Unemployment Rate 7.8%- The Web's Most Complete Report

Townhall.com ^ | October 6, 2012 | Mike Shedlock

[Kaslin]

Initial Reaction and Election Impact

The establishment report of +114,000 jobs was pretty much about what most expected. The four-month average is a mere 120,000 a month (a very weak set of establishment numbers for this point in a recovery).

However, the household survey surprise shows the unemployment rate fell three-tenths of a percent to 7.8%.

On the surface, this is a solid showing, and 100% certain to boost the Obama campaign. I suggest these numbers will overshadow a horrendously weak performance by the president in the debate.

That said, a closer look shows the entire drop in the unemployment rate can be attributed to a surprise rise of 582,000 in part-time workers. U-6 unemployment remained at 14.7%. U-6 includes part-time workers who want a full-time job.

Still, all things considered, this was the strongest report in four months.

Does it change my recession outlook?

No, it doesn't. A one-month potential outlier based primarily on a rise in part-time employment, accompanied by other weak data does not change my perception.

Jobs Report at a Glance

Here is an overview of today's release.

• September Payrolls +114,000 - Establishment Survey
• Four-month average +120,000 - Establishment Survey
• US Employment +873,000 - Household Survey
• Involuntary Part-Time Work +582,000 - Household Survey
• Baseline Unemployment Rate -.03 at 7.8% - Household Survey
• U-6 unemployment did not drop. It remained at 14.7%.
• The Civilian Labor Force +418,000

Recall that the unemployment rate varies in accordance with the Household Survey not the reported headline jobs number, and not in accordance with the weekly claims data.

Quick Notes About the Unemployment Rate

• US unemployment rate -.3 to 7.8%
• In the last two months the unemployment rate dropped .5%
• Reversing a three-month trend, those "not" in the labor force fell by 211,000
• In the last year, those "not" in the labor force rose by 2,643,000
• Over the course of the last year, the number of people employed rose by 2,867,000. 
• Participation Rate rose .01 to 63.6%
• Long-Term unemployment (27 weeks and over) was 4,844 million a decline of 189,000
• Were it not for people dropping out of the labor force, the unemployment rate would be well over 10%.

Over the past several years people have dropped out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low. Some of this was due to major revisions last month on account of the 2010 census finally factored in. However, most of it is simply economic weakness.

September 2012 Jobs Report


Please consider the Bureau of Labor Statistics (BLS) September 2012 Employment Report.

The unemployment rate decreased to 7.8 percent in September, and total nonfarm payroll employment rose by 114,000, the U.S. Bureau of Labor Statistics reported today. Employment increased in health care and in transportation and warehousing but changed little in most other major industries.

Click on Any Chart in this Report to See a Sharper Image

Unemployment Rate - Seasonally Adjusted



Nonfarm Employment - Payroll Survey - Annual Look - Seasonally Adjusted



Employment is above the total just prior to the 2001 recession, and about where it was in 2005.

Nonfarm Employment - Payroll Survey Monthly Changes - Seasonally Adjusted



click on any chart for sharper image

Between January 2008 and February 2010, the U.S. economy lost 8.8 million jobs.

Since the employment low in February 2010, nonfarm payrolls have expanded by about 4.7 million jobs. Of the 8.8 million jobs lost between January 2008 and February 2010, approximately 53% percent have been recovered (not accounting for normal demographics growth)

Statistically, 125,000+- jobs a month is enough to keep the unemployment rate flat. For a discussion, please see Question on Jobs: How Many Does It Take to Keep Up With Demographics?

Since the beginning of the year, job growth has averaged 145,000 per month, compared with an average monthly gain of 175,000 in 2011.

Current Report Jobs



Average Weekly Hours



Index of Aggregate Weekly Hours



Average Hourly Earnings vs. CPI



BLS Birth-Death Model Black Box

The BLS Birth/Death Model is an estimation by the BLS as to how many jobs the economy created that were not picked up in the payroll survey.

The Birth-Death numbers are not seasonally adjusted, while the reported headline number is. In the black box the BLS combines the two, coming up with a total.

The Birth Death number influences the overall totals, but the math is not as simple as it appears. Moreover, the effect is nowhere near as big as it might logically appear at first glance.

Do not add or subtract the Birth-Death numbers from the reported headline totals. It does not work that way.

Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another as noted by numerous recent revisions.

Birth Death Model Adjustments For 2011



Birth Death Model Adjustments For 2012



Birth-Death Notes

Once again: Do NOT subtract the Birth-Death number from the reported headline number. That approach is statistically invalid.

Note the historically rare occurrence this month of a negative non-January adjustment.

In general, analysts attribute much more to birth-death numbers than they should. Except at economic turns, BLS Birth/Death errors are reasonably small.

For a discussion of how little birth-death numbers affect actual monthly reporting, please see BLS Birth/Death Model Yet Again.

Household Survey Data



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In the last year, the civilian population rose by 3,701,000. Yet the labor force only rose by 1,059,000. Those not in the labor force rose by 2,643,000 to yet another record high 88,921,000.

That is an amazing "achievement" to say the least, and as noted above most of this is due to economic weakness not census changes.

Decline in Labor Force Factors

1. Discouraged workers stop looking for jobs
2. People retire because they cannot find jobs
3. People go back to school hoping it will improve their chances of getting a job
4. People stay in school longer because they cannot find a job

Were it not for people dropping out of the labor force, the unemployment rate would be well over 10%.

Part Time Status



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There are 8,613,000 workers who are working part-time but want full-time work. This is a volatile series, however, this month's jump of 582,000 is exceptionally large.

BLS Alternate Measures of Unemployment



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Table A-15 is where one can find a better approximation of what the unemployment rate really is.

Notice I said "better" approximation not to be confused with "good" approximation.

The official unemployment rate is 7.8%. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 14.7%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Note that U-6 unemployment did not drop. Only baseline unemployment did.

Duration of Unemployment



Long-term unemployment remains in a disaster zone with 40% of the unemployed in the 27 weeks or longer category.

Grossly Distorted Statistics

Given the complete distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is easy to misrepresent the headline numbers.

Digging under the surface, the drop in the unemployment rate over the past two years is nothing but a statistical mirage. Things are much worse than the reported numbers indicate.

[Snuph]

Real unemployment per real stats

http://www.shadowstats.com/alternate_data/unemployment-charts

[TwelveOfTwenty]

Were it not for people dropping out of the labor force, the unemployment rate would be well over 10%.

Romney should be pointing this out, especially that by this measure it has been over 10% over the past three years. From what I've seen, he will.

BTW, wasn't this participation rate adjustment Clinton's idea?

[Stosh]

Romney’s initial reaction (shown on Fox last night) to the unemployment scam was exactly that - he said explicitly that if the number of people in the work force was the same as it was when BO took office, the unemployment rate would be over 11%.

Now it doesn’t take a rocket scientist to guess whether that clip appeared on ABCCBSNBCetc.

My suggestion to the GOP: do a quick commercial pointing out that Obama’s approach to lowering unemployment is to make the economy so bad it drives people out of the work force (and then a quick graph with numbers to support that), while Romney’s approach would be to make the economy so good that it will draw people back into employment.

[tsowellfan]

More than that sometime around Jan 14th EVERYBODY’s federal emergency benefits end because that’s when the program expires. It does not matter if someone has just got on emergency unemployment in August, October or december - they all stop on that date.

What the republicans should do is put up a bill that extends the emergency unemployment benefits for 3 - 6 months. And offer cuts in other places (preferably in places Harry Reid would not like to see cuts) to offset the cost of the emergency unemployment.

This will put Harry Reid and his party in a very difficult position (between a rock and a hard place). It will NOT look good if his party votes against the unemployed victims of this pResident.

If this had been done earlier we would not be seeing 7.8% unemployment because the more people that get back into the program the higher the unemployment rate will reflect Realville as it heads up toward 11%.

Most likely we will see another drop in the unemployment rate next month. This is the time that those who went on emergency unemployment expire and are no longer counted as unemployed. This benefits Obama.

pssst, there's a reason why the desperate democrats who are facing probable defeat in both houses are biting their tongue and not crying for the extension at this time.

Their deafening silence will go away after election day and once again they will be calling for another extension. They cant have that happen now because the UE rate will again begin to rise as these people are again counted as unemployed.

If Romney wins and there is a new extension, the dems know that the UE rate will go up and they will make sure he owns every percentage point.

That's another reason why Romney should be pointing this out sooner rather than later.

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[palmer]

pssst, there's a reason why the desperate democrats who are facing probable defeat in both houses are biting their tongue and not crying for the extension at this time.

Thanks for the explanation.

[stocksthatgoup]

133,561,000 workers Jan 2009
133,500,000(P) workers Sept 2012
Total Non Farm Payroll Seasonal Adjusted
Bureau of Labor Statistics

http://data.bls.gov/pdq/SurveyOutputServlet?request_action=wh&graph_name=CE_cesbref1

[Raebie]

If Obama loses the next debate we might have 5% unemployment by the election...

[NTHockey]

Anyone smell a setup? 0bambi puts out these bogus numbers and when they have to be “adjusted” to the correct numbers, it will be Romney’s fault that unemployment goes up.

[zeestephen]

Great insight, fan, on the employment numbers and the MSM onslaught Romney must expect if he is elected.

The GOP establishment and our presidential nominees are ALWAYS the completely stunned victims of media mayhem.

Until Conservatives understand that the MSM is the dominant political force in America - not Obama, not the Democrats - we will always be playing defense and catch-up.