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The BLS Jobs Report Covering October 2013: Effects of the Shutdown Mostly Hidden But Still Large

The October 2013 shutdown of the federal government affected seasonally unadjusted data in the Household survey only. It did not affect seasonally adjusted data in the Household survey or any data, adjusted or unadjusted, in the Establishment survey. Since official numbers, like the unemployment rate (7.3%) and jobs created (204,000), are seasonally adjusted, no effect from the government shutdown will be seen in them.

The shutdown appears to have affected 400,000+ federal employees. About half of these reported themselves as unemployed on temporary layoff and half as employed but not at work. The BLS considers that they all should have been designated as unemployed but did not correct the data. Again this only affects the seasonally unadjusted numbers.

The unadjusted Household survey also shows wider negative effects most likely from the shutdown. The labor force declined 618,000. However, in 2011-2012, October was the fall peak for the labor force. Last October showed an increase of 704,000 in the labor. That is a swing of 1.322 million.

There is a disconnect in this month’s report. The unadjusted Household survey is the only part of the report which reflects, caveats and all, the effects of the government shutdown. I would expect the unadjusted jobs numbers from the Establishment survey to show some of the wider effects just mentioned, but it does not. Total nonfarm jobs increased 940,000 with 453,000 of these in the private sector and most of the rest in state and local education. This October’s increase in private sector jobs is somewhat better than last October’s increase of 406,000 jobs. That is significant because the Establishment survey (jobs) is more precise than the Household survey (employment), but it completely misses both the government shutdown and any ancillary effects of it.

The big story here is that while unemployment as measured by the BLS changed little in October, the labor force and the employed declined significantly, and my counts of real unemployed (21+ million) and disemployed (~29 million), both current and trend, spiked. This represents a much larger effect than just what happened to federal employees in October. It could be fairly large ripple effects in the rest of the economy from the shutdown or it could be these and a general weakening in the economy.

Some of the differences between the two surveys may stem from the fact that the Establishment survey counts a job as a job if a person received pay within the survey timeframe even if they did not work. As usual, we will know more next month.

The kinds of jobs created and the lack of any real positive movement in wages or hours continue the trend of the crapification of the American workplace.

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Household/Employment Survey

Potential Labor Force
In October, the potential labor force as defined by the Civilian Non-Institutional Population over 16 (NIP) increased 213,000 from 246.168 million to 246.381 million. Multiplying this by the seasonally adjusted employment ratio for October (58.3%) gives a rough estimate of the number of jobs needed to keep up with population growth: .583(213,000) = 124,000.

Labor Force
In October, seasonally adjusted, the labor force decreased 720,000 from 155.559 million to 155.839 million

Unadjusted, the labor force decreased by 618,000 from 155.536 million to 154.918 million. You will remember that the unadjusted labor force declined 1.225 million last month.
Participation Rate
The respective changes in the labor force are reflected in the participation rate, the ratio between labor force and the potential labor force as represented by the NIP. Seasonally, adjusted the participation rate fell four-tenths percent to 62.8%.

Unadjusted, it fell three-tenths of a percent to 62.9%. Both numbers are consistent with the fall in the labor force, adjusted and unadjusted.

Employment
In October, seasonally adjusted, employment decreased 735,000 from 144.303 million to 143.568 million.

Unadjusted, it decreased 507,000 from 144.651 million to 144.144 million.

Employment-Population Ratio
Seasonally adjusted the employment ratio, the ratio of the employed to the potential labor force of the NIP, fell three-tenths percent to 58.3%.

Unadjusted, it fell three-tenths percent to 58.5%.

Unemployment
In October, seasonally adjusted unemployment increased 17,000 from 11.255 million to 11.272 million.

Unadjusted, despite the government shutdown, it fell 112,000 from 10.885 million to 10.773 million.

As always, it is important to remember that the BLS uses a restrictive definition for unemployed. It does not mean without a job but want one. The BLS uses a jobseeker model. For the BLS, unemployed means without a job but have looked for one in the last 4 weeks.

Unemployment rate
Seasonally adjusted, unemployment increased one-tenth of a percent to 7.3%.

Unadjusted, it was unchanged at 7.0%.

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Full Time vs Part Time Employment
Seasonally adjusted (trendline), full time employment (35 or more hours/week) erased most of its near 700,000 increase of last month, dropping 623,000 to 116.276 million from 116.899 million. Part time employment (1 to 34 hours/week) fell 127,000 from 27.405 million to 27.278 million.

Unadjusted, full time employment declined 510,000 to 116.798 million from 117.308 million. Part time employment (actual) was virtually unchanged increasing 3,000 from 27.343 million to 27.346 million. The number of federal employees working part time for economic reasons (84,000) was largely unchanged.

Involuntary vs. Voluntary Part Time Employment
Seasonally adjusted, involuntary part time workers increased (124,000) to 8.050 million from 7.926 million.

Unadjusted, they increased by 178,000 from 7.522 million 7.700 million.

Voluntary part time workers, seasonally adjusted, declined 181,000 from 18.967 million to 18.786 million.

Unadjusted, voluntary part time workers increased 77,000 from 19.151 million to 19.228 million.

[Standard Note: As usual, I will note that the distinction between voluntary and involuntary is often in the eye of the beholder. Part time workers for voluntary reasons include those who must work part time because of they are raising children, taking care of a relative, or on Social Security and must restrict their hours to stay below Social Security limits on income. For the workers involved, part time work often is not a voluntary choice.]

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The U-6
The BLS' broader measure of un- and under employment, the U-6, increased, seasonally adjusted (trendline) 0.2% to 13.8%. Unadjusted, it increased 0.1% to 13.2%.

Seasonally adjusted, the U-6 is composed of 11.272 million unemployed, 8.050 million involuntary part time workers, and 2.283 million of the marginally attached (those who have no job but looked for work in the last year but not the last month; a decrease of 19,000 from September), or 21.605 million total, a rise of 122,000 from last month.

[Standard note]
As said above, the BLS has a restrictive, though internationally recognized, definition of unemployment, that is without a job but have looked for one in the last 4 weeks. The marginally attached are not counted as part of the labor force and their use in the U-6 is an indication that this is what the BLS considers its functional undercount to be.

The BLS also has a more extended category: Not in Labor Force, Want a Job Now (seasonally unadjusted). In October, this fell 72,000 to 5.683 million.

This BLS category does not often reflect well actual movements in the economy. So I have developed a simple alternative to it. I calculate the size of where the labor force should be by multiplying the potential labor force of the NIP by a participation rate characteristic of a solid economic expansion (67%, the Clinton boom was at or above this level for nearly 40 months). The difference between this and the current labor force measures the size of the real BLS undercount, those who do not have jobs but would work if jobs were available to them. This then allows me to recalculate where real unemployment is and where real un- and under employment (disemployment) is.

.67(246.381 million) = 165.075 million (where the labor force should be)
Trend Undercount:
165.075 million — 154.839 million = 10.236 million, an increase of 862,000 from September
Current Undercount:
165.075 million — 154.918 million = 10.517 million, an increase of 1.120 million
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Real Trend Unemployment (that is seasonally adjusted) :
11.272 million (U-3 unemployment) + 10.236 million (undercount) = 21.508 million, up 879,000
21.508 million / 165.075 million = 13.0%, up 0.5% from last month

Real Unemployment Now (i.e. seasonally unadjusted) :
10.773 million (U-3 unemployment) + 10.517 million (undercount) = 21.290 million, up 1.008 million
21.290 million / 165.075 million = 12.9%, up 0.6%
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Real Trend Disemployment:
Real Trend Unemployment + involuntary part time workers seasonally adjusted = 21.508 million + 8.050 million = 29.558 million, up 1.003 million
29.558 million / 165.075 million = 17.9%, up 0.6%

Real Disemployment Now:
Real Unemployment Now + involuntary part time workers seasonally unadjusted = 21.290 million + 7.700 million = 28.990 million, up 1.186 million
28.990 million / 165.075 million = 17.6%, up 0.7%

Other
The number of long term unemployed (6 months or more) continued to drop (83,000) to 4.063 million. This is a 954,000 fall year over year (5.017 million in October 2012). The long term unemployed account for 36% of the U-3 unemployed, a 1% drop from September. The bad news is that many of these may have simply been counted out of the labor force.

White unemployment was unchanged at 6.3%. White teen unemployment increased 0.1% to 19.4%. African American unemployment increased 0.2% to 13.1%. African American teen unemployment increased 0.9% to 36.0%. African American unemployment continues at levels twice that of whites.

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Establishment/Business/Jobs Survey

Jobs
Seasonally adjusted the private sector added 212,000 jobs and government was down 8,000 yielding the reported 204,000 total.

Last month’s jobs estimate was revised up 15,000 to 163,000 and August’s was further increased 45,000 to 238,000.

Seasonally adjusted total nonfarm jobs were 136.554 million (up 204,000). Total private were 114.692 million (up 212,000).

Unadjusted, total nonfarm jobs increased 940,000 to 137.540 million. Private sector jobs increased 453,000 to 115.308 million.

Unadjusted, construction added 1,000 to 6.056 million. However, this is actually 5,000 less than last month’s original figure of 6.061 million (since revised). Manufacturing fell 4,000 to 12.029 million.

Unadjusted, the subsector of private service providing jobs increased 455,000 to 96.328 million, of which retail trade added 159,500 to 15.3029 million, professional and business services added 77,200 to 8.146 million, of which temp jobs increased 33,900 to 2.8507, healthcare added 47,100 to 14.6393 million, and leisure and hospitality lost 175,000 to 14.227 million. The private sector is simply not producing good jobs.

Unadjusted, government added 487,000 jobs to 22.232 million. The federal government lost 21,000 to 2.712 million. State education gained 139,200 to 2.5604 million, and local education added 403,600 to 8.0581 million

Hours and Earnings
Average weekly hours for all employees on private nonfarm payrolls was unchanged at 34.4 hours. Average hourly earnings increased 2 cents to $24.10/hour and average weekly earnings grew 69 cents to $829.04 (which is actually $2.07 less than the original figure for September of $831.11).

Average weekly hours for production and nonsupervisory (blue collar and clerical) personnel fell back 0.1 hour to 33.6 hours (the same as a year ago). Average hourly earnings increased 2 cents to $20.26. With the cut in hours, this erased last month’s $1.35 gain in average weekly earnings and October’s average weekly earnings were the same as August’s $680.74.

Household data (Employment/unemployment)
Statistical significance: +/ - 300,000
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 9 Full 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: +/ - 90,000
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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