Guest post: Payroll data mixed despite the bullish headline job loss figure

Submitted by Edward Harrison of the site Credit Writedowns

The payroll data this morning were pretty good given the job losses came in nearly 200,000 less than expected.  But further digging suggests the number is not nearly as bullish when parsing the data.  Below are a few data points.


  1. BULLISH: The headline jobs number of a 345,000 loss comes from the establishment survey and is seasonally adjusted.  The unadjusted numbers were even more bullish, showing an increase of 319,000 jobs.
  2. BEARISH: The Business Birth-Death Model added 220,000 jobs to the headline seasonally-adjusted number.  Without this number, we are looking at a loss of 565,000 jobs.
  3. BEARISH: The number of jobs lost in the last 12 months increased from 5.34 million in April to 5.51 million in May.


  1. BULLISH: Looking at the reported numbers (which are seasonally-adjusted), the number of unemployed persons increased less in the last 12 months in May (5.98 million) compared to April (6.05 million). This is the first such decline since April 2008.  The same decline also occurred on an unadjusted basis for the first time since April 2008
  2. BEARISH: The number of persons employed decreased last month after popping up in April (Feb – 141.7 million; Mar – 140.9 million; Apr – 141.0 million; May 140.6 million).  The same trend from February to May was also evident in the unadjusted numbers.
  3. BEARISH: While the number of workers currently not in labor force who want a job decreased from 5.94 million to 5.86 million, this was only because of seasonal adjustments.  In reality, the increase was sharp: 5.89 million to 6.61 million.
  4. BEARISH: Other indicators suggest that the shadow supply of discouraged workers not counted in the numbers will now return to the labor force, pushing up the unemployment number. For example, the U-6 unemployment number was a gargantuan 16.4 %, the highest ever.
  5. BULLISH: The unemployment rate 2nd derivative turned up for the first time this cycle.  The unemployment rate is 3.8% higher than it was 12 months ago.  In April that number was 3.9%.  Generally, a change in the 2nd derivative occurs either before or just as recession is ending. Since this data set goes back to 1929, I would consider this the most bullish statistic of the lot (see my post “Chart of the day: unemployment as a recession indicator").


  1. BEARISH: The nominal increase in hourly earnings is slowing.  It is now only 3.0% over the last 12 months.  In April, this figure was 3.2%.  Last May, it was 3.8%.
  2. BEARISH: The number of hours worked per week hit record lows of a seasonally-adjusted 33.1 hours and an unadjusted 33.0 hours.

My conclusion from the data is that we are still in that limbo period waiting for clear signals that a definitive improvement in the labor market has occurred.  For the time being, the employment picture in the U.S. remains weak.  However, it does not seem to be deteriorating.  The most bullish signal is the peak in the change in the unemployment rate which has signalled an end to recession in recessions since 1929.


Also see last post on Credit Writedowns

Unemployment rate climbs to 9.4%

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About Edward Harrison

I am a banking and finance specialist at the economic consultancy Global Macro Advisors. Previously, I worked at Deutsche Bank, Bain, the Corporate Executive Board and Yahoo. I have a BA in Economics from Dartmouth College and an MBA in Finance from Columbia University. As to ideology, I would call myself a libertarian realist - believer in the primacy of markets over a statist approach. However, I am no ideologue who believes that markets can solve all problems. Having lived in a lot of different places, I tend to take a global approach to economics and politics. I started my career as a diplomat in the foreign service and speak German, Dutch, Swedish, Spanish and French as well as English and can read a number of other European languages. I enjoy a good debate on these issues and I hope you enjoy my blogs. Please do sign up for the Email and RSS feeds on my blog pages. Cheers. Edward


  1. Leo Kolivakis

    Hi Edward,

    hardly bullish but the of U.S. job losses eased dramatically in May. This was the slowest pace of jobs destructions since September last year, which is encouraging.

    But employment data always lags other indicators so I wouldn't read too much in one jobs report. We need to more easing in nonfarm payrolls to say the worst is behind us.

    Interestingly, Bloomberg reports that Robert Hall, head of the National Bureau of Economic Research’s Business Cycle Dating Committee, said it’s too early to call for the end of U.S. recession. Mr. Hall notes that gross domestic product estimated on a monthly basis “had a trough earlier this year, but it is way too early to say that it is a true trough rather than a pause in a longer decline.”



  2. Mikkel

    "BEARISH: The Business Birth-Death Model added 220,000 jobs to the headline seasonally-adjusted number. Without this number, we are looking at a loss of 565,000 jobs."

    I've read repeatedly that the Birth-Death model numbers aren't seasonally adjusted so you can't just subtract. It begs the question why they don't released what the actual contribution to the headline number is, but eh.

  3. Brick

    All those who became unemployed over the last six months still have to come off unemployment checks which may feed through to a further drop in demand.

  4. homebody at heart

    Don't get bullish yet. There is more to come. Many teachers, school support people and bus drivers will be laid off when school is over in June. The state and municipal budgets here in California also aren't finalized and when that happens, many other state and local government employees (firefighter and police among them) will also be laid off if they aren't offered or don't except work furloughs.

    Many cities are cutting deep into their budget reserves this year and they are also telling us that if it doesn't improve next year, it will really get ugly.

  5. Hugh

    Seasonal factors, the sucker's market, and some stimulus money may all be working together to slow our descent.

    Some 6 million jobs have been lost since the recession began in December 2007. From then through the end of 2010 some 4.4 million jobs would also be needed for population growth. So even if not another job is lost between now and 2011, we are looking at a jobs hole of 10.4 million and we have 19 months left to go to 2011.

  6. Richard Kline

    We get an inventory bounce, which definitely pushes into the downtrend of major job loss. We get the birth/death thumb on the scale number, which has been consistently loony tunes since job losses started _nearly two years ago_. But I think Dirk van Dijk above has the most interesting contextualization statistic: long-term unemployeds aren't getting hired.

    The notion that job losses in this economic down cycle are slowing may be a good thing, but there is nothing good about this report. Show me evidence of _hiring_, or even evidence of demand that might lead to hiring, and we can all put on smiley face buttons. Hasn't happened. As also mentioned by another commentator, the dis-employment impact of state and local tax revenue collapse hasn't even really been felt yet. We'll get that through the summer into the autumn. If in the fact of that the rate of job loss change [2nd order derivative] continues positive, then yes, that too could be a turning point of a kind. I doubt that that is what we will see, though.

    It boggles my mind the extent to which the many in the media want to see 'good news around the corner.' That's wonderful wishful thinking, and would be wonderful for them (and us) if true. As analysis, it's punk, bunkum, or worse. When one wants to see a certain outcome/number and so shades the reading toward that end, the resulting take has diminished credibility/utility. Most socieities lie to themselves about what they really do; have we become do blatant that it is now _all_ that we do?

  7. Anantha

    some one has already said this in the comments above. the Birth/Death model adds or substracts jobs from the Non-seasonally adjusted data. Therefore, its final contribution to the Seas. Adj. data is hard to decipher.

    It is correct to say, however, that the Birth/Death model job creation number has contributed substantially to the reported May Non-Seas. adjusted job creation

  8. Bruce Krasting

    I am going to throw a curve at you Ed. I am curious as to your thoughts.

    There were 12mm illegal workers in the US as of 2007. The vast majority of them were working. Some had fake SS# and worked on the books, others were just day workers getting paid cash.

    Around here the going rate is $100 per day. Assume the average is $80 per day on a national basis.

    Those are very big numbers. In the neighborhood of $250 billion, nearly 2% of total GDP.

    I am very familiar with this story. I will tell you that in the NY, Atlanta,S.Florida and SoCal areas the unemployment rate for illegals is at least 50%.

    They were always the marginal workers. Now they have been marginalized. They are now playing soccer and volleyball. They want to work but there are no jobs. They are going home in big numbers.

    There are at least 6mm people who have lost their jobs that are not included in the numbers. I can hear the comments that will say, "Who cares? They should not have been here in the first place!"

    That is a different matter. Those 6 million workers would have earned and spent over 100 billion dollars. Now they will not. It will make a difference.

    Every where 'we' look there are signs of recovery. Every where that I look I see signs that that recover will be very very weak

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