Yves here. As Hugh said via e-mail:
The report is actually two reports fundamentally at odds with each other. The Household data see some of the effects of the government shutdown but their strong negatives are most likely from knock on effects or a larger weakening of the economy. While unemployment was little changed, employment and the labor force fell through the floor, in a month where we would expect a healthy increase in both.
The jobs survey didn’t see any of this. Unadjusted, 940,000 jobs were added. State and local education added more than 500,000 jobs related to the school year and the private sector added 453,000 with increases in most of the usual crap areas, except leisure and hospitality which fell 175,000 with the end of vacation.
It’s like taking a hammer to a tomato. One report says the tomato got smashed. The other report says the tomato got bigger. Which are you going to believe?
By Hugh, who is a long-time commenter at Naked Capitalism. Originally published at Corrente. A complete archive of Hugh’s reports can be found here.
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.
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.
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.
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.
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.
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%.
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.
Seasonally adjusted, unemployment increased one-tenth of a percent to 7.3%.
Unadjusted, it was unchanged at 7.0%.
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.]
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.
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)
165.075 million — 154.839 million = 10.236 million, an increase of 862,000 from September
165.075 million — 154.918 million = 10.517 million, an increase of 1.120 million
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%
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%
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.
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
Do you follow the Shadow Stats site? I don’t know what goes into their report–but it has been steadily up and is now up to around 24%. I don’t know what goes into their number because you have to subscribe to get it I believe.
I think this is what we have to face from now on. Most of us here understand that there will be no recovery as we knew that term in the past. Full-employment is theoretically impossible at this point. We are facing a steady-state economy (at best) where employment stays more or less constant. Labor force participation rates have been going down consistently regardless of unemployment rates. I’m wondering what percentage of this drop is due to retirement and what due to people just doubling up or the rise of the underground economy which I believe is more substantian than we think.
I think shadow stats estimates a smaller potential workforce than Hugh does, so unemployment rates trend higher… In any case the range of 17-24% unemployment rates are more accurate than those usually bandied about in the media.
Thank you for this info: both the participation rate and the employment-population rates declined. The % of working age people with jobs declined.
Employment-population ratio down 0.3% to 58.3%. Does Hillary Clinton have a jobs policy?
Im sure its the same as every other Neoliberal. Probably a clone of whatever nonexistent policy Bill had
It’s clear the economy has settled into a depressed equilibrium characterized by large swegments of idle labor force and capital utilzation. Basically 20% of the workforce is written off. (Hugh credible argues that 28-30 million people are unemployed or disemployed need full time jobs).
30-35% of capital stock is idle.
Many expect another crash coming from any of these markets: repo-market crash is in the works along with asset bubbles in equities… there has been a market trend in net negative international capital flows out of the US as well…
There’s no political will for corrective measures or regulatory reform, so likely we’ll just stumble over the abyss when one of these market bubbles implodes again.
Explains why Homeland Security recntly purchase 1.5 billion rounds of ammo. The overclass sees the writing on the wall as well and is prepared to stay ahead of the next post-crash economy, aka, The New Dark Ages.
I’m expecting a post-capitalist neofeudalism in which the functions of landlord and boss are combined and the masses all work not for money, which has collapsed, but for their right to sit atop private property.
Please. Permission to sit atop private property.
TOO MUCH TO ASK OF A NATION?
I suggest, for a very well done analysis of what is happening to household incomes, to look at last week’s edition of the Economist (Nov.2 “Labour pains») where you will find this infographic: here.
In that infographic, note the diminishing “Labour costs as a % of GDP black line. It was historically (from 1970) just a bit less than 70% when, in the early 1990s, it breaks away and starts its descent to the present day 65%.
Note also this important analysis:
All in all, an excellent article worth reading for anyone trying to understand why America’s lower- and middle-Middle Cass existence has gone to hell in a hand-basket.
WHAT’S A COUNTRY TO DO?
Admit that low cost “nimble-fingers work” at rock-bottom hourly rates in the Far East are NOT going away. And place a national effort on (1) educating our young to necessary work-force skills and (2) a nationwide access to Continued Education that enhances the work-force towards the necessary skill-level.
All free, gratis and for-nothing – so there is No Excuse Whatsoever for not obtaining those skills. And thereby perhaps avoiding prison for criminal activity and being able to provide shelter and sustenance for one’s family.
The money would be better spent “investing in workforce skills” than were it dispensed for UI because those skills were unavailable (except flipping hamburgers at Macdonalds for less than the minimum wage).
Is that too much to ask for of a nation? Methinks not …
I have pointed out in the past that for the last 35 years, gains in productivity have been siphoned off/looted by the rich. That will not change until we replace the current political class since this looting has occurred under, and indeed promoted by, both Democrats and Republicans.
As for the rest, the skills/jobs mismatch argument has been debunked many times. The same is true of the robotics argument as well. In fact, you allude to the real reason: tens of millions of cheap Chinese, Bengladeshi, Vietnamese, Mexican, etc. workers. It’s not skills mismatches or robotics but cheap labor working in cheap and often unsafe working conditions. And as Yves has also pointed out, pressure on stock price even when offshoring makes little sense. There is an answer to this: tariffs, managed trade, a national industrial policy, and tax and penalties for corporations that offshore.
Right on target… Eight million jobs were lost in the 08-09 period… that’s not the effect of robotics or trade… it’s a financial blowout followed by a credit panic and subsequent economic contraction that’;s never been reversed.
The other factors, to the extent they’re even in play, have a slower, more gradual impact.
Such arguments are usually blowing smoke for Wall Street malefactors
Assuming the same number of staff were working at BLS during the Reference Week for this Report (the week with the 12th in it)their estimate has 9 days data to work with (Reference Week with adjustments, if any, based on previous week). This would suggest the estimated number is reasonable.
However, with 178,000 retail hires this year, compared to 36,000 in the first estimate for October 2012, something’s amiss in the shopping world. Last year the total for October was considerably higher even with a much smaller retail contribution. No matter which way you cut it, this report fails to impress – unless there were fewer than normal staff, in which case I’d expect some sizable revisions.
No data were collected during the government shutdown. However, the BLS reported good survey responses for both surveys. The report also was delayed a week to give staff more time to finish it.
I expect substantial revisions to the internals – the overall number should be reasonably accurate given they’ve got 14 days of activity to work with – again with a caveat on the retail numbers, which could be so off as to trigger significant downward revisions.