The Strangest Number In Today's Jobs Number
While we already presented the explanation for the dramatic drop in today's unemployment report (almost entirely driven by the surge in part-time jobs for economic reasons, hardly a thing to be proud of as more and more full time jobs, especially those on Wall Street, are a thing of the past, while the transition to a part-time worker society has been documented extensively in the past here), there is another number that is by far the most perplexing in today's NFP dataset: that showing the employment of workers in the 20-24 year age category (both seasonally adjusted and unadjusted). See if you can spot the outlier in the chart below.
The chart above shows the sequential change in Non-Seasonally Adjusted jobs for the 20-24 year old cohort (aka those who normally are in student age) into the month of September going back to 1980, as represented by the Household Survey.
We have shown just 22 years of data, but believe us: in this data set, the September NSA jobs change has been negative every single year since the beginning of data collection. Except for 2012 (and considering the surge in temp-jobs for economic reasons, one can be certain that if indeed correct, all these young people obtained primarily part-time jobs, if any).
Ok, what about the Seasonal Adjusted: after all that Arima-X-12 data fudger should be put to good use. Well, here is the data:
Cutting to the chase: the September surge in Seasonally Adjusted jobs give to 20-24 year old is the biggest in decades. This is on top of the only positive NSA increase in 20-24 year old jobs in history.
How does one explain this stunning discovery? RBS's Richard Tang, who noted it first, proved one explanation:
While we cannot be certain, the back-to-back gains in September 2011 and September 2012 could reflect a decision by younger workers to remain in the workforce rather than pursue a higher education. Given how difficult it is to get a job in the current environment, more young workers may be choosing to hold on to the jobs they already have. In fact, this does seem to be the case during periods of weakness/recessions. The last time we had back-to-back September gains in employment in the 20-24 year old cohort even approaching what we have seen in September 2011 and 2012 was in the 2000-2001 period. Prior to that, it was in 1984-85. In any case, the unemployment rate for 20-24 year olds plummeted from 13.9% in August to 12.4% in September, the lowest reading since November 2008. The 1.5 percentage point drop in September matched the sixth-largest monthly drop going back to 1948.
A valient effort but one thing remains outstanding: the record amount of student loans outstanding, and defaults, which as we explained last Friday, is indicative of one thing: everyone is doing their best to avoid the labor market in this worst possible time for jobs and is hiding instead in the "safety" of a Federally funded college education. This explains not only the record amount of student loans outstanding, well over $1 trillion in total, and over $900 billion just Federally funded.
So somehow in September, in addition to all the other discrepancies in the labor report, we have one more to add: that of the Schrodinger Student: one who is both in college and piling up student loans on one hand, yet on the other hand entering the work force in the month of September, a time when historically every single month in recorded history has seen an exit from the labor force for the 20-24 year old cohort.
We'll leave this one for Jack Welch to figure out.