Unemployment: 9.4%
The monthly employment situation report came out this morning. Payrolls declined by 247,000, after a 467,000 drop in June. The unemployment rate moved from 9.5% to 9.4%. The Bloomberg consensus range for payrolls was -375,000 to -190,000, but the -190K was a bit of an outlier; the quoted consensus from Bloomberg was -300K. The consensus range for the unemployment rate was 9.5% to 9.8%, with a quoted consensus at 9.7%. The slowing hemorrhage of jobs is a genuine improvement (subject to sampling errors), but the decline in the unemployment rate is not. According to the household survey (one component of their statistics), 637,000 net people have left the labor force, and they no longer get counted as unemployed. Since this is July data, I don’t think this can be explained by people deciding to go back to school. I’d focus on the payroll number instead of the unemployment rate for this report.
Nonfarm payroll employment continued to decline in July (-247,000), and the unemployment rate was little changed at 9.4 percent, the U.S. Bureau of Labor Statistics reported today. The average monthly job loss for May through July (-331,000) was about half the average decline for November through April (-645,000). In July, job losses continued in many of the major industry sectors.
In July, the number of unemployed persons was 14.5 million. The unemployment rate was 9.4 percent, little changed for the second consecutive month.
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The number of long-term unemployed (those jobless for 27 weeks or more) rose by 584,000 over the month to 5.0 million. In July, 1 in 3 unemployed persons were jobless for 27 weeks or more.
The civilian labor force participation rate declined by 0.2 percentage point in July to 65.5 percent. The employment-population ratio, at 59.4 percent, was little changed over the month but has declined by 3.3 percentage points since the recession began in December 2007.
Former engineers and bankers working in food services or retail for 10 hours a week do not count as unemployed, but they are arguably underemployed. While not captured by the official unemployment number (U-3), they are captured in the U-6 number from Table A-12, the alternative measures of labor underutilization (BLS term). The number remains unchanged from last month at 16.8% (a dip from 16.5% to 16.3% seasonally adjusted).
You might hear a couple complaints about this report. First, the BEA and the BLS have both gone back and revised a large number of statistics for the worse. Many of these statistics are related to employment. Some, such as GDP, are a little indirect, but some, such as the income tax withholding numbers, are quite directly related. This caused some people to predict a worse number on this report. Those people were expecting those revisions to somehow be incorporated into this report.
Other people are going to complain about the sources of sampling errors in the report. You might hear complaints about the seasonal adjustment factors. This is a bit of an unreasonable source of concern, because there is a large seasonal component to employment. For a comparison, you either should look at a seasonally adjusted number, or the monthly change in the year-over-year difference unadjusted. The latter is a little complicated to interpret because of the non-uniformity of the sizes of the labor pool from one year to the next, so we are left with the former. The other complaint, though, is a correction term called the birth / death model. It has shown job growth in every month since the start of the recession. That means that new businesses are outnumbering small business closures every month. There are official statistics that disagree with this. More importantly, a walk down any commercially zoned district in the US disagrees.
Some people will use a variety of arguments against these numbers, arguing that the actual numbers are much worse. They will point to a variety of other government statistics and question the methods used in this report. For those people, I offer this quote from the ancient philosopher Homer (Simpson): “Facts are meaningless. You can use facts to prove anything that’s even remotely true.”
Why use seasonally-adjusted U-3 and non-seasonally-adjusted U-6? It looks like the change in both is just seasonality as there was no change from June in the non-seasonally-adjusted numbers for either.
