BLS Jobs Report, July 2011: Surface Blah, Deeper Worsening
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The main number that will be cited by the media in this month's jobs report, from the Establishment data, is 117,000 jobs created.
However, the noninstitutional population (NIP) was 239.671 million in July, an increase of 182,000 from June.
And the ratio of those employed to this population declined a tenth of a percent to 58.1%.
This means (.581 x 182,000) that about 106,000 jobs were needed in July just to account for natural growth in the population. So on this measure the economy essentially went nowhere in July.
The media will also mention the U-3 unemployment rate. The U-3 edged back down to 9.1% in July from June's 9.2%. Seasonally adjusted, this represented a decline in the unemployed of 156,000 to 13.931 million. Without the seasonal adjustment, the number of unemployed increased slightly (19,000).
The broader measure of un- and under employment, the U-6, declined a tenth of percent to 16.1%. This translates into 24.67 million.
The big number in the report that the media won't emphasize is the decline in the labor force participation rate from 64.1% to 63.9%. The NIP you will recall measures the potential labor force. The actual labor force is comprised of both the current employed and unemployed. The labor force participation rate is the ratio of these two: actual labor force / potential labor force. This decline is a result of the decline of the actual labor force by 197,000 to 153.228 million and the previously noted 182,000 increase in the NIP. In other words, the numerator got smaller and the denominator got bigger. Because both the numerator and denominator are so large (hundreds of millions), a change of a tenth of a percent in this ratio is a big deal.
The BLS measure of its undercount (Not in labor force, want a job now) was little changed at 6.575 million, an increase of 38,000.
There is a 2.8 million overlap (the marginally attached) between the U-6 and Not in labor force, want a job now categories. So to arrive at a number for the disemployed (all those who want to be fully employed but aren't either because they can't find a job at all or can't find a fulltime job), we add the U-6 and the Not in labor force, want a job now and subtract the overlap. This comes to 28.445 million for July and corresponds to a disemployment rate of 18.1%.
The problem with the BLS undercount is that it does not reflect changes going on in the real economy. Therefore, I also do my own calculation of the undercount, that is those whom the BLS should count in the labor force but does not. To do so, I first calculate what the labor force should be if we were in a reasonably robust expansion: .67(NIP) and then subtract the current labor force from it. The difference is the undercount. For July, this was 7.352 million.
Based on my numbers there are 29.222 million disemployed in the country and the disemployment rate is 18.2%. This is unchanged from June.
The average work week was unchanged at 34.3 hours. Hourly earnings increased 0.4%, to $23.13, a good number if it could be sustained. The long term unemployed, those unemployed for 27 weeks and more, continue to dominate the unemployment picture, accounting for 44.4% of the unemployed, unchanged from last month.
U-3 unemployment for whites remained unchanged at 8.1%. Unemployment among African-Americans declined from 16.2% to 15.9%. However, the African-American labor force declined by 151,000 in July with the labor force participation rate diving from 61% to 60.4%. The number of employed African-Americans declined by 69,000. In other words, the unemployment rate declined among African-Americans because the BLS stopped counting many of them as being in the labor force.
Unemployment among 16-19 year olds increased from 24.5% to 25%.
In the Establishment data, the private sector created 154,000 jobs and the public sector (government) lost 37,000, giving the net 117,000 jobs mentioned above. If Minnesota state government had not shut down, job growth would have been closer to 140,000, a relatively good number but at odds with what is happening in the Household data.
On the surface, nothing much changed from last month. However, this is only true because the BLS continues to stop counting many unemployed workers. We are now in the extraordinary situation where the labor force is 400,000 smaller than it was a year ago, despite an expected increase in its size of 1.193 million (my calculation) during this same time period. It is rather like seeing a swimmer treading water out in the ocean. The BLS is telling us that their head is still above water so very little has changed. What it is not telling us is that beneath the surface the swimmer is being slowly eaten by sharks.
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Comments
An interesting item for you, Hugh --
slightly OT, but not entirely. Yesterday, there was a discussion on msnbc (forgot which show) about economics and someone mentioned that all the government cutbacks are decreasing the amount of economic data available, apparently quite a bit, making it more difficult to determine the effects of various programs, legislation, etc. As usual, that seemed to be a feature.
Anyway, thanks for this. I completely tune out the media's yammering about unemployment statistics now and just wait for your analysis. Not that I don't trust them ... well, actually, yes it is because I don't trust them. But that's a whole other piece.