Initial Reaction

Counting the upwardly revised 298,000 nonfarm payroll report in June (originally reported as 288,000), this was a decent report.

Yet, digging into the details, the household survey showed a gain in employment of only 131,000. Thus, for the second consecutive month, the household survey was substantially weaker than the headline number.

The unemployment rate rose by 0.1% (by 197,000) thanks to a rise in the labor force greater than the rise in employment.

May BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +209,000 – Establishment Survey
  • Employment: +131,000 – Household Survey
  • Unemployment: +197,000 – Household Survey
  • Involuntary Part-Time Work: +275,000 – Household Survey
  • Voluntary Part-Time Work: -33,000 – Household Survey
  • Baseline Unemployment Rate: +0.1 at 6.1% – Household Survey
  • U-6 unemployment: +0.1 to 12.2% – Household Survey
  • Civilian Non-institutional Population: +209,000
  • Civilian Labor Force: +329,000 – Household Survey
  • Not in Labor Force: -119,000 – Household Survey
  • Participation Rate: +0.1 at 62.9 – Household Survey

Additional Notes About the Unemployment Rate

  • The unemployment rate varies in accordance with the Household Survey, not the reported headline jobs number, and not in accordance with the weekly claims data.
  • In the past year the working-age population rose by 2,226,000.
  • In the last year the labor force declined by 330,000.
  • In the last year, those “not” in the labor force rose by 1,939,000
  • In the past year, the number of people employed rose by 2,067,000 (an average of 172,250 a month)

Please note that over the course of the last year, the working-age population rose by more than the number of people employed. In normal times, the unemployment rate would have gone up slightly. Instead, the unemployment rate fell from 7.3% to 6.2%. Over 100% of the decline in unemployment was due to people dropping out of the labor force, rather than strength in the economy!

July 2014 Employment Report

Please consider the Bureau of Labor Statistics (BLS) July 2014 Employment Report.

Total nonfarm payroll employment increased by 209,000 in July, and the unemployment rate was little changed at 6.2 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, manufacturing, retail trade, and construction.

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Unemployment Rate – Seasonally Adjusted

Nonfarm Employment January 2003 – July 2014

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Nonfarm Employment Change from Previous Month by Job Type

Hours and Wages

Average weekly hours of all private employees has been flat for five months at 34.5 hours. Average weekly hours of all private service-providing employees was flat at 33.3 hours.

Average hourly earnings of private workers rose $0.04 to $20.61. Average hourly earnings of private service-providing employees rose $0.03 to $20.39.

For discussion of income distribution, please see What’s “Really” Behind Gross Inequalities In Income Distribution?

Birth Death Model

Starting January, I dropped the Birth/Death Model charts from this report. For those who follow the numbers, I keep this caution: Do not subtract the reported Birth-Death number from the reported headline number. That approach is statistically invalid. Should anything interesting arise in the Birth/Death numbers, I will add the charts back.

Table 15 BLS Alternate Measures of Unemployment

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

Notice I said “better” approximation not to be confused with “good” approximation.

The official unemployment rate is 6.2%. However, if you start counting all the people who 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.

U-6 is much higher at 12.2%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Labor Force Factors

  1. Discouraged workers stop looking for jobs
  2. People retire because they cannot find jobs
  3. People go back to school hoping it will improve their chances of getting a job
  4. People stay in school longer because they cannot find a job
  5. Disability and disability fraud

Were it not for people dropping out of the labor force over the past several years, the unemployment rate would be well over 9%.

Mike “Mish” Shedlock