The numbers are in:
The March non-farm employment situation increased by 162,000, the unemployment rate (U-3 measure) remains unchanged at 9.7%.
The more accurate representation of the employment situation remains the U-6 measure. U-6 is the identifier given to a data set of all unemployed people plus it adds those people who have had to take part time work for economic reasons and others who are marginally attached to the labor force. Using this data set we find the under-employed rate is 16.9% (17.5% if we remove seasonality adjustments).
While the top line number of 162,000 sounds like a good first step, it hardly even puts a dent in the total employment situation. Especially if we begin to look under the rug.
We know from the official data that of the 162,000 jobs gained, 48,000 of them were temporary census workers. That brings us down to 114,000. And we also know that the mysterious birth/death model added 81,000 jobs. So, lets say we take out the imaginary birth/death model, that gives us 33,000 net jobs gained on the month.
While a net gain of 33,000 is far better than a decline of 500,000 just six months ago, there are still concerns about the employment situation. One is the increase in the U-6 figures, this is extremely disturbing that more and more people are taking part time jobs for economic reasons (meaning that the individuals could not find full time, good paying jobs). The second troubling bit of data from this report is that the number of individuals on unemployment for longer than six months which has risen to a new record high.
As of last month, more than 6.5 million unemployed people have been without a job for more than six months, this is a frightening statistic. And the desperation of those individuals is why we are seeing the U-6 data ticking upwards as they need ‘any’ kind of work, even if it is only part time and offers little pay.
The report indicates that job growth was seen in government, temp agencies, manufacturing, and health care. While all other sectors held steady or were negative. In my view manufacturing growth is still a result of stimulus money which is not organic growth, and as such, will be in jeopardy of a double dip once all the “cash for whatever” programs runs out. The next phase, already underway, is cash for old appliances. But some states are already having difficulty funding those programs and they may end sooner than expected.
A boost in temporary agencies does not come as a surprise. It is far cheaper for a company to fill a position with a person from a temp agency than it is to hire someone outright. Using the temp agency removes most of the overhead costs associated with the worker. And the notion that a pickup in temp agency workers is a precursor to outright full time hiring is not likely to follow the norms of the past, especially with the new health care laws that will cost businesses even more going forward. I don’t see any let up in the usage of temp agencies for a considerable period of time.
So the top line numbers had the main stream media all giddy with excitement, but what lies underneath still smells rotten. The unemployment situation in the United States remains terrible, and will remain so for a long time to come. Over the next several months we will see more and more census jobs being added to the reports, this will bring down the unemployment rate a bit. But remember, they are just temporary employees and that must be kept in context when evaluating future unemployment reports.
One final note, in a recent poll conducted by Gallup just one day before the government data was issued, Gallup finds that the total number of people under-employed is at 20.3% (Gallup)
Back to the topic of the birth/death model used by the Bureau of Labor Statistics, my question to them was answered (if you want to call it that) during Friday’s live chat session. My question pertained to modifications to the model to reflect current economic conditions. The answer provided was just a cut and past response. They did not answer the question pertaining to adjustments to the model based on current economic conditions, not normal business cycles.
I am strongly in favor of just doing away with the birth/death model adjustments. It is simply flawed and does not work in times of severe jolts to the economy.
Their response:
10:27
Michele Walker (BLS-CES):
Hi Chuck Young,
Thanks for your question.
Historical QCEW data are the inputs for the CES birth/death figures. Research has shown that net contribution of births and deaths is relatively small and stable, regardless of the business cycle.
Birth/death numbers are revised once a year with the benchmark revision. There are two reasons that the birth/death values change with the update. First, each year another 12 months of data are added to the historical series used in fitting the models. As a result of the additional data, the models provide updated results. Secondly, in general the amount of birth/death required is of a larger magnitude the further the reference month is from the benchmark. As a result one model is used to provide birth/death values for the first 12 reference months after the benchmark month, and the second model is used for providing birth/death values for 13 to 21 months from the benchmark. As an example, the first preliminary estimate for June 2003 was produced on the March 2002 Benchmark using a second year model. When the March 2003 Benchmark was implemented, the June 2003 birth/death factor came from a first year model.
Friday April 2, 2010 10:27 Michele Walker (BLS-CES)
