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

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Friday, July 8, 2011

Employment Situation

Brace yourself.  No matter how this comes out, this will be big today.
This, of course, is the Employment Situation report.  It's that time of the month again, the time when the Bureau of Labor Statistics releases the official figures on how many jobs were created in the previous month, what the official unemployment rate is, and so on and so forth.  This is a huge and closely followed report, because employment and new jobs are a strong indicator of economic health, which is measured in GDP.
If you recall, the figures for May were not just sad, they were brutally depressing.  The analysts were looking for 170,000 new nonfarm jobs, and we added only 54,000.  The unemployment rate increased to 9.1%, representing 13.9 million people unemployed and looking for work - and 44.6% of those people had been out of work for more than 27 weeks.  The number of people employed part time for economic reasons declined slightly to 8.5 million and the number of individuals marginally attached to the labor force fell to 2.2 million[1], putting the effective unemployment rate at 16.1%.
The good news was that the average workweek increased to 34.4 hours, and average hourly earnings increased 0.3%.
Looking towards the June figures, the Econoday-surveyed analysts are mildly optimistic.  They're looking for 105,000 new jobs, for unemployment to drop to 9.0%, for the rate of increase in hourly earnings to drop to a 0.2% increase, for the average workweek to remain unchanged, and for private payrolls to increase 125,000.[2]  To find out how right they are, let's turn to The Employment Situation -- June 2011, where we see...
If you haven't clicked that link yet, sit down first.  Listen to some mood music.
The Bureau of Labor Statistics is reporting that only 18,000 new nonfarm jobs were added in June - missing expectations by 87,000.  They describe unemployment as "little changed", rising "only" 10 bps to 9.2% (yes, also missing expectations).  That represents 14.1 million people unemployed and looking for work[3], with 44.7% of them having been out of work for 27 weeks or more.  An additional 8.6 million people were employed part time for economic reasons, and 2.7 million people were marginally attached to the labor force[4].  All of that puts the effective unemployment rate at 16.53%.
In the wake of all that, people probably aren't too worried about the other predictions.  But let's check them anyway.  Average hourly earnings decreased - not "slowed to a lower rate of increase" but actually decreased - by 1%, and the average workweek decreased 0.1 hours to 34.3 hours.
Finally, and here's the icing on the doom cake, last month's total new nonfarm jobs was revised from the original 54,000 down to only 25,000.
"It takes a worried man to sing a worried song
"It takes a worried man to sing a worried song
"It takes a worried man to sing a worried song
"I'm worried now, but I won't be worried long."
[1]  To recap:  "employed part time for economic reasons" means "working a part time job because they can't find anything better", and "marginally attached to the labor force" means "would like a job, but isn't looking any more because they've given up hope of finding one".
[2]  In other words:  they're expecting the private sector to add 125,000 new jobs and the public/nonprofit sector to lose 20,000 jobs.  Which seems fairly consistent with the Challenger report data.
[3]  Yes, in the world of the BLS, 200,000 more people out of work is "little changed".
[4]  Meaning, if you're playing the "bad news bingo" home game, the number of people employed part time for economic reasons increased by 100,000 last month, and the number of people marginally attached to the labor force increased by 500,000.

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