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

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Monday, May 7, 2012

Employment Situation

This is clearly a few days late, but I don't work on Fridays anymore.
Well, more accurately, I don't come in to the office on Fridays.  Having a 19-month-old means I still work on Fridays.  But that's neither here nor there.  The point is, this is a few days late.
The Employment Situation Report is one of the big reports.  It's put out by the U.S. Department of Labor's Bureau of Labor Statistics, and it is the official word on how - wait for it, you may not guess from the name - non-farm employment looks in the United States[1].  It's a lagging report, looking at the previous, and it has the power to shake the heavens.  Or to, at least, shake the markets for the day.  It is, after all, a look at the health of the economy.
The Econoday-surveyed analysts were pretty optimistic before the report came out on Friday.  They were looking to see 165,000 new nonfarm jobs added in April, to see the unemployment rate remain steady at 8.2%[2], to see average hourly earnings increase 0.2%, and for the average workweek for employees to remain at 34.5 hours.
I won't try to build any suspense out of this, because the data came out something like 72 hours ago.  Instead, let's just go ahead and jump right into the optimism-crushing news delivered by The Employment situation - April 2012 Report.  Nonfarm payroll employment rose by 115,000 (missing expectations terribly), and unemployment shrank mildly to 8.1%.  The average workweek remained steady at 34.5 hours, and average hourly wages rose $0.01 (or about 0.04%).
Now, let's have a look at that 8.1% unemployment rate.  That represents about 12.342 million people (5.1 million of whom have been out of work for 27 weeks or longer), and constitutes people that are not currently working but who have looked for work in the past 4 weeks.  That number decreased by 0.159 million from March.  But here's something interesting.
There are two categories of people that are not considered unemployed, that many economists believe should be.  These are people "marginally attached to the labor force" and people who work "part time for economic reasons".  "Marginally attached to the labor force" means that you are out of work, that you want to work and can work, and that you have not looked for work for at least 4 weeks.  There are 2.363 million people in this category (an increase of 0.011 million from March), 1 million of whom have given up hope of finding work.  "Part time for economic reasons" means people who are working a part-time job, who want full time employment but can't find it.  There are 7.853 million of these people (up 0.181 million from March, handily absorbing the entire decline in the official unemployment rate).  Factoring these people in, you get an unemployment rate of 14.8%.
So anyway, in a "better late than never" sort of way, you now have a little more insight into what happened to the markets last week.
[1]  No, I don't know why they don't consider farm employment to be employment.
[2]  And we'll be looking hard at that percentage in a moment.

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