This morning the BLS reported an increase of 290,000 jobs. Headline unemployment rose to 9.9%. Hidden beneath the surface the BLS Black Box – Birth Death Model added 188,000 jobs. However, as I have pointed out many times before, the Birth/Death numbers cannot be subtracted straight up to get a raw number. It contributed to this months employment total for sure, but the BLS will not disclose by how much.

This month there were 66,000 temporary census workers added to the payrolls. That number can directly be subtracted. Interestingly, the details show only 59,000 government jobs in total were added. That means, states have cut back 73,000 jobs. Expect this trend to continue.

Next month is the big census hiring effect where as many as 500,000 temporary workers will be hired. In June through August they will all be fired but that will not stop economists and the administration from crowing about the numbers.

On the whole, this was a decent jobs report, but the birth/death number is quite problematic. I do not buy it. Moreover, the BLS report does not remotely jibe with the ADP April 2010 National Employment Report estimate of 32,000. Someone is wildly off, and I expect that to be the BLS, not ADP.

Those expecting the unemployment rate to drop given the headline number were in for a surprise. However, we were not surprised having talked about this before. The participation rate had been falling like a rock, and if people think there may be jobs, they start looking for them.

That means people who were not counted as unemployed, now are. Expect this to go on for a long time, and expect the unemployment rate to be stubbornly high.

By the way, I still do not think the top in the unemployment rate is in and expect it may rise substantially June through August, and keep rising at a modest pace thereafter for most of the rest of the year. Time will tell.

April 2010 Report

Please consider the Bureau of Labor Statistics (BLS) April 2010 Employment Report.

Nonfarm payroll employment rose by 290,000 in April, the unemployment rate edged up to 9.9 percent, and the labor force increased sharply, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in manufacturing, professional and business services, health care, and leisure and hospitality. Federal government employment also rose, reflecting continued hiring
of temporary workers for Census 2010.
.

Unemployment Rate – Seasonally Adjusted



Nonfarm Payroll Employment – Seasonally Adjusted

Since September 2009, temporary help services employment has risen by 313,000.

Establishment Data

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Highlights

  • 290,000 jobs were added
  • 14,000 construction jobs were added
  • 44,000 manufacturing jobs were added
  • 166,000 service providing jobs were added
  • 12,000 retail trade jobs were added
  • 80,000 professional and business services jobs were added
  • 35,000 education and health services jobs were added
  • 45,000 leisure and hospitality jobs were added
  • 59,000 government jobs were added

Note: some of the above categories overlap as shown in the preceding chart, so do not attempt to total them up.

Index of Aggregate Weekly Hours

Production and non-supervisory work hours rose one tick to 33.4 hours and average hourly earnings rose a nickel.

Birth Death Model Revisions 2009

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Birth Death Model Revisions 2010

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Birth/Death Model Revisions

The BLS Birth/Death Model methodology is so screwed and there have been so many revisions and up it is pointless to further comment other than to repeat a few general statements.

Please note that one cannot subtract or add birth death revisions to the reported totals and get a meaningful answer. One set of numbers is seasonally adjusted the other is not. In the black box the BLS combines the two coming out with a total. The Birth Death numbers influence the overall totals but the math is not as simple as it appears and the effect is nowhere near as big as it might logically appear at first glance.

The BLS added massive numbers of jobs every month to its model, all through the recession. Those jobs never existed. Last month the BLS made those revisions to job totals to reflect errors in its Birth/Death model.

BLS Black Box

For those unfamiliar with the birth/death model, monthly jobs adjustments are made by the BLS based on economic assumptions about the birth and death of businesses (not individuals).

Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing practice is clearly another.

Household Data

In April, the number of unemployed persons was 15.3 million, and the unemployment rate edged up to 9.9 percent. The rate had been 9.7 percent for the first 3 months of this year.

The number of long-term unemployed (those jobless for 27 weeks and over) continued to trend up over the month, reaching 6.7 million. In April, 45.9 percent of unemployed persons had been jobless for 27
weeks or more. (

Among the unemployed, the number of reentrants to the labor force rose by 195,000 over the month.

In April, the civilian labor force participation rate increased by 0.3 percentage point to 65.2 percent, as the size of the labor force rose by 805,000. Since December, the participation rate has increased by 0.6 percentage point. The employment-population ratio rose to 58.8 percent over the month and has increased by 0.6 percentage point since December.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was about unchanged at 9.2 million in April. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

[Mish Note: In January the number was 8.3 million]

Persons Not in the Labor Force

About 2.4 million persons were marginally attached to the labor force in April, compared with 2.1 million a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding
the survey.

Table A-8 Part Time Status

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The chart shows involuntary part-time employment increased by 738,000 workers in February and March. Wow. A likely explanation is the BLS reported number in January is pure garbage. As I pointed out in my unanswered question, seasonal swings are increasing in amplitude.

The key take-away is there are 9,152,00 of workers whose hours may rise before those companies start hiring more workers.

Table A-15

Table A-15 is where one can find a better approximation of what the unemployment rate really is.

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Grim Statistics

The official unemployment rate is 9.9%. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

It reflects how unemployment feels to the average Joe on the street. U-6 is 17.1%.

Looking ahead, there is no driver for jobs. Moreover, states are in forced cutback mode on account of shrinking revenues and unfunded pension obligations. Shrinking government jobs and benefits at the state and local level is a much needed adjustment. Those cutbacks will weigh on employment and consumer spending for quite some time.

Expect to see structurally high unemployment for years to come.

Keep in mind that huge cuts in public sector jobs and benefits at the city, county, and state level are on the way. These are badly needed adjustments. However, the union parasites will not see it that way, nor will the politicians.

All things considered, this report looks decent on the surface, less so underneath, given that it took trillions in stimulus whose effects will be waning and the unemployment is still 9.9%.

Mike “Mish” Shedlock
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