Unemployment: Some "Good" News

Econophile's picture

This article originally appeared in The Daily Capitalist.


Here is a good summary of yesterday's employment news:

We actually have some positive news in that the Establishment Jobs Survey shows that total private nonfarm employment increased by 159,000 jobs. But the negative is that there weren't enough new jobs created to reduce the overall unemployment rate which is stuck at 9.6% (the so-called U-3 rate of unemployment in the Household Survey). There are 14.8 million unemployed workers.

The overall total rate of unemployment (U-6) is still high at 17%. The U-6 rate accounts for "persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule." 42% of unemployed Americans, or 6.2 million people, were out of work for more than six months.

Click chart to enlarge

In the private sector, service-providing jobs advanced 154,000 after an 111,000 increase in September. Within services for October, temp help gained 35,000; health care added 24,000 jobs; and retail trade jumped 28,000. Goods-producing industries edged up 5,000 after a 4,000 dip in September. In the latest month, manufacturing was little changed, slipping 7,000; construction rose 5,000; and mining increased 8,000.


Average hourly earnings gained 0.2 percent in October after rising 0.1 percent in September. The October number matched the market forecast. The average workweek for all workers edged up to 34.3 hours from 34.2 hours in October, marginally topping expectations for 34.2 hours. On a year-ago basis, overall payroll job growth rose to up 0.6 percent in October from up 0.3 percent the month before.

If we factor in the new jobless claims, we can see from the report for the week of October 23 that they are stuck in the 440-490,000 range since December 2009.

The Challenger, ADP, and Monster indices have flattened out as well. This indicated that job creation is on stall mode, but perhaps starting to slightly improve as the Establishment Survey shows us.

If anyone can find the brown lining in the silver cloud, it is Dave Rosenberg at Gluskin Sheff:

The headline was undoubtedly strong, as were some of the details, but we want to warn readers that this was not a universally solid report. First, within the nonfarm report itself, virtually all the gains were in three sectors — health/education, retail trade and waste/administrative services. Goods-producing employment barely rose. The diffusion index for private payrolls dipped in October, to 55.0 from 55.6, which is a four-month low, and for manufacturing, the diffusion index fell to 42.1 from 54.3, which is the lowest since December 2009. So while there was depth to the report, in terms of magnitude, there was not a whole lot of breadth to it. Many sectors still reported job declines last month, including manufacturing, commercial and residential construction, transportation, information, financial and government. As I said, not a universally strong report, notwithstanding the solid headline results.


Moreover, the Household Survey showed a 330,000 decline in October, and again, full-time jobs declined, as they have for each of the past five months for a cumulative plunge of 1.1 million. The employment-to-population rate — the share of the population that is working — fell to 58.3% from 58.5%, a 10-month low.

Tyler Durden at Zero Hedge has calculated that we need to create about 232,400 a month to bring employment back to pre-crash levels by the end of Obama's second term. Obviously we are nowhere near that. Which is why Ben Bernanke is gambling with our future by printing money to stimulate the economy. It will end badly in my opinion with inflation without the growth (stagflation).

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BORT's picture

Does anyone understand the changes in seasonal adjustment that were applied to the recent data?  Some are claiming there was a large change in seasonal adjustments that made the number look better

THE JOBS REPORT FOR OCTOBER was released by the Bureau of Labor Statistics on Friday, and at first blush was surprisingly strong, much stronger, indeed, than expected. Payrolls expanded by 151,000 and the two previous months' were revised upward. But hold the hurrahs. The unemployment rate was stuck at 9.6%, and, toss in the underemployed and the rate remains at an elevated 17%.

Moreover, the household version of the employment picture was a real bummer, showing an employment drop of 330,000. That especially weird disparity between the household and the payroll reports made us do a double-take. Happily, the always astute Stephanie Pomboy of MacroMavens provided a quickie explanation:

"The seasonal bar which the payroll data must jump was (inexplicably and dramatically) lowered from prior Octobers."

Thus in October 2009, the BLS set the bar at 870,000 jobs, similar to the 840,000 it anticipated in October 2008. This year, by contrast, it lowered the bar to 768,000. Mumbo, jumbo, payrolls presented "an upside surprise" of 100,000.

According to John Williams at Shadow Government Statistics, the BLS' fiddling with the figures via what he calls "seasonal-factor games" actually created 200,000 phantom jobs last month. John cites such finagling as the reason his prediction of an October decline and a rise in the jobless rate was wrong. It also explains why seasonally adjusted payrolls were revised upward by 110,000 in September including 56,000 in August.

As we've observed before, those seasonal adjustments sure are magical: They can make it snow in the Sahara and be hot as blazes in the middle of winter in Siberia.

onlooker's picture

------“Benny continues with these QE's he is shooting himself in the foot.”------ Not to quibble about semantics, but Benny has shot you and me and our children in the foot. Not to mention the entire US population. 

Everyman's picture

Point ceded to you sir.  You are correct, he IS shooting us.  Can we shoot back now?

BORT's picture

The total net imbalances in goods in international trade is about $600 Billion per year.  We have a positive imbalance in services of about $150 Billion, so I guess under your reasoning the QE is reduced by 20% of $450 Billion, or $90 Billion.

BORT's picture

Gasoline this week at my station went from $2.75 to $3.10.  That's a net increase in required spending(tax if you like) of $48 Billion on an annual basis with average daily consumption of gasoline at 9 Million barrels per day.  I assume it will continue to go higher until the American consumer goes on a buying strike like they did in 2007.  Then we will see a big problem, I'm afraid

Everyman's picture

Good point Bort.  You can also take that as a percentake reduction in the TOTAL QE funds as well.  What a lot of people are not understanding is that as Benny continues with these QE's he is shooting himself in the foot.  Think about it.  Remember that the banks and all were looking for $500 Billion in QE2 and they came out with $600 Billion.  Ever stop to think "why"?.  It is the devaluation in dollars.  He wants $500 billion, but by doing so he devaluates the dollar from the .78x to .70, an 11% loss, add in the extra $1000 Billion! It seems as if he is expecting actually 20% reduction of our money, so we are down to a $450 billion actual QE now with the gasoline only.  Add in the rest of the food and commoditity inflation, and that QE looks pretty light.

Everyman's picture

We have had a steady and static rate of about 14.4 million people that say they are "unemployed" for the last year.  That is despite what the liars at BLS say. 

Add in the effect of what Benny the psycho is doing and just the movement in commodities and the dollar and there will be no hiring for a long time to come.  Take the dollar for instance, just in the last month and a half it has gone down from 78.x to flirting with 70.  That is .08/.78x and it is almost a backwards value of dollars in our hand being 11% less than it was a month and a half ago!  Add in the fact that commodities are up about 20-25% on average over that same month and a half, and we were devalued greater than 35% and it will accelerate.

NO BUSINESS is going to hire with a decreasing dollar value and an increase in commidiy prices!  The writing is on the wall, and this economy is so fucked and so over.