The BLS Jobs Report Covering May 2012: More Nothing
[Welcome, Naked Capitalism readers! --lambert]
This jobs report reflects a weak even stagnant economy. The two big numbers this month are a weak jobs number 69,000 and an unemployment rate which rose a tenth of a percent to 8.2%. Additionally, the March job numbers were revised down 11,000 from 154,000 to 143,000. April was revised down 38,000 from 115,000 to 77,000. Total downward revisions were 49,000. The April number is significant because it fell below the 105,000 needed for that month to keep up with population growth.
Diving into the numbers, the potential labor force, the Civilian Non-Institutional Population over 16 (NIP) increased 182,000 from 242.784 million to 242.966 million. Multiplying this increase by the employment-population ratio which increased two-tenths of a percent (a good sign) yields 107,000. That means that 38,000 fewer jobs were created than were needed to keep up with population growth. This number is the result of a combination of a weak economy and seasonal adjustments.
The participation rate, the ratio of the actual labor force to the potential labor force of the NIP, increased 0.2% to 63.8% seasonally adjusted, and 0.4% to 63.8% unadjusted. This is an improvement.
The actual labor force increased strongly in May, up 642,000 seasonally adjusted from 154.365 million to 155.007 million, and up 1.093 million from 153.905 million to 154.998 million seasonally unadjusted. We expect an inrush of job seekers this time of year looking for summer work, but the size of the inrush this year is unexpectedly high. The increase last year seasonally adjusted was 280,000, less than half this year's figure. As the actual labor force is the sum of the employed + those defined as unemployed by the BLS, we can see the breakdown of the labor force number by looking at these two numbers. I should add that the difference in size between the adjusted and unadjusted numbers with the unadjusted numbers exceeding the adjusted ones marks their seasonal divergence. Remember just as late and early year numbers are pumped up in the seasonal adjustments they are trimmed back in the spring and summer.
The number of employed rose 422,000 in May seasonally adjusted from 141.865 million to 142.287 million. This accounts for 65.7% of the increase we saw in the labor force. Unadjusted, employment rose 732,000 (or 67% of the increase in the labor force) from 141.995 million to 142.727 million.
The number of seasonally unemployed increased 220,000 in May (34.3% of the increase in the labor force) from 12.500 million to 12.720 million. Seasonally unadjusted unemployment rose 361,000 from 11.910 million to 12.271 million. For the increase in the labor force in May, there were approximately two employed for each employed. A 33-34% unemployment rate in this group is not good when you consider the official unemployment rate of 8.2% is only a quarter of this.
In May, the U-6 rate, the BLS measure of un- and under employment (i.e.disemployment) increased from 14.5% to 14.8% seasonally adjusted. The U-6 is made up of the 12.720 million unemployed seasonally adjusted (up 220,000), involuntary part-time workers 8.098 million seasonally adjusted (up 245,000) , and those marginally attached to the labor force seasonally unadjusted 2.423 million (up 60,000). This is a total increase of 525,000 with most of the increase coming from part-timers and the unemployed.
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). This jumped 507,000 in May from 6.328 million to 6.835 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(242.966 million) = 162.787 million (where the labor force should be)
162.787 million — 155.007 million = 7.78 million (the BLS undercount)
This is a decrease of 520,000 from the April figure of 8.300 million. So if you want to know where the surge in the labor force came from, it came from workers without jobs whom the BLS had defined out of the labor force because they had not been looking for work recently. The big question here is did they come back because A) they thought the economy was doing better or B) they were forced to because their benefits had run out (regular workers) or were otherwise (think students) economically pressured. I think the answer is B and is reflected in the increase in the number of unemployed and part-time workers we saw in May. There is also evidence for this in the Establishment survey which I will get to below.
With my calculation of the BLS undercount, we can now calculate real numbers corresponding to the BLS' U-3 unemployment and U-6 disemployment rates.
Real unemployment: 12.720 million (U-3 unemployment) + 7.78 million (undercount) = 20.500 million (down 300,000 from April)
Real unemployment rate: 20.500 million / 162.787 million = 12.6% (down from 12.8% in April)
Real disemployment: Real unemployment + involuntary part time workers = 20.500 million + 8.098 million = 28.598 million (down 55,000 from 28.653 million in April)
Real disemployment rate: 28.598 million / 162.787 million = 17.6% (unchanged from 17.6% in April)
What these numbers show is shifting within the category of the disemployed in May with little overall improvement. You can argue that part time work is better than no work, but then you can also argue that part time work puts downward pressure on full time wages.
In keeping with the benefits running out scenario, the number of long term unemployed (6 months or more) increased 310,000 from 5.101 million to 5.411 million in May and seasonally adjusted their percentage of the unemployed increased from 41.3% to 42.8% or back to near the level they were in March (42.5%).
By race, white unemployment remained at 7.4%. However, adult (over 20) white female unemployment dropped slightly from 6.8% to 6.7% while unemployment among adult white males increased from 6.8 to 7.0%. White teen (16 to 19) unemployment was 22%. Unemployment among African Americans increased from 13% to 13.6%. African American adult male unemployment increased somewhat from 13.6% to 14.2% and that among adult African American females increased from 10.8% to 11.4%. Teen African American unemployment decreased from 38.2% to 36.5%. Latino unemployment jumped from 10.3% to 11%.
Turning to the Establishment data, the private sector added 82,000 and government lost 13,000 netting the 69,000 highlighted in the report. Construction was a big loser (-28,000). That's not a good sign as we move into good weather months. Nor is a loss of 9,000 jobs in leisure and hospitality. The energy sector: oil, gas, and coal was unchanged, again indicative of an economy going nowhere. Healthcare, as usual increased, in May by 32,800. Ground transit increased by 20,100. Manufacturing added 12,000.
Finally and significantly, average weekly hours for all employees decreased slightly from 34.5 hours to 34.4 hours. The manufacturing work week declined from 40.8 to 40. 5 hours and average overtime decreased from 3.3 to 3.2 hours.
Hourly wages increased 2 cents to $23.41/hour, but because of the reduced work week, average weekly wages decreased $1.66 from $806.96 to $805.30. For production and nonsupervisory (what used to be called blue collar) employees, average weekly hours remained unchanged at 33.7 hours. Hourly wages decreased one penny to $19.70 and weekly wages decreased 34 cents to $663.89.
This is a picture of an economy dead in the water. I don't believe for a second more people are looking for jobs because there are more jobs out there. The data indicate there are not more jobs. I think more people are looking for work out of necessity, and they are not finding it, getting part time jobs, or landing relatively low quality jobs, and all this is reflected in a slow deterioration of hours and wages.