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The Jobs Report For March 2014: After A Long Winter, The Economy Plays Some Catchup

The Brief Version

The usual seasonal spring rebuild in jobs was delayed a little this year due to the extended and severe winter. In March, some of this ground was recovered making it a particularly good month in seasonal terms. The labor force grew 600,000. This increase was comprised of a 956,000 rise in employment and a 356,000 drop in unemployment. What this means is that for each unemployed person who found work in March, two who were not counted in the labor force at all found work.

The labor force which had looked like it might be secularly plateauing at the end of last year as instead resumed its growth, indicating that the effects of Boomer retirements on it may be premature.

The reason the official unemployment rate did not change from 6.7% is because this is a trendline number, not a seasonal one. In seasonal terms, unemployment describes a V this time of year. There is a major spike after Christmas and a decrease in the spring. The seasonal view describes both the increase and the decrease while the trend is a projection splitting the difference between the two. The ups and downs are where we live, but this has been almost completely forgotten in media reporting which cites the trendline number for March as if it were the actual number for March.

This same mistaking the trendline for the reality takes place on the jobs side as well. The trend increase in jobs was 192,000, but the actual increase, after a huge post-Christmas decrease, was 1.059 million. Unfortunately, these jobs are being created almost entirely in low wage sectors, like retail, business services, leisure and hospitality, and healthcare. American workers had more weekly take home pay on average this month. Unfortunately, their hourly wages declined slightly, meaning they worked longer hours for that increase in their weekly wage. This is another indicator of poorer quality jobs.

As I note below, a category to watch is voluntary part timers. This segment has been growing faster than expected recently. There is a lot of volatility in it but this is the group which contains those on Social Security but working for extra income. If a trend develops, this could partly negate the Boomer “retirement” effect on measures like the participation rate. That is not all Boomers are, or can, retire and leave the labor force. Some may be retiring and staying in the labor force.

Household/Employment Survey

Potential Labor Force

The potential labor force as represented by the Civilian Non-Institutional Population over 16 increased 173,000 from 247.085 million to 247.258 million. Multiplying this increase by the employment-population ratio (58.9%) yields a rough estimate of the number of jobs needed this month to keep up with population growth (102,000)

Labor Force

Seasonally adjusted, the labor force increased 503,000 from 155.724 million to 156.227 million. Last year, the labor force fell 412,000 in March.

Unadjusted, it increased 600,000 from 155.027 million to 155.627 million. Last year it grew 215,000 in March.

Participation Rate

The participation rate is the ratio of the labor force to the potential labor force. Seasonally adjusted, the participation rate in March increased two-tenths percent to 63.2% (the same as March of last year).

Unadjusted, it grew two-tenths of a percent to 62.9%. This is two-tenths percent less than last year (63.1%)

Employment

Seasonally adjusted, employment grew 476,000 from 145.266 million to 145.742 million.

Unadjusted, it increased 956,000 from 144.134 million to 145.090 million. A large increase is expected this time of year as part of the spring rebuild. This March is substantively better than the last two Marches, but if we look at the rebuild to date (Jan. to Mar.), it comes out looking like this:

2104: 1.564 million
2013: 1.084 million
2012: 2.051 million

Employment this year is in range with the last two years. The exceptionally good March we are seeing is likely due to the end of a long and unusually hard winter.

Employment-Population Ratio

Seasonally adjusted, the E-P ratio increased one-tenth percent to 58.9%.

Unadjusted, it grew four-tenths percent to 58.7%.

Unemployment

Seasonally adjusted, unemployment increased slightly (27,000) from 10.459 million to 10.486 million.

Unadjusted, it declined 356,000 from 10.893 million to 10.537 million. Unadjusted, the change in unemployment looks like this:

Job losers -245,000
Job leavers -33,000
Re-entrants -45,000
New entrants -34,000

The decline in job losers stemmed from declines in those on layoff (105,000) and those completing temporary positions (142,000)
Unemployment rate
Seasonally adjusted, unemployment was unchanged at 6.7%.

Unadjusted, it declined two-tenths percent to 6.8%.

Full Time vs Part Time Employment

Seasonally adjusted, full time employment increased 184,000 from 117.819 million to 118.003 million. Part time employment grew 365,000 from 27.330 million to 27.695 million.

Unadjusted, full time employment grew 662,000 from 116.323 million to 116.985 million. Part time employment increased 296,000 from 27.810 million to 28.106 million.

Involuntary vs. Voluntary Part Time Employment

Seasonally adjusted, involuntary part time workers increased 225,000 from 7.186 million to 7.411 million. Voluntary part timers increased 189,000 from 19.027 million to 19.216 million.

Unadjusted, involuntary part time employment increased 58,000 from 7.397 million to 7.455 million. Voluntary part time workers increased 81,000 from 19.651 million to 19.732 million. There is both volatility and seasonal variability in the number of voluntary part timers, but currently there is an increase of 432,000 over last March, about twice what might be expected. This is a number to watch since those on Social Security who are still working (but part time due to income limits) are assigned to this group.

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The U-6

The U-6, the BLS’ broader measure of un- and under employment increased 0.1% to 12.7%, seasonally adjusted.
The seasonally adjusted U-6 was composed of 10.486 million unemployed, 7.411 million involuntary part time workers, and 2.168 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 135,000), or 20.065 million, a decline of 117,000 from last month.

The unadjusted U-6 decreased three-tenths of a percent to 12.8%.

[Standard note]

The BLS uses a restrictive job seeker 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 March, this decreased 200,000 to 5.891 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(247.258 million) = 165.663 million (where the labor force should be)

Trend Undercount:
165.663 million — 156.227 million = 9.436 million , a decrease of 387,000

Current Undercount:
165.663 million — 155.627 million = 10.036 million, a decrease of 484,000
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Real Trend Unemployment (that is seasonally adjusted) :
10.486 million (U-3 unemployment) + 9.436 million (undercount) = 19.922 million, a decrease of 360,000
19.922 million / 165.663 million = 12.0%, down 0.3%

Real Unemployment Now (i.e. seasonally unadjusted) :
10.537 million (U-3 unemployment) + 10.036 million (undercount) = 20.573 million, down 840,000
20.573 million / 165.663 million = 12.4%, down 0.5%
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Real Trend Disemployment:
Real Trend Unemployment + involuntary part time workers seasonally adjusted = 19.922 million + 7.411 million = 27.333 million, down 135,000
27.333 million / 165.663 million = 16.5%, down 0.1%

Real Disemployment Now:
Real Unemployment Now + involuntary part time workers seasonally unadjusted = 20.573 million + 7.455 million = 28.028 million, down 782,000
28.028 million / 165.663 million = 16.9%, down 0.5%

Other

The number of long term unemployed (6 months or more), as defined within the BLS job seeker model, decreased 110,000 to 3.739 million. The long term unemployed account for 35.7% of the U-3 unemployed, a decrease of 1.1%. The median number of weeks of unemployment, seasonally adjusted, was down slightly to 16.3 weeks (around 4 months) while the average declined 1.5 weeks to 35.6 weeks (about 9 months). The likelihood is that the decline in long term unemployed (with its subsequent effect on the average length of unemployment) results from these workers being defined out of the labor force, not that they found jobs.

White unemployment was unchanged at 5.8%. White teen unemployment was unchanged at 18.3%. African American unemployment increased 0.4% to 12.4%. African American teen unemployment increased 3.7% to 36.1% .

Employment of women head of household (i.e. single moms) increased 11,000 to 9.344 million.

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Establishment/Business/Jobs Survey

Jobs

Seasonally adjusted, the number of private sector jobs increased 192,000. Government job numbers were unchanged. January was revised upward another 15,000 to 144,000, and February, 22,000 to 197,000

Seasonally adjusted, total nonfarm jobs increased 192,000 to 137.928 million. Total private jobs increased 192,000 to 116.087 million.

Unadjusted, total nonfarm jobs grew 1.059 million to 137.135 million. The spring rebuild is not over and is still 1.1 million off the November peak. Total private jobs increased 831,000 to 114.886 million. Government jobs grew 110,000 to 22.249 million, principally from 23,700 in state government education and 58,600 in local government education (These gains in government are much smaller than those of the previous month.)

Unadjusted, where the economy is now, construction increased by 131,000 jobs to 5.658 million. Manufacturing gained 32,000 to 12.013 million.

Unadjusted, the super sector of private service-providing jobs added 656,000 to 96.329 million (after losing 1.973 million in January),
of which
wholesale added 20,000 to 5.8022 million;
retail added 57,100 to 15.0062 million;
professional and business services added 142,000 jobs to 18.838 million;
of which
temp jobs increased 59,300 to 2.7457 million;
healthcare increased 451,000 to 14.6249 million;
and leisure and hospitality increased 265,000 to 14.133 million

Hours and Earnings
Average weekly hours for all employees on private nonfarm payrolls increased two-tenths hour to 34.5 hours (the same as a year ago). Average hourly earnings decreased 1 cent to $24.30/hour, and average weekly earnings grew $4.52 to $838.35, a yoy increase of 2.1%.

Average weekly hours for production and nonsupervisory (blue collar and clerical) personnel increased three-tenths hour to 33.7 hours (one-tenth hour less than a year ago). Average hourly earnings decreased 2 cents to $20.47/hour. Average weekly wages increased $5.47 to $689.84, a 1.9% increase yoy.

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 11 Reason for unemployment
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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