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Everything You Need to Know About December Labor Stats ^ | January 5, 2013 | Mike Shedlock

Posted on 01/05/2013 6:27:59 AM PST by Kaslin

Initial Reaction

The establishment survey report of +155,000 jobs was about what most expected.

However, beneath the surface, this report looks weak.

The household survey shows a gain of a mere 28,000 jobs. The unemployment rate stayed the same although the number of people unemployed rose by 164,000.

December BLS Jobs Report at a Glance

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

December 2012 Jobs Report

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

Nonfarm payroll employment rose by 155,000 in December, and the unemployment rate was unchanged at 7.8 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in health care, food services and drinking places, construction, and manufacturing.

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 mid-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 5.3 million jobs. Of the 8.8 million jobs lost between January 2008 and February 2010, approximately 60.22% have been recovered (not accounting for normal demographic-related job growth).

In 2012, employment grew by an average of 153,000 per month, the same as the average monthly gain for 2011.

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?

Once again, recall unemployment is based on the household survey.

Current Report Jobs

Average Weekly Hours

Average weekly hours have improved substantially but are still below where they were at the start of the recession.

Index of Aggregate Weekly Hours

The index of aggregate hours paints a good picture of the stall in the recovery. Employment is up, but hours are not up proportionally.

Average Hourly Earnings vs. CPI

Average hourly earnings has been falling for years and lagging CPI inflation since September 2009. Simply put real wages have been declining. Add in increases in state taxes and the average Joe has been hammered pretty badly.

For further discussion, please see What's "Really" Behind Gross Inequalities In Income Distribution?

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.

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

click on chart for sharper image

In the last year, the civilian noninstitutional population rose by 3,766,000. Yet the labor force only rose by 1,566,000.

Those "not" in the labor force rose by 2,199,000 to 88,839,000.

The massive rise of those "not" in the labor force is primarily economic weakness, not demographics. Actually, older workers are returning to the work force because they cannot afford retirement. One look at the average age of Walmart greeters and those working in fast food restaurants tells a story itself.

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 (in Thousands)

click on chart for sharper image

There are 7,918,000 workers who are working part-time but want full-time work. This is a volatile series.

BLS Alternate Measures of Unemployment

click on chart for sharper image

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 who 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 14.4%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Duration of Unemployment

Long-term unemployment remains in a disaster zone with 39% 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.

Last month shows pronounced weakness in the underlying numbers, this month was weak again.

For a look ahead to 2013, please see Small Business Owners' Hiring Intent Plunges to 2008 Lows; Don't Blame Sandy or Fiscal Cliff.

TOPICS: Business/Economy; Culture/Society; Editorial

1 posted on 01/05/2013 6:28:03 AM PST by Kaslin
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To: Kaslin

Great article by Mish.

Here is some additional info.

2 posted on 01/05/2013 7:41:08 AM PST by whitedog57
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To: Kaslin
"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."

What does the government have to gain by lying and distorting the data? I thought after Obama was elected that they'd quit.

3 posted on 01/05/2013 8:03:03 AM PST by blam
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To: blam
If the Left wanted to fool voters, and just wanted to get a good outcome in Nov, then around this time in 2013, they might start letting the truth slip out. Why hide it? The die is cast, and they got want they wanted.

But that's not the play they're making.

If the Left wanted to destroy the country and drive us down a road of no return, then they would want to get as far down that road as possible. They need the lies and destruction to continue for as long as possible so that few people rise up and say, "Hold on now! What are you up to??"

That's the game. They will play it until forced to stop.

4 posted on 01/05/2013 8:10:51 AM PST by ClearCase_guy (Nothing will change until after the war.)
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To: Kaslin
Of the 8.8 million jobs lost between January 2008 and February 2010, approximately 60.22% have been recovered (not accounting for normal demographic-related job growth).

Do they mean they're getting the same jobs back, or they're replacing their full time jobs with benefits with part time jobs? Over the past few months, that accounted for some of the job growth.

5 posted on 01/05/2013 8:11:59 AM PST by TwelveOfTwenty (Ho, ho, hey, hey, I'm BUYcotting Chick-Fil-A)
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To: Kaslin

Excellent article discussing many aspects of unemployment and government statistics about it. Thanks for posting this.

6 posted on 01/05/2013 8:46:34 AM PST by AFPhys ((Praying for our troops, our citizens, that the Bible and Freedom become basis of the US law again))
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To: Kaslin; GeronL; JRandomFreeper; Buddy Sorrell; samadams2000; ThunderSleeps; tarawa; Spktyr; ...
165,000 jobs lost?

So my guess that the WARN numbers I'm tracking are about 50% of the real number wasn't that far off. I had predicted 136,000 new unemployed based on my hard count of 68,000 reported WARN notices and layoffs.

Next time I'll use a 2.5X correction factor and see just how close I can get... has already announced more than 3200 job cuts this week.

7 posted on 01/05/2013 9:20:51 AM PST by null and void (The world is full of Maple Streets.)
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To: null and void


You are doing a good job.

8 posted on 01/05/2013 10:31:09 AM PST by GeronL (
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