Thread: A "Quality Assessment" Of US Jobs Reveals The Ugliest Picture Yet

A "Quality Assessment" Of US Jobs Reveals The Ugliest Picture Yet


Submitted by Tyler Durden on 02/07/2012 00:29 -0500

Over the past week we have repeatedly exposed the BLS' shennanigans to both keep the headline unemployment rate suppressed and to generate an upward bias in the market courtesy of a "bigger than expected beat" of expectations. Granted, various semantics experts continue to scratch their heads in attempting to explain a collapsing labor force when even Goldman's Sven Jari Stehn just predicted that it will drop to 63.1% by the end of 2012 (and 62.5% by the end of 2015). Funny then that the US will have no unemployment left when the participation rate drops to 58.5%. And no, the "population soared argument based on revised data" doesn't quite cut it when the bulk of said surge not only did not get a job, but was not even counted toward the labor force. Yet what the biggest flaw with all these arguments that vainly (and veinly) attempt to defend the US economy as if it is growing, is that they focus exclusively on the quantity of jobs, doctored or not, and completely ignore the quality. We have decided to step in and fill this void.
By now, most of our readers know that every incremental dollar of public debt leads to less than one dollar of GDP growth, courtesy of the debt/GDP ratio having surpassed 100% a month ago. Yet what most don't know is that the marginal utility of public debt is not the only thing that may have peaked: as of January 31, 2012, the date of the most recent BLS jobs report, it appears that the "marginal utility" of job formation (if such a concept existed) also turned negative. And since it doesn't exist, yet, allows us to explain.
While the BLS is the best, if massively seasonally adjusted, tracker of job quantity, the only true indicator of job quality is the FMS's Daily Treasury Statement, which tracks and updates how much government revenue is generated any given day courtesy of withheld income and employment taxes. So to avoid any potential semantic confusion, we will stick to numbers and bullets: hopefully even the most dedicated newsletter sellers and "asset managers" can follow those without losing much in translation.

• In the fiscal year 2011 and 2012 (starting October 1) and continuing through the date of the most recent BLS update or January 31, there have been 87 official work days. This is the period which we will define as YTD (fiscal year to date period) for 2012, and will use its matched equivalent for 2011 for comparative purposes.
• In the 2012 YTD period, the US Treasury recorded personal income withholding tax revenue of $592.676 billion (source)
• In the comparable period for 2011, beginning October 1, 2010 and continuing through January 31, 2011, withholding taxes were$592.984 billion (source)
• In other words, the US Treasury collected $310 million more in tax withholdings in the first 4 months of fiscal 2011 than in the first 4 months of fiscal 2012.

Presented visually - the black bar shows the cumulative divergence between the fiscal 2011 and 2012 data series. Below zero, such as that on January 31, is bad.

• Based on establishment survey data, the US started fiscal year 2011 (Sept 30, 2010) with 129,885,000 employed (source)
• Based on establishment survey data, the US started fiscal year 2012 (Sept 30, 2011) with 131,694,000 employed (source)
• Based on establishment survey data, at January 31, 2011, the US had 130,456,000 employed (source)
• Based on establishment survey data, at January 31, 2012, the US had 132,409,000 employed (source)
• Said otherwise, in the first 4 months of fiscal 2011 the US "created" 571,000 jobs; in the first 4 months of 2012, the US "created" 715,000 jobs.
• More importantly, between January 31, 2011 and January 31, 2012 the US added 1,953,000 jobs.

And yet...

• Over the same period, as shown above tax withholdings are actually trending lower in 2012 compared to 2011!

But that's not the kicker. This is:

• The 130.456MM workers "employed" at January 31, 2011 created a total of $592.985MM in withholdings, or on average of $4,545.48 per worker over the first 4 months of the fiscal year 2011.
• The 132.409MM workers "employed" at January 31, 2012 created a total of $592.675MM in withholdings, or on average of $4,476.09 per worker over the first 4 months of the fiscal year 2012.

Translation: based on the above, even as America was "creating" jobs, 2 million to be precise (and 2.5 million between Sept 30, 2010 and January 31, 2012), the government tax revenues created by these jobs actually declined in 2012 compared to 2011, on a per job basis, by roughly 1.5%!

This analysis ignores completely any seasonal fudging, census adjustments, "updated population controls" and all those other "fudge factors" which keep BLS Ph.D.s employed (especially during election years). It is pure math based on numbers reported by both the US Treasury and the BLS.

This analysis also has substantial ramifications on the Treasury's forecast debt issuance schedule, which is driven substantially based on model assumptions for tax withholdings. Alas, absent some massive surge in income, and thus increased tax withholdings, going forward, we see no reason why there should be any material upside in government income tax revenues in 2012 compared to 2011. Which means that absent significant spending cuts, which we all know will never happen, the US is about to substantially underestimate just how much debt it has to issue for fiscal Q2 and Q3. Needless to say, this also means that the debt ceiling in such a case, would be breached far sooner than even in our pessimistic scenario of early November 2012.

Finally, and most, importantly, we hope that this analysis has proven that while the BLS may play around with various numerators, denominators, seasonal adjustments, and other irrelevant gimmicks which are only fit for popular consumption particularly by those who have never used excel in their lives, a deeper analysis confirms our concerns, that not only is America slipping ever further into a state of permanent "temp job" status, but that a "quality analysis" of the jobs created shows that the US job formation machinery is badly hurt, and just like the marginal utility of debt now hitting a critical inflection point, so the "marginal utility" of incremental jobs is now negative, which means that Obama, or whichever administration, can easily represent to be growing jobs, and declining the unemployment rate by whatever gimmick necessary. Yet these very jobs are now generating far less in so very critical tax revenue for the US treasury, and continue to declining steadily in quality.

A "Quality Assessment" Of US Jobs Reveals The Ugliest Picture Yet | ZeroHedge

Guest Post: Bringing The "Not In The Labor Force" Mystery To Light



Submitted by Tyler Durden on 02/06/2012 17:21 -0500
Submitted by Lance Roberts of Streettalklive.com

Bringing The "Not In The Labor Force" Mystery To Light



There has been much debate over the weekend regarding the 1.2 million individuals who moved into the "Not In Labor Force" category in Friday's Bureau of Labor Statistics report, which included an increase to the total population of 1.5 million. From the Wall Street Journal:"Here's what happened: According to the Census Bureau, the civilian population [age 16 and over] grew by 1.5 million people in 2011. But the growth wasn't distributed evenly. Most of the growth came among people 55 and older and, to a lesser degree, by people 16-24 years old. Both groups are less likely to work than people in their mid-20s to early 50s. So the share of the population that's working is actually lower than previously believed. Taking that into account, the employment-population ratio went up. The unemployment rate wasn't affected.

'There was not a big increase in discouraged workers,' economist Betsey Stevenson commented on Twitter. 'What happened was Census found a bunch of old people we had assumed died.'

The adjustments had other effects, as well. They made the drop in the number of unemployed look smaller than it really was, and the rise in the number of employed look bigger. And because the Labor Department doesn't readjust its historical data to account for the new calculations, it isn't possible to compare January's figures on employment, unemployment and similar measures to those from earlier months."
So, fortunately, we have a lot more people alive than previously estimated. (Note to self: the TWO best jobs in the world are Mortician and Labor Analyst - when everything goes wrong people come back to life). However, I want to dig a little deeper into the Not In Labor Force (NILF) category to see what is really going on.



From the BLS Report (emphasis added): "The adjustment increased the estimated size of the civilian noninstitutional population in December by 1,510,000, the civilian labor force by 258,000, employment by 216,000, unemployment by 42,000, and persons not in the labor force by 1,252,000. Although the total unemployment rate was unaffected, the labor force participation rate and the employment-population ratio were each reduced by 0.3 percentage point. This was because the population increase was primarily among persons 55 and older and, to a lesser degree, persons 16 to 24 years of age. Both these age groups have lower levels of labor force participation than the general population."

So, as you can see in the first chart above, the adjustment to the population over the last decade was the second largest on record. However, the devil is in the details, as the population of 55 and older didn't really increase — they were always there but just not counted. The real concern is with the 16-24 age group. The longer that age group remains unemployed, the higher the probability that they will become long-term unemployable due to degradation of job skills. As we have seen in the recent reports, this age group has a much higher unemployment rate than any other category, and that doesn't bode well for economic strength in future as this group moves into lower wage-paying positions. Recent manufacturing reports show that one of the problems they face is finding "skilled" labor to fill available positions. The shift away from a production and manufacturing base over the last 30 years in the U.S. is now starting to take its toll. The problem, in trying to bring manufacturing back to the U.S., is not just education and skill training but also competitive advantages that the U.S. will have a difficult time overcoming in terms of underlying production and labor costs. Countries like China and Korea have no regulatory, environmental and minimum wage requirements to meet. Those are all additional costs that the U.S. must build into production costs, which limits our competitive potential. Outsourcing is going to be a long-term problem that will be very difficult to reverse.




But that is only one part of the issue. Another reality that impacts long term employment issues is our ongoing decline in economic prosperity. The number of individuals falling into the NILF category has been on the rise over the last decade, and the slope of that rate of increase is rising sharply. Of course, the knee-jerk answer response is that it is due to the rash of "baby boomers" moving into retirement. There is no arguing that a large number individuals are moving toward what would normally be retirement years. However, given the fact that the majority of average Americans, including the aging demographic, are woefully underprepared for retirement, they are being forced to work longer into their retirement years. Therefore, demographic trends alone do not adequately answer this issue. The reality is that the economic growth rate of the country over the past three decades has not been sufficient to support the growth in population. This is the same problem that exists in many other countries as well, countries where population growth has been faster than economic capacity. The decline in prosperity, which can be directly linked to increasing debt per household and lower savings rates, has led to higher levels of long-term unemployment and ultimately increases in the NILF category as shown in the chart above.



The chart above shows the actual revised NILF numbers from January 1990 to Present with an estimated increase of 350,000 per month going forward to account for the retiring "baby boomer" generation. The issue is that the January increase to the NILF category was 4X the estimated rate of increase. While there will be revisions in the coming months, what is important to note here is that, as usual, analysts and the media got lost in "the number" rather than understanding the relevance of the number in relation to the overall trend.

With the long-term trends of economic growth and employment on the decline, the issue for the U.S. going forward is how to correct these problems and return the country to a path of prosperity. With debt ratios in excess of GDP and deficits running into the foreseeable future, the negative ramifications for economic prosperity remain headwinds. The debt deleveraging cycle for households will take much longer than most think, and the impact of the deflationary cycle will continue to takes its toll on wages and employment going forward.

The good news, however, is this. Just as it happened post "The Great Depression", the country will rid itself of its excesses and return to its root values that have been lost to greed and excess over the past thirty years. Individuals will once again return to saving more, which will in turn lead to productive investment. The "innovation" cycle that the U.S. holds will continue and, as debt levels are reduced, the growth rate of the economy will begin to accelerate.

America is not doomed to "Third World" status if the leaders of this country will begin to do what is fiscally and politically in our collective best interest. The idea of the "American Dream" is still alive. However, that dream was gradually perverted by the shift from generations of hard working individuals who strived to "build stuff" to an "entitlement generation" of "give me stuff". The country cannot prosper with 1 out of 2 Americans on some sort of government assistance program, 87 million not in the labor force and over 46 million Americans on food stamps. This will change as necessity will ultimately dictate.

The best for us lies ahead. It will just take the realization that "hard work" and "sacrifice" are ideals that will once again have to be adopted not only by the "Average American" but by our government as well.

Guest Post: Bringing The "Not In The Labor Force" Mystery To Light | ZeroHedge

In simple terms they(government) are lying to us. With a growing population some of it poor under educated illegal immigrants, outsourcing,trade deficits with China being the main culprit,ever growing welfare society, skyrocketing debt, American and it's people face a calamity,the question I have, is it on purpose or simply ignorance because a plain old hillbilly such as myself can see it coming why can't they.
Please remember this is an election year expect to see little truth in a corrupt news media.

The January Jobs Are Statistical Artifacts

February 7, 2012 by Paul Craig Roberts

In a prolonged downturn, seasonal adjustments and the birth/death model produce nonexistent employment.

Last Friday, the U.S. Bureau of Labor Statistics reported that in the first month of this year 243,000 jobs were created and the unemployment rate fell to 8.3 percent. This good news is a mirage. It is due to faulty seasonal adjustments and to the BLS birth/death model. In a prolonged downturn, seasonal adjustments and the birth/death model produce nonexistent employment.

The unadjusted data show a rise in the unemployment rate. The birth/death model, which estimates the net effect of jobs lost from business failures and jobs created by new start-ups, was designed for a normal growing economy, not for a prolonged downturn.

Statistician John Williams (shadowstats.com) reports that the BLS adds 48,000 new jobs per month to the payroll employment report based on the birth/death model even though the economy has not come out of the deep recession. In other words, over the course of a year, the birth/death model adds about 580,000 jobs to the reported jobs numbers. End-of-year benchmark revisions quietly take the nonexistent jobs out of the totals, but these revisions do not receive headlines and pass largely unnoticed.

The reported January jobs gains are contradicted by other official reports. For example, the January payroll jobs report shows 50,000 new jobs in manufacturing, but according to the recently released fourth quarter gross domestic product, 81 percent of the reported growth consisted of undesired inventory accumulation. Normally, companies produce for sales, not for inventories. Why would manufacturers be hiring people to produce goods for undesired inventories?

Most of the new reported January jobs are in services. The January jobs report has 24,500 new jobs in wholesale and retail trade and 13,100 new jobs in transportation and warehousing. However the data show that inflation-corrected real retail sales are down. Why does it take more people to sell fewer goods?

The other remaining sizable components of the January jobs number are: professional and technical services (30,000), administrative and waste services (36,700), health care and social assistance (29,700), and leisure and hospitality (44,000) of which the largest component is food services and drinking places (32,800).

The leisure, waitresses and bartender employment numbers seem high for January. Perhaps it was an excellent ski month in the United States. However, accommodation (hotels) does not support this conclusion, as accommodation lost 3,900 jobs.

The BLS reports 21,000 new jobs in construction. However, the housing report says that housing starts dropped more than forecast in December, falling 4.1 percent. Why does it take more construction workers to produce fewer houses? Building permits, a proxy for future construction, were little changed.

As the adjusted data produce phantom jobs and employment, the BLS should headline the raw unadjusted data. With so many discouraged workers unable to find jobs, dropping discouraged workers out of the measure of unemployment seriously understates the true magnitude of the unemployment problem. If Americans were aware of the double-digit unemployment rate, would they be as tolerant of Washington’s multitrillion-dollar wars? Would Obama be facing a tougher re-election campaign? Would Republicans be pushing to reduce the Federal budget deficit at the expense of the social safety net?

The phony data serve many interests, but not those of the American people.

The January Jobs Are Statistical Artifacts : Personal Liberty Digest™=

The Smallest Workforce Since Carter

Bob Beauprez



The recent labor reports certainly have some encouraging news. New jobs in January estimated at 243,000 and a decline in unemployment to 8.3 percent suggests that the economy might be headed in the right direction. But, another key indicator that doesn’t get the attention of the jobs number or the unemployment rate shows that all is definitely not well.

As the following graph courtesy of the Labor Department demonstrates, the Labor Participation Rate (LPR) continues to decline. The LPR measures the number of people employed or looking for work compared to the total of age eligible population. As the graph indicates, the LPR has been on decline since the recession began, and it made another significant move downward to just 63.7 percent in January. That is the lowest since Carter era recession year of 1981.

The declining LPR is a clear indication that more Americans continue to give up on even finding employment as the failed economic policies of Barack Obama infect the market place with anxiety and uncertainty. A higher LPR indicates more people bringing home a paycheck and greater economic output. Until there is a sustained turnaround in the LPR, any talk of “recovery” is premature.

Labor Participation RateSource: Bureau of Labor Statisticshttp://data.bls.gov/timeseries/LNS11300000


The Smallest Workforce Since Carter - Bob Beauprez - Townhall Finance