By Hugh, who is a long-time commenter at Naked Capitalism. Originally published at Corrente.
The current BLS jobs report covering December 2012 states, without qualification, that the official or U-3 unemployment rate remained unchanged at 7.8%. It is only on page 5 of the pdf in a table that you find that the November rate was originally reported (a few days before the election) as a more favorable 7.7% down from 7.9%. This revision is part of the BLS’ yearly revision of its numbers in the Household (people) survey. This complicates matters because revisions to the Establishment (jobs) survey will not happen until next month. There is also the further wrinkle that in the February report covering January Household data will reflect updated estimates from the Census going forward but not backward, meaning that the Household data for January 2013 cannot be directly compared with data from December 2012 and before. The way the BLS stretches its yearly revisions out over 2-3 months means that about a quarter of the time, its reports have even more problems than they usually have.
I also had an interesting experience of déjà vu this month. I was watching NBC Nightly News last night and they had a preview of this month’s jobs report. I could have misheard and I have tried unsuccessfully to track down a transcript but I could have sworn I heard their business correspondent report offhandedly that experts thought this month’s jobs creation would be in line with last month’s 161,000. The problem with this is that the November jobs number cited by NBC is the revision for November in the December report. In other words, NBC I believe broke the embargo on the December report by some 14 hours and its prediction that this month’s report would be much like last month’s report wasn’t a prediction at all. As with many other news organizations, the BLS had passed NBC an advanced copy and the correspondent was just reading off from the report. This sloshing around of supposedly privileged information raises an important point. If you don’t think that Wall Street insiders don’t have access to this information ahead of time, I have a bridge in Brooklyn I would like to sell you. Only rubes, muppets, and bloggers like this one, have to wait for the public release.
Turning to the report, as I said, official unemployment was 7.8% (seasonally adjusted) and the economy added 155,000. The revisions in the jobs number for the last two months look like this:
October 171,000 > 138,000 > 137,000
November 146,000 > 161,000
The potential labor force as represented by the civilian non-institutional population over 16 (NIP) increased 176,000 from 244.174 million to 244.350 million. The employment-population ratio was 58.6%. If we multiply this by the NIP, we get 103,000, a rough estimate of the number of jobs needed to keep up with population growth. The official number of jobs created 155,000 beat this by 52,000. That would be a rate of 624,000 over population growth (beginning now) per year, but we are still 4.268 million below the jobs peak in November 2007. At that rate, it would take us 6.8 years to work through that backlog. At the same time, that 4.268 million jobs shortfall does not take into account that the November 2007 peak reflected several years of poor jobs growth during the Bush Administration. Nor does it take into account prior population growth.
In the Household data, the labor force increased 192,000 seasonally adjusted from 155.319 million to 155.511 million but declined unadjusted 49,000 from 145.953 million to 154.904 million.
The variance in the labor force numbers, adjusted and unadjusted, reflect deeper changes in the employment levels as the Christmas hires go away. Seasonally adjusted, employment increased 28,000 from 143.277 million to 143.305 million. Unadjusted, employment dropped 489,000 from 143.549 million to 143.060 million.
Again it is important to note that the seasonally adjusted numbers are reported in the media as the official numbers and treated as if they show where the economy is actually at. They do not. Seasonally adjusted numbers are normalized points on a line. This line takes out the lows and the highs, hopefully exposing the underlying trend. The underlying trend is not where we live. We live in the here and now with all its ups and downs. This is what the “unofficial” unadjusted numbers measure.
You can see some of this skewing in the adjusted numbers where both employment and unemployment increased. Seasonally adjusted, unemployment rose 164,000 from 12.042 million to 12.206 million. The unadjusted numbers are more consistent. Corresponding to the 489,000 decline in employment, we see unemployment increasing 440,000 from 11.404 million to 11.844 million.
While the BLS now reports unemployment, seasonally adjusted, remained unchanged in December at 7.8%. Unadjusted and reflecting the end of the Christmas shopping season, unemployment rose from 7.4% to 7.6%. And we should see another big jump in the unadjusted rate next month as the remaining Christmas hires are let go.
The participation rate is the ratio of the actual labor force (employed plus unemployed, as defined by the BLS) to the potential labor force, the NIP. Adjusted, it remained unchanged at 63.6%. Unadjusted, it decreased 0.1% to 63.4%.
In the broader U-6 measure of un- and under employment, or disemployment, seasonally adjusted, it was unchanged at 14.4%. Unadjusted, there was a 0.5% increase to 14.4%.
The seasonally adjusted U-6 un- and under employed represent 12.206 million U-3 unemployed (up 164,000 from November), 7.918 million involuntary part timers (down 220,000 from November), and 2.614 million marginally attached (those who have looked for work in the last year but not in the last 4 weeks before the survey) (up 109,000 from November).
The BLS has a restrictive, though internationally recognized, definition of unemployment: 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). This was up 37,000 in December to 6.532 million and could also be taken as a measure of its undercount. The problem which I state each month at this point in my analysis is that this number does not reflect very well actual changes in the economy. So 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% (as boomers retire I may have to adjust this figure). The difference between these two is my measure of the undercount.
.67(244.350 million) = 163.715 million (where the labor force should be)
163.715 — 155.511 million = 8.204 million (the real undercount)
This is a decrease of 102,000 from the November number of 8.306 million. This is my estimate for the capture of the full undercount, those who do not have jobs but would work if jobs were available to them.
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: 12.206 million (U-3 unemployment) + 8.204 million (undercount) = 20.410 million (up 75,000 from 20.335 million in November)
Real unemployment rate: 20.410 million / 163.715 million = 12.5% (up from 12.4% in November)
Real disemployment: Real unemployment + involuntary part time workers = 20.410 million + 7.918 million = 28.328 million (down 183,000 from 28.511 million in November)
Real disemployment rate: 28.328 million / 163.715 million = 17.3% (down 0.1% from November)
The long term unemployed, those without a job who have been looking for one for 6 months or more, changed little, decling 18,000 to 4.766 million.
By race, unemployment among whites increased slightly (0.1%) seasonally adjusted to 6.9%. African American unemployment which tends to be more volatile even seasonally adjusted increased 0.8% to 14.0%. White teen unemployment, seasonally adjusted, was 29.1%. African American teen unemployment was 40.5%.
In the Establishment or business survey, the private sector created 168,000 jobs seasonally adjusted. Government lost 13,000, netting 155,000 for a total of 134.021 million jobs. Unadjusted, the number of jobs fell 243,000. This is a minor part of the fall off in jobs after Christmas. The really big part of this drop will occur next month, even as the seasonal numbers will likely show a healthy increase. Again seasonal numbers are part of a trend line. Unadjusted numbers are where you live.
Adjusted, healthcare added 44,500 jobs; food services and drinking places, 38,000; construction, 30,000; and manufacturing, 25,000. Part of the odd bubble in clothing store employment dissipated with a loss of 18,700 jobs. Education at the local level lost 11,500 jobs.
Unadjusted, healthcare added 57,400 jobs, food services and drinking places lost 14,000; construction lost 162,000; manufacturing gained 15,000. State government education lost 64,900; local government education lost 37,300; and local government excluding education lost 50,600 jobs.
The average work week for all employees increased 0.1 hour to 34.5 hours. Average hourly pay increased 7 cents to $23.73, and average weekly earnings increased $4.79 to $818.69.
The average work week for production and nonsupervisory (blue collar) employees also increased 0.1 hour 33.8 hours. Average hourly pay increased 6 cents to $19.92 and average weekly earnings increased $4.02 to $673.30.
These numbers would indicate that wages may have beaten inflation for the year by a few tenths of a percent. The December CPI will be out later this month.
These end of the year reports with their various revisions tend to be something of a muddle. Additionally, we begin to get a significant separation between the adjusted and unadjusted numbers, that is between the trend and the reality. Adjusted, this looks like a reasonably solid report. Jobs are up if not brilliantly. Wages are up. However, many of the jobs “created” remain McJobs.
Unadjusted, the Christmas hiring season is over and the economy is shedding workers and jobs. There are also significant job losses at the state and local level.
On the macro level, real unemployment and real disemployment remain high and little changed.
I suppose you could look on this as three reports. Good, bad, and indifferent. Take your pick.
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