"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

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Friday, December 3, 2010

Employment Situation: The 800 lb Gorilla Of Metrics

It's that time of the month. The time of the month when the Bureau of Labor Statistics collates data points and puts out a report that makes the markets sweat blood.

Yes, sir, it's time for the Employment Situation.

Let's start off with a recap of October: nonfarm payrolls were up a total of 151,000, with private payrolls up 159,000. The unemployment rate was 9.6%, and average hourly earnings increased by 0.2%.

For November, the Street is feeling optimistic. They're expecting to see an additional 168,000 nonfarm jobs created, and they're expecting to see average hourly earnings increase an additional 0.2%. They are also, however, expecting to see the unemployment rate rise to 9.7%.

Now, how did we do? To start with, go ahead and pull up the Employment Situation at http://www.bls.gov/news.release/empsit.nr0.htm. Go ahead. I'll wait.

Now, let's start with the dry facts. Nonfarm payroll employment was up only 39,000 in November - far less than the 168,000 consensus projection (far less than the low end of the consensus range for that matter, which still called for a 100k increase). The breakout is as follows:
* Temporary Help Services jobs increased by 40,000
* Health Care jobs increased by 19,000 (8,000 of which were in hospitals)
* Mining jobs increased by 6000.
* Retail Trade employment fell 28,000 (9000 in department stores, 6000 in home furnishing stores)
* Manufacturing Jobs fell 13,000.

The unemployment rate hit 9.8%, with 15.1 million unemployed - a figure that includes the 390,000 people who lost their jobs in November, the 9.1 million people who are "short term" unemployed [1], and the 6.3 million who are "long-term" unemployed [2].

This unemployment figure does not count in three categories of people: individuals not looking for employment, individuals "marginally attached to the labor force" [3], and individuals "employed part time for economic reasons" (aka "involuntary part-time workers' or "the underemployed"). There are obviously no figures on people who are not looking for and are not interested in obtaining work. There are 2.5 million people who are "marginally attached to the labor force" (1.3 million of whom no longer believe they will be able to find a job), and 9.0 million "involuntary part-time workers". In other words, the unemployment rate would be 11.39% if we actually counted the "marginally attached to the labor force" unemployed, and goes up to 17.23% if you also include the "involuntary part-time workers" (which is not unreasonable if you think about it).

Average hourly earnings for the people who are still employed increased by $0.01 to $22.75. In percentage terms, that is not quite unchanged - it was up 0.04%.

So, the results? Grim. No matter how you slice it, the employment situation is bad.

[1] Unemployed for less than 27 weeks.
[2] Unemployed for 27+ weeks.
[3] The difference between people not looking for work and people marginally attached is this: the second category want a job, can't find one, and haven't looked for at least 4 weeks because they've run out of hope. Source: "Who is counted as unemployed?" from http://www.bls.gov/cps/cps_htgm.htm#unemployed.

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