Thread: Unemployment Drops On Non-Existent Job Growth

Unemployment Drops On Non-Existent Job Growth

February 4, 2011 at 9:30am
by Mike Opelka
Comments 123

The January Jobs Report has shown a significant drop in the overall unemployment number as the government reports a move to 9.0% from 9.4% . http://abcnews.go.com/Business/wireStory?id=12839865 A nearly half-point drop in the jobs number will be seen by many as important, but behind that number is a startling statistic. Job growth was significantly less than expected. Dismally lower than expected. Only 36,000 new jobs were created in January and that was 110,000 fewer than anticipated in earlier reports;

WASHINGTON (AP) — Economic growth is gaining momentum, with factories busy and service firms expanding, but one critical area still lags: job creation.

The Labor Department will issue its January jobs report Friday, and economists are forecasting that it will show only modest hiring. Employers are expected to add a net total of 146,000 new jobs. That’s barely enough to keep up with population growth. The unemployment rate is likely to tick up to 9.5 percent from 9.4 percent in December.

If you recall, December’s Jobs Report showed a drop to 9.4% unemployment on anemic job creation of 106,000 jobs. That drop in unemployment was credited to a large group of people, over 240,000 of them, just giving up on the job search. http://www.thestreet.com/story/10966487 ... inion.html

Job creation is going to take the spotlight as there are an average 5,000 job seekers in every county across the country, http://www.upi.com/Top_News/Analysis/Ou ... 296730860/ but 36,000 new jobs works out to fewer than 12 jobs added per county. The government tells us we need 240,000 jobs added each month to lower the unemployment number and yet last month the number dropped significantly, why only 36,000 new jobs were added. Are we to assume that several hundred thousand people have given up on finding work?

Aside from the obvious benefit all Americans will reap if and when the economy improves and more people are back to work, the unemployment number looms to any politician hoping to be re-hired in the 2012 elections. MSNBC‘s Chris Matthews appeared on Morning Joe today and made a bold statement about the unemployment number and the President’s future;

“He needs to get that number to 8, if he get to 8, he gets re-elected.â€

I don't think we can trust these unemployment numbers any more. And I've not believed them for several years, long before Obama became President. The problem is we are not counting the unemployed. We're using statistica models based on surveys, the same way the Pew Center counts illegal aliens.

Do I need to say more?

Friday, February 04, 2011 1:19 PM

Labor Force and Unemployment Statistical BS

I had no idea what to expect in today's jobs report. ADP projected 187,000 jobs but has been wildly off numbers reported by the BLS. Economists expected +146,000 jobs. The actual establishment survey report shows +36,000.

I knew huge revisions and methodology changes were coming this month would make gaming the report a crap-shoot. However, the amazing thing in the jobs report was not the number of jobs, but the statistical sleight-of-hand in the unemployment rate.

Statistical BS

The unemployment rate (based on the household survey), unexpectedly fell from 9.4% to 9.0%. How did that happen?

Based on population growth, the labor force should have been expanding over the course of a year by about 125,000 workers a month, a total of 1.5 million workers. Instead, (for the entire year) the BLS reports that the civilian labor force fell by 167,000. Those not in the labor force rose by 2,094,000. In January alone, a whopping 319,000 people dropped out of the workforce.

To get the unemployment rate down from 9.8% to 9.0%, you simply do not count two million workers. Look on the bright side, at this rate we will be back to full employment in no time.

Huge Downward Revisions

One way to make recent numbers look better is to revise the historical data downward. Today we have a third massive backward revision since the beginning of the recession.

"The total nonfarm employment level for March 2010 was revised downward by 378,000 (411,000 on a seasonally adjusted basis). The previously published level for December 2010 was revised downward by 452,000 (483,000 on a seasonally adjusted basis)."

Decade of Revisions Next Year

"The population control adjustments introduced with household survey data for January 2011 were applied to the population base determined by Census 2000. The results from Census 2010 will not be incorporated into the household survey population controls until the release of data for January 2012."

Hallelujah, the recent census report will provide fertile ground to revise away anything the BLS wants.

January Jobs Report

Please consider the Bureau of Labor Statistics (BLS) January 2010 Employment Report. http://www.bls.gov/news.release/pdf/empsit.pdf

The unemployment rate fell by 0.4 percentage point to 9.0 percent in January, while nonfarm payroll employment changed little (+36,000), the U.S. Bureau of Labor Statistics reported today. Employment rose in manufacturing and in retail trade but was down in construction and in transportation and warehousing. Employment in most other major industries changed little over the month.

Unemployment Rate - Seasonally Adjusted



Bear in mind, were it not for millions of people allegedly dropping out of the labor force over the last year, the unemployment rate would be over 11% right now.

Nonfarm Payroll Employment - Seasonally Adjusted



Establishment Data



Index of Aggregate Weekly Hours



The average workweek for all employees on private nonfarm payrolls fell by 0.1 hour to 34.2 hours in January. The manufacturing workweek for all employees rose by 0.1 hour to 40.5 hours, while factory overtime remained at 3.1 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls declined by 0.1 hour to 33.4 hours; the workweek fell by 1.0 hour in construction, likely reflecting severe winter weather.

In January, average hourly earnings for all employees on private nonfarm payrolls increased by 8 cents, or 0.4 percent, to $22.86. Over the past 12 months, average hourly earnings have increased by 1.9 percent. In January, average hourly earnings of private-sector production and nonsupervisory employees rose by 10 cents, or 0.5 percent, to $19.34.

BLS Birth-Death Model Black Box

The big news in the BLS Birth/Death Model is the BLS is going to move to quarterly rather than annual adjustments. http://www.bls.gov/web/cesbd.htm

Effective with the release of January 2011 data on February 4, 2011, the establishment survey will begin estimating net business birth/death adjustment factors on a quarterly basis, replacing the current practice of estimating the factors annually. This will allow the establishment survey to incorporate information from the Quarterly Census of Employment and Wages into the birth/death adjustment factors as soon as it becomes available and thereby improve the factors.

For more details please see Introduction of Quarterly Birth/Death Model Updates in the Establishment Survey http://www.bls.gov/ces/ces_quarterly_birthdeath.pdf

In recent years Birth/Death methodology has been so screwed up and there have been so many revisions that it has been painful to watch.

It is possible that the BLS model is now back in sync with the real world. Moreover, quarterly rather than annual adjustments can only help the process.

The Birth-Death numbers are not seasonally adjusted while the reported headline number is. In the black box the BLS combines the two coming out 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 Number Revisions

Inquiring minds note enormous backward revisions in Birth-Death reporting. Here is the chart for 2010 that I showed last month.

Birth Death Model Revisions 2010 (as reported last month)



Birth Death Model Revisions 2010 (as reported this month)



Is this new model going to reflect reality going forward?

That's hard to say, but things were so screwed up before that it is unlikely to be any worse. One encouraging sign is several negative numbers in the recent chart. January would have been negative too, had they shown it. Historically there were only 2 negative number every year, January and July. That anomaly broke November of 2010.

Household Data



In the last year, the civilian population rose by 1,872,000. Yet the labor force dropped by 167,000. Those not in the labor force rose by 2,094,000. In January alone, a whopping 319,000 people dropped out of the workforce.

Households Stats

* The number of unemployed persons decreased by about 600,000 in January to 13.9 million, while the labor force was unchanged. (Based on data adjusted for updated population controls)
* The number of long-term unemployed (those jobless for 27 weeks or more) edged down to 6.2 million and accounted for 43.8 percent of the unemployed.
* After accounting for the annual adjustment to the population controls, the employment-population ratio (58.4 percent) rose in January, and the labor force participation rate (64.2 percent) was unchanged.
* The number of persons employed part time for economic reasons declined from 8.9 to 8.4 million in January. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
* In January, 2.8 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. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

In January 2010 the number of people working part time for economic reason was 8.3 million. 12 months later the total has gone up by 631,000.

Table A-8 Part Time Status



There are now 8,407,000 workers whose hours may rise before those companies start hiring more workers.

Table A-15

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



Grim Statistics

Given the total distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is hard to discuss the numbers.

The official unemployment rate is 9.0%. 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.

While the "official" unemployment rate is an unacceptable 9.0%, U-6 is much higher at 16.1%. Moreover, both the official rate and U-6 would be much higher were it not for huge numbers of people dropping out of the workforce.

Things are much worse than the reported numbers would have you believe.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

http://globaleconomicanalysis.blogspot. ... yment.html

Joe LaVorgna Reincarnates The "Green Shoots", Destroys Professional Credibility In Process

by Tyler Durden
02/05/2011 13:34 -0500

The man who once actually had some credibility, and has over the past two years become, very deservedly so, the biggest one-sided propaganda joke on Wall Street, Joe "Snow" LaVorgna, is out with yet another career reputation killer note. In his commentary on the BLS, the Deutsche Bank cheerleader dares to go where not even the Comcast-GE schizos fear to tread, namely in the most ridiculed never never land of Green Shoots. Because heaven forbid seasonal adjustments take account for snowfall in the deep of winter. Have no fear it is all good, and just like that other administration rag Mark Zandi, it is all back end loaded, and as a result we will see a 250k pick up in February payroll, February showers excluded... and in fact, should the weather dramatically vary by more than +/-0.01 degree from the median temperature, all bets are off. They don't call it the priced to perfection, Tungstenilock recovery for nothing. But here is the killer: while saying don't believe the bad news from the NFP report, the curly haired, CNBC sideshow Jow says: "However, the sizeable and unexpected drop in the unemployment rate was legitimate." In other words - let's pick and choose the data points he likes from any economic report going forward, blame the bad ones on ridiculous things, and pray that people are so dumb to not see the utter contempt for their intellgience that infuses the entire "analytic" process.

From LaVorgna:

Labor "green shoots" lurk beneath the snow

As expected, inclement weather wreaked havoc with the January employment report, depressing both nonfarm payrolls and hours worked. Barring outsized weather disruptions in February, these distortions should reverse and we should see a sizeable payback next month. This is similar to what happened after a major blizzard in 1996. However, the sizeable and unexpected drop in the unemployment rate was legitimate and strongly suggests the economy is operating at an above trend pace this quarter. Consequently, we are in the midst of reviewing upside risks to our 2011 GDP projections. New forecasts will be published in next week’s edition of the US Economics Weekly....In forecasting February employment, we should add this estimate to what we believe is the underlying pace of nonfarm payroll growth. Assuming an underlying trend of +128k—this was the three-month moving average from October to December—then a 120k weather payback implies a 250k increase in February nonfarm payrolls. Of course, the trend in the labor market might be stronger than the +128k Q4 2010 average because recent data suggest economic momentum is building. For example, the employment components of the manufacturing and non-manufacturing ISM surveys each made record highs last month

Our question: if February ends up being below 250,000 can we finally put Joe LaVorgna, Mark Zandi and, of course, the ADP Payrolls report on the "brown sh[ ]ts" compost heap of irrelevant chaterbox indicators where they are long overdue to take their rightful place?

http://www.zerohedge.com/article/joe-la ... ty-process

Originally Posted by Judy

I don't think we can trust these unemployment numbers any more. And I've not believed them for several years, long before Obama became President. The problem is we are not counting the unemployed. We're using statistica models based on surveys, the same way the Pew Center counts illegal aliens.

Do I need to say more?

judy the number s are not right they have so many of the guy's & girl's in Pa that are still out of work .
our friend told me that . every company . just want the mexico . the name are kappa book .& they also have chinese that come from NJ now that not right we also want work . but we can not get it get Obama & the illegal immigrants & may I add the chines also out
in Pa one town is chinese town . & in another town they it mexico it not funny . as i said the number are not right