A 12 Duration of unemployment
A 15 U 6 un- and under employment
A 16 Persons not in labor force

Establishment date (jobs)
Statistical significance: +/ - 100,000
The B tables: http://www.bls.gov/ces/cesbtabs.htm
B 1 Total jobs and jobs by industry/type
B 2 Weekly hours, all employees
B 3 Hourly and weekly earnings, all employees
B 6 Weekly hours, blue collar
B 7 Hourly and weekly earnings, blue collar

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Comments

Submitted by lambert on

Here it is:

The big question in this month's report is where did those 582,000 part time jobs come from? They seem to have had no impact on weekly hours. Of course, part time is defined as 1 to 34 hours per week, and if you notice, the average for all workers is only slightly better than that. More surprising is that these did not drag on earnings. Earnings increased, even beat inflation, and all this despite what is generally considered to be a slowing economy. Perhaps there will be more clarity next month.

That's what caused the rate drop, right? Can you think of any reasons for this? Students in part time jobs at school? Are there past precedents?

Considering the use that will be made of these figures, it would be irresponsible not to speculate.

Cujo359's picture
Submitted by Cujo359 on

One thing I noticed about this month's report is that employers laid off fewer people. It was 460k less than usual, or thereabouts. It looks like a lot of those workers went part time, mostly involuntarily.

Anyway, this all looks a bit anomolous to me, though the basic lackluster nature of the news definitely does fit the trend.

letsgetitdone's picture
Submitted by letsgetitdone on

Always the best analysis of the Jobs report anywhere!

I tried to make that comment at NC, but I'm still blocked from commenting there for reasons unknown!

Submitted by Hugh on

Thanks, lets, appreciated.

Cujo, AFAIK a full timer converted to a part timer would still be counted the same. I just can't readily put my finger on where all the part timers came from and why they aren't reflected somewhere in the jobs figures.

Submitted by Hugh on

A note: I overstated my calculation of the undercount by 33,000. I corrected this in the text above and subsequently in the calculations of real unemployment and disemployment. The most noticeable change is that the real unemployment went from 12.5% > 12.4%. Sorry for any inconvenience.

Submitted by Hugh on

Actually it was late and there was no error. So my original post is/was correct.