Friday, December 7, 2012

Unemployment Rate Edges Down to 7.7 Percent as Job Growth Slows---Reminder we have a jobs crisis!


New job data is out (chart via Calculated Risk).  Its a good reminder that we have currently have a jobs crisis not a "fiscal cliff" crisis on our hands.  

CEPR has a rundown:

The unemployment rate fell to 7.7 percent in November, its lowest level since December of 2008. However, the immediate cause was a drop of 350,000 in the size of the labor market as reported employment actually fell by 122,000. The establishment survey reported job growth of 146,000. With the prior two months growth revised downward by 49,000, this brings the average over the last three months to 139,000. This is somewhat worse than the 158,000 average rate of job growth over the last year.

The private sector accounted for almost all the November job growth, adding 147,000 jobs. Average growth over the last three months has been 153,000. All the loss in public sector employment over this period was attributable to decline in employment of 50,000 in local government education. Without the loss of jobs in this sector, government employment would have been essentially flat over the last year....

....On the whole, the data in the November report show pretty much the same picture as what we have been seeing over the last six months. The economy is creating jobs at a rate that is a bit faster than what is needed to keep pace with the growth of the labor market. At the current pace, we would not see the economy returning to full employment for another decade. Furthermore, there are more downside risks than upside -- for example, if there were to be severe deficit reduction as a result of the current negotiations between President Obama and Congress.

Paul Solman make a really important point when he takes a closer look at the numbers--Great Jobs Numbers? U-7 Says It Ain't Necessarily So

And at first glance, the "household" survey of actual people made a similarly upbeat proclamation: unemployment dropping to 7.7 percent.

But if the month-to-month payroll number means little, headline unemployment fluctuations may mean even less. Reported as "U-3" by the BLS, the headline unemployment percentage excludes anyone who didn't look for a job in the past 4 weeks. Counted as employed, therefore, is anyone who worked at least one hour in the past week, even if they said they were "part-time" for economic reasons and wanted, desperately even, full-time work.

That's why we tally U-7, which totals everyone who says they want a job -- the BLS asks this very question each month -- and adds everyone who is working part-time but tells the survey taker that s/he wants to work full-time. U-7 dipped from 16.69 percent to 16.60 percent in November, hardly the headline drop from 7.9 percent to 7.7 percent. Without numbing you with the arithmetic, the U-3 drop is five times larger than what happened to U-7. So what explains the difference?

The answer lies deeper in the data. The US "civilian noninstitutional population" grew by a couple of hundred thousand but the labor force shrank by more than a quarter of a million. That's a whole lot of people who didn't die, didn't emigrate. So where did they go? Given the BLS definition of "labor force," they were no longer laborers -- presumably because they hadn't looked for work in the past four weeks.

This would jibe with another downbeat statistic. A full hundred thousand fewer Americans were reported as "employed" (even if only super-part-time, remember), though this could be Sandy related. And the shrunken labor force also corresponds to the "fact" that some 200,000 people were subtracted from last month's "unemployed" total. They are simply no longer "unemployed" by U-3 standards. But they almost surely consider themselves to be if you take seriously the "persons who want a job" number, which rose dramatically in November.

Bottom line, today's "healthy" drop in U-3, it would appear, is nothing to write home about. As for the payroll survey surge, relative to low projections in the wake of Sandy, I don't know what to make of it except to proceed with caution. I can't count the number of times, over the years I've been looking at the BLS data, that the payroll and household surveys have contradicted one another. As economist Dean Baker wisely counseled me long ago, look at trends, not the latest monthly blips.

No comments:

Post a Comment