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Is Unemployment Really Declining?
This article originally appeared in The Daily Capitalist.
I tend to believe the BLS unemployment numbers in that they indicate marginal gains in employment, although they are probably statistically insignificant. Last Friday's report said that the civilian unemployment rate declined to 8.9% from 9.0%.
According the the BLS:
The number of unemployed persons (13.7 million) and the unemployment rate (8.9 percent) changed little in February. The labor force was about unchanged over the month. The jobless rate was down by 0.9 percentage point since November 2010. ...
The number of job losers and persons who completed temporary jobs, at 8.3 million, continued to trend down in February and has fallen by 1.2 million over the past 12 months. The number of long-term unemployed (those jobless for 27 weeks or more) was 6.0 million and accounted for 43.9 percent of the unemployed. ...
In February, 2.7 million persons were marginally attached to the labor force, up from 2.5 million a year earlier. (These data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. ... Among the marginally attached, there were 1.0 million discouraged workers in February, a decrease of 184,000 from a year earlier. ...
From Econoday:
By major sectors, the goods-producing numbers look good, showing a 70,000 jump, following a 35,000 rise in January. For the latest month, manufacturing jobs advanced 33,000 after a 53,000 boost in January. Even better, only 1,000 of the February gain in manufacturing was for motor vehicles. Construction employment increased 33,000 in February, following a 22,000 decline the prior month. Mining rose 4,000 in February.
Private service-providing jobs jumped 152,000 after a 33,000 increase in January. The latest was led by a gain of 47,000 in professional and business services with 16,000 coming from temp help. Health care employment continued to increase in February, expanding by 34,000. Transportation and warehousing employment increased by 22,000 in February, with half of that gain in truck transportation. On the downside, employment in retail trade slipped 8,000-possibly due to adverse winter weather.
Government jobs fell 30,000, following a 5,000 dip in January.
Here is the U-6 data, showing that the broadest measure of unemployment also declined:
The BLS data is consistent with the job cut report for the prior week (Feb 25) which showed another decline in new claims for unemployment benefits:
In order to test this data, we would expect that private data, such as from ADP and Challenger would be consistent:
The inconsistency in the Challenger report is that it is heavily loaded with government/nonprofits layoffs which skew its data: otherwise they reported private employment as being flat.
So then, why did Gallup come out with a far more negative survey?
Note the household survey of unemployment trend going up as opposed to the BLS trend going down for the same period. Gallup interviews 18,000 people at random and concluded that 10.3% of those are unemployed. The BLS household survey interviews 60,000 people. So who is right? I'm not a statistician so I don't know. Mish usually likes this kind of stuff, but I checked and he doesn't know either. The only thing I can say is that Gallup's data doesn't match the BLS, Challenger, or ADP.
The less sanguine parts of the report were that the civilian labor force participation rate, at 64.2%, and the employment-population ratio, at 58.4%, were unchanged in February. Also, average hourly earnings increased by only 1 cent to $22.87. Which means wage growth remains stagnant. Like Dave Rosenberg, I find this dismaying news but not unexpected. Rosenberg points out that wages have been declining for the past three months:
Why not unexpected after the government's (I include the Fed here) massive efforts at fiscal and monetary stimulus? They have been beating this drum since 2008, and it didn't work then and it won't work now. If you wish confirmation of employment growth, keep waiting until the data is all consistent (job growth, wage growth, loan growth, real estate stabilization).
My belief is that there are natural forces in the economy that tend to repair the problems without any government help (but with plenty of government hindrance). This is the difficult process of liquidating the malinvestments made during the boom phase which is ongoing. One of the major factors of any recovery is a strong manufacturing sector, and indeed, manufacturing is rising. But one reason is the declining dollar and the attractiveness of U.S. goods and services abroad. This is reflected in our international trade:
This "cheap dollar" policy is a direct and intentional result of our fiscal and monetary policy as much as any organic economic growth. As we all know, the currency markets are fickle and another shock somewhere in the world, perhaps the continuing one in the eurozone, will kick the dollar back up despite QE2. But, I believe the continuing trend for the dollar will remain negative in the face of massive fiscal deficits being monetized by the Fed.
I expect the employment situation to moderate during 2011 but I don't expect to see the job growth needed to significantly drop unemployment levels back to pre-crash levels. At best it will s-l-o-w-l-y decline as we meet inflation head-on.
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There are a lot of home-based opportunities right now. I think, its just a matter on how people look for the job and keep a tight budget. Currently I am managing a site about vancouver condo rentals in which I also promote the site.
With out a doubt the most comprehensive I've seen. Very well done!!! appreciate the hard work and time taken to do this write up.
http://employmentgenius.com/
Allow me to fix that title for you econ:
Man, Employment is Really Declining!
service and 'paper pushing' sectors always benefit the most during inflationary prosperity only to be revealed as a waste of time after money creation is halted.
The problem with the metrics is that they aren't inclusive of the whole population. Once you pass through the existing 'filters' you are cast aside and you aren't counted any longer. If the metric was worth anything it would constitute the whole of the populace, account for increases in population and not discard you when you fell out of one bucket and into another or into oblivion (post 79-99 weeks?). I.e. it would be all inclusive.
In other words, what we have is an unemployment metric that can actually decline when in fact there are so many on the other side of the fence "that we don't count" that the exercise becomes meaningless.
In other words, if you have 1000 people, 999 have been unemployed for longer than any BLS measure counts in any metric and the one remains employed what do you have? Reducto ad absurdum
I believe that over the course of a number of years that what we have now, which measures little to nothing, was designed deliberately to work this way.
smite me if I'm overzealous but that's my .02 and I'm sticking with it.
We're at about 23% Real Unemployment about now aren't we?
Taking into consideration the people that have given up and will begin living the life of Sheen.
Drugs/Booze/Hookers/and doing their own web-telecasts!
Yes..... All GOVT figures are Bogus. They put down what they need.
How would you ever check it ??????
Why are you supposed smartypants discussing fake numbers as if they were to be discussed at all. And does anyone know what Conchy Joe means? I do - dat's a Bahamian! What's up bey!
Does a wild bear use a bidet?
In the woods..?
Conchy Jo, thanks for taking the time to illustrate. Wage and staffing cuts remain in my neck of the woods too where the work requires skill as well. Demand for new hiring (a few Qs from now) will likely have more to do with retiree replacement then growth as more and more baby boomers take the leap and say FUCK IT to the grind.
The state of the Social Security Trust fund could be telling a real story of fewer people in the workforce supporting growing pool of dependent older people. In this instance the trust fund was actually improving a notch through January 25, when the fund hit 4.652 trillion. However since that date the trust has seen $36 billion dissipated (through March 7). It is my understanding that the payroll tax decrease is being paid out via the general budget, which makes the situation doubly dire.
I don't know of an engineering firm that hasn't done both layoffs and pay cuts here in Florida. While 75% of my engineering/scientist friends are still employed, almost all have lost significant benefits and 90%+ have taken paycuts. My former company has done 3 rounds since 2008, putting the majority of the remaining senior staff at 50 - 60% of their 2008 salaries. They closed 5 offices shortly before I left.
My current company has fared better, but still 25 - 40% salary reductions across the board from 2008 levels (again, not counting bonuses and benefits).
As far as what work is out there, we used to see 2 or 3 good projects to bid on a week (city, county, state and federal), now I would say we don't see that many in a month. The majority of my clients are all private corporations and individuals that are in the "just get by" mode. The majority of my clients have done pay cuts and layoffs as well. None feel that this is getting better, but many feel it isn't getting worse.
Underemployment is another key that isn't properly factored in. None of these people are spending money on anything but their morgages, loans and essentials.
If all those that were dropped from labor force participation since this recession began were counted the U3 unemployment rate would be 11.5%+. Nuff said.
I share views of John Law Lives. Not being an engineer,I was involved in international trade when most imports were initially autos and low end apparel limited by quotas. Then multinationals realized profits at top could be maximized by outsourcing just about anything with lobbyists working hard to eliminate tariffs and quotas entirely. Walmarts and other retailers also came out of the closet and followed trend by importing directly ,rather than through small importers which also killed jobs along entire supply chain.
So here we are today ,stuck in a consumer economy that cannot be sustained, high unemployment, huge deficits ,with a blind faith that somehow with a little more time the free market and financial system will save or pull us out of this mess. Even Fed admits to juicing stock market as solution of last resort
While I was fortunate to benefit from the rise in international trade, I now believe it will be a detriment or not a solution for the younger generation in achieving real growth and prosperity. Good luck
To see the true facts check out John Williams shadowstats.com
Unemployment has been over 20% since 2009
Shadowstats does not class folks as "employed" just because they have been counted at "unemployed" for x number of weeks,,,
you must consider 3 data series to understand employment: 1. labor force participation 2. people out of work who want to work (whether discouraged or not) 3. pay roll withholding taxes
number 1 is falling, number 2 is climbing 3. and i don't know what 3 is but last i looked it was declining or flat...
the usa is in for chronic high unemployment because it has a hostile business environment from an awful tax structure which benefits the super rich and hurts the middle classes and because it's fiscal and monetary policies drive capital destruction. the usa is eating its seed corn.
without capital investment wages must fall and unemployment must rise. and the asshole wall street banksters are aiding and abetting the destruction.
Do you work for CNBC?
If you start from a false baseline of 9% or some fractional variation, say 9.2,9.3 etc and then you modify the birth/death model to give an even more optimistic estimate and you disregard totally the long term unemployed, then if you can't manipulate a positive increase in employment, than you aren't really keen on statistical manipulation.
What shall we believe the reality reflected by all the other data points like 44.1 million people on food stamps and record foreclosures, 5,000 applicants showing up for 1 job opening, or shall we believe the BLS?
I'd have to say the government pretty much always lies about pretty much everything, so why anyone would feel that government statistics have any integretity is beyond my reckoning abilities.
"Self aware robots" need to be built by self aware sheeple...Good luck with that one.
Any job creation data these days needs to be QUANTIFIED. I want to know what kinds of jobs are being created and what sort of salaries and benefits they involve. If white collar jobs are being exported and blue collar jobs are replacing them, the supposed drop in the U3 levels doesn't mean very much. It is a losing proposition.
I hate to say it, but I honestly believe some of the goddam "Free Trade" elite want to develop a middle class in China and India etc. at the expense of our own. Those SOBs are treasonous snakes.
If unemployment is going down, why is the number of homeless who hit on me for money every day going up?
The BLS has an agenda; both Gallup and Shadowstats do not.
Every1 has an 'agenda' didn't you learn anything ?
Coming from the trenches, it is not getting much better out here for engineers or scientists.
And that is the FUCKING RUB at the end of the day, isn't it.
A dragon, not the pathetic sheeple, is being awakened.
www.dailyjobcuts.com shows a dismal dismal picture.
That is a shame. As a retired engineer (I have two engineering degrees), I know how much work goes into earning engineering degrees and working in that field. It is a shame that so many jobs have been sent abroad in the pursuit of cheap widgets. I saw this happening in the early-to-mid 1990s before Lou Dobbs had anything to say about it. I am very fortunate that I could retire. Good luck out there.
Depends on the company, some are hiring big time. Overall, it is down though. Mostly "service" sector jobs, as the data shows. No need for highly educated people in the coming world of self-aware robots.