January 10, 2014

The December Employment Situation Summary (011014): 74K SA Job Adds, Unemployment Rate at 6.7%, Participation Rate Drops Again

Filed under: Economy,Taxes & Government — Tom @ 8:10 am

Econ Catchup:

  • ISM Manufacturing — 57.0% in December, down from 57.9% in November.
  • ISM Non-Manufacturing — 53.0% in December, down from 53.9% in November.
  • Auto Sales — only up by 0.3% year-over-year in December; overall, 2013 was 7.6 percent higher than 2012. GM was down by 6.3% in December; Toyota was down by 1.7%. Ford and Chrysler were at +1.7% and +5.7%, respectively.
  • ADP Private-Sector Payroll — 238,000 jobs added in December
  • Initial Unemployment Claims: a seasonally adjusted 330,000 yesterday; 345,000 a week ago.

Predictions:

  • Mark Zandi of Moody’s, in Wednesday’s ADP conference call — 230,000 seasonally adjusted jobs added, unemployment rate staying at 7.0%.
  • Bloomberg — 197,000 jobs, 7% unemployment.
  • Reuters — 196,000 jobs, 7% unemployment. Reuters emphasized that their poll was done before ADP’s report came out.
  • Associated Press — same as Reuters.

Not seasonally adjusted benchmarks:

Here’s a look at the raw (i.e., not seasonally adjusted) and seasonally adjusted numbers for the past 12 years:

NSAandSAjobAddsJan01toNov13

This one’s difficult to peg, because it looks like the seasonal trends are now significantly different from the middle of last decade, last time the economy was in really good shape — either that, or a consistently mediocre economy generates significantly different seasonal trends.

I’ll go with the latter in benchmarking. Evidence of genuine improvement would mean 25,000 or fewer jobs actually lost overall, and 75,000 or more jobs gained in the private sector.

This is one of those reports where the seasonally adjusted number may not reflect the underlying reality very well, e.g., note how better raw results in December 2012 compared to December 2011 (+78K overall and +50K in the private sector) somehow generated lower December 2012 seasonally adjusted results (-11K and -25K, respectively).

Other items to watch for:

  • Labor force growth or contraction.
  • Continued divergence between the Household and Establishment Surveys on jobs added.
  • Part-time vs. full-time job adds.
  • Which industries are picking up jobs.
  • The workforce participation rate, especially since Gallup is foreshadowing a possible drop in that already historically low figure.

The report will be here at 8:30.

HERE IT IS (permanent link): More of the same, it would appear. That is, a lower unemployment rate despite little job growth (pending a closer look, of course) —

The unemployment rate declined from 7.0 percent to 6.7 percent in December, while total nonfarm payroll employment edged up (+74,000), the U.S. Bureau of Labor Statistics reported today. Employment rose in retail trade and wholesale trade but was down in information.

Household Survey Data

The number of unemployed persons declined by 490,000 to 10.4 million in December, and the unemployment rate declined by 0.3 percentage point to 6.7 percent. Over the year, the number of unemployed persons and the
unemployment rate were down by 1.9 million and 1.2 percentage points, respectively.

Among the major worker groups, the unemployment rates for adult men (6.3 percent) and whites (5.9 percent) declined in December. The rates for adult women (6.0 percent), teenagers (20.2 percent), blacks (11.9 percent), and Hispanics (8.3 percent) showed little change. The jobless rate for Asians was 4.1 percent (not seasonally adjusted), down by 2.5 percentage points over the year.

… Establishment Survey Data

Total nonfarm payroll employment edged up in December (+74,000). In 2013, job growth averaged 182,000 per month, about the same as in 2012 (+183,000 per month). In December, job gains occurred in retail trade and wholesale trade, while employment declined in information.

Employment in retail trade rose by 55,000 in December.

… Employment in professional and business services continued to trend up in December (+19,000). In 2013, job growth in professional and business services averaged 53,000 per month. Within the industry, temporary help services added 40,000 jobs in December, while employment in accounting and bookkeeping services declined by 25,000.

… Construction employment edged down in December (-16,000).

The average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour to 34.4 hours in December.

… The change in total nonfarm payroll employment for October remained at +200,000, and the change for November was revised from +203,000 to +241,000.

So the seasonally adjusted job adds dropped by over two-thirds from November to December (241K to 78K).

Let’s look at the not seasonally adjusted results … they really, really stink:

NSAandSAjobAddsJan01toDec13

The overall actual loss of 246,000 jobs missed its -25K benchmark by 221,000 jobs. In the private sector, the actual loss of 120,000 came in 195,000 worse than the +75,000 benchmark. These are huge setbacks compared to what needed to happen.

Now let’s look at a few Household Survey/unemployment rate-related items:

  • (Table A-1) The labor force dropped by 347K, and is 548K below where it was a year ago. The labor force participation rate dropped to an almost unfathomable 62.8%. “Not in labor force” increased by 525K to an all-time record 91.8 million.
  • (Table A-9) Full-timers went up by 1.543 million in 2013. Part-timers decreased by 188K. The net is 1.355 million. But the Establishment survey (Table B-1) says employment is up by 2.186 million. My theory is that the Establishment Survey’s higher result has a lot of people who are part-timers that the Household Survey isn’t picking up.
  • (Table B-1) There are several items which strongly differ from what ADP reported on Wednesday. One of the most obvious is construction. ADP had (not kidding) +48K; BLS had -16K.
  • (Also Table B-1) The seasonally adjusted temporary help services adds of 40.4K are well over half of ALL seasonally adjusted jobs adds.
  • (Table A-15) Interesting that the “official” unemployment rate went down, but the fully-loaded U-6 rate stayed at 13.1%.

My overall reaction to this is that we’re turning into a zombie economy.

_________________________________________

UPDATE: Zero Hedge is calling BS on Mark Zandi’s ADP conference call comments:

ADP’s Mark Zandi went on the record to say that “The job market ended 2013 on a high note. Job gains are broad-based across industries, most notably in construction and manufacturing. It appears that businesses are growing more confident and increasing their hiring.” It appears not.

I thought Zandi’s assessment was overly rosy (“The job market has kicked into a higher gear”). He claimed to base his take partly on actual discussions with businesspeople. I wonder which ones?

UPDATE 2: Also at Zero Hedge — “The good news: the unemployment rate plunged to 6.7% from 7.0%… For all the wrong reasons – the number of people not in the labor force rose to a record 91,808,000. As a reason for the plunge the BLS says there was a major weather effect seen on the forced part-time series, and notes the decline in healthcare which is rare and part of the sector slowing. Thank you Obamacare.

UPDATE 3: CNBC — “The monthly job creation was the worst in nearly three years.”

Oh, and here’s Zandi: “Economists Mark Zandi and Austan Goolsbee said on CNBC that the numbers shouldn’t be taken seriously and likely will be revised higher in future counts.” A Conference Board economist is also claiming that the weak month “stands in contrast to the strengthening posted in other major economic data, suggesting the dip in hiring might prove temporary.”

Looking at the upated tables above, the overall job market went from +81K vs. a year ago in November (476K vs. 395K) to MINUS 170K (from -76K to -246K). That’s a one-month negative swing of a quarter million (from +81K to -170K).

So maybe BLS did miss some job creation (they had no trouble finding a lot of temps, did they?), and we’ll see December revised upward. Or maybe this is the start of a serious meltdown. I don’t think Zandi and others who are downplaying today’s bad news really know —how can they, when there is no precedent for gauging the potential impact of Obamacare? — and that they’re putting on brave fronts.

UPDATE 4: This CNBC video shows Zandi going all-in, still insisting, as he did on Wednesday, that “we’ve turned the corner.”

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7 Comments

  1. Looking over the report, the new national anthem of the ObamiNation should be “Bang The Drum All Day” because nobody wants to work anymore.

    Comment by steveegg — January 10, 2014 @ 8:48 am

  2. There is no corner to turn in a recovery. There is only rate of recovery.
    Perhaps if you are looking (that is, if you are interested in looking and not cheerleading) for an actual change in direction, the labor force participation rate would be a good place to start. And that tells a lot.
    The problem with this rate is that efficiency demanded by the downturn will not be undone. At the risk of sounding heartless, if we focus off of employment and instead focus on production, perhaps our policies would improve, and the tide would rise. Up to now, we take water from a river and dump it in the ocean, and then desperately search for monthly changes in the shoreline.

    Comment by Jim — January 10, 2014 @ 10:37 am

  3. 6.7% unemployment? It’s an absurdity, preposterous. Why doesn’t it feel like the economy is getting better? Well let’s get out the employment numbers from when Obama took office until now.

    Jan 2009 & all 2009 Including PT workers

    All Ag workers 1,988,000 & 2,103,000
    All Non Ag 138,449,000 & 137,775,000
    ——————————–
    Total Emp Jan -140,437,000 & All – 139,878,000
    ——————————–
    All PT Econ 8,829,000 & 8,913,000
    All PT Non Econ 19,051,000 & 18,710,000
    ——————————–
    Total All PT Emp Jan – 27,880,000 & All – 27,623,000
    ——————————–
    PT Non Ag Econ 8,675,000 & 8,791,000
    PT Non Ag Non Econ 18,734,000 & 18,372,000
    ——————————–
    Total Non Ag PT Emp Jan – 27,409,000 & All – 27,163,000
    ================================
    Jan 2013 & all 2013

    All Ag workers 1,895,000 & 2,130,000
    All Non Ag 139,718,000 & 141,799,000
    ———————————
    Total Emp Jan – 141,613,000 & All 143,929,000
    ———————————
    PT Econ 8,628,000 & 7,935,000
    PT Non Econ 18,596,000 & 18,903,000
    ———————————–
    Total All PT Emp Jan – 27,224,000 & All – 26,838,000
    ———————————–
    PT Non Ag Econ 8,506,000 & 7,823,000
    PT Non Ag Non Econ 18,259,000 & 18,582,000
    ————————————
    Total Non Ag PT Emp Jan – 26,765,000 & All – 26,405,000

    Notes: PT – Part Time; all numbers NOT Seasonally Adj.; Ag – Agricultural Workers; Non Ag – Non Agricultural workers; Non Econ – Employment Non Economic Reasons; Econ – Employment Economic Reasons.

    You will note that the part time categories have proliferated since 2009, this makes it harder to get the total number of part time workers. I personally think it no longer makes sense to separate out the total Ag workers since part time does this and total Ag isn’t a significant portion of the work force anymore. There are only some 300,000 PT Ag workers for Economic Reasons, making the case that Work Visas really aren’t necessary anymore. Notice how they give Ag and Non Ag for total employment but you have to tease out the part time Ag numbers from Total PT and NON Ag numbers. Why the inconsistency on their part? An attempt at obfuscation?

    Making sense of the numbers:

    YOY Jan 2009 vs Jan 2013
    All 140,437,000 vs 141,613,000
    PT 27,880,000 vs 27,224,000
    ————————–
    FT 112,557,000 vs 114,389,000 YOY Net Gain = 1,832,000
    ========================
    All 2009 vs All 2013
    All 139,878,000 vs 143,929,000
    PT 27,623,000 vs 26,838,000
    ————————–
    FT 112,255,000 vs 117,091,000 Annual Net Gain = 4,836,000

    While a gain of 4.8 million Full Time jobs over 5 years shows improvement over Obama’s term of office, I did not put in 2008 #s to get the fuller context if we got back to where we started. The point was to see what Obama’s policies affected for a so called economic expansion. During the 5 years of his policies, some 20 million young people graduated high school expanding the work force, meaning over 15 million young people were left out of these statistics. Meaning the Not in Labor Force number grew substantially. Meaning the current 6.7% unemployment rate is so badly out of wack that it has become a propaganda tool and not a meaningful metric of economic health. This is why the food stamp rolls have grown dramatically under Obama’s obviously FAILED policies. This is why we feel the economy is doing badly even though the employment numbers are up. This is why wages can’t rise to keep up with food and fuel inflation because way too many people are chasing too few jobs, thus an over supply in the available excess labor pool.

    Comment by dscott — January 10, 2014 @ 10:42 am

  4. 2008 Stats

    All Jan & Annual
    Ag – 2,032,000 & 2,168,000
    Non Ag – 142,575,000 & 143,194,000
    —————————————
    Total Emp Jan – 144,607,000 & All – 145,362,000
    —————————————
    PT Jan & Annual
    Econ 5,340,000 & 5,875,000
    Non Econ 19,804,000 & 19,343,000
    ————————————
    Total PT Jan – 25,144,000 & All – 25,218,000
    ————————————-

    Total FT Emp Jan – 119,463,000 & All – 120,144,000

    Jan 2013 Tl FT Emp Jan – 114,389,000 & All – 117,091,000
    =====================================
    Net Losses from 2008 to 2013!!!!

    YOY Jan (5,074,000) & All – (3,053,000)

    Part time jobs 2013 vs 2008 is 26,838,000 vs 25,218,000 respectively, an increase of 1,620,000 PT jobs.

    So far Obama’s economic policies have yet to recover the full time positions lost and now you understand why Democrats are trying to change the subject from ObamaCare’s failure to a minimum wage raise. Not working a full time job is THEIR NEW NORMAL!!! So not only did 20 million young people not get FT jobs that were supposed to be created over that time period under normal Republican Policies, an additional 3 million people beyond that lost their FT jobs as well. Obama is 23 million FT jobs behind and he thinks that’s success! What would he consider a failure???????

    Comment by dscott — January 10, 2014 @ 11:13 am

  5. Note: All data from BLS Table 8 NOT Seasonally Adjusted http://www.bls.gov/webapps/legacy/cpsatab8.htm

    Comment by dscott — January 10, 2014 @ 11:20 am

  6. Tom,

    Ace has a chart up that shows what the true unemployment rate would be absent the massive drop in labor force participation rate:

    http://ace.mu.nu/archives/unemploymentrate2009constantLPR.jpg

    I don’t have the charting ability but you do. Can you create one that overlays the true unemployment rate over the Romer/White house estimate when they were selling the stimulus?

    https://i0.wp.com/www.aei-ideas.org/wp-content/uploads/2012/10/romerbernsteinSeptember20122.jpg

    This is a chart that needs to be on the front page of every news site and blog and posted by every reader who cares about the nation and our fraud in the White House.

    Cheers,

    O.V.

    Comment by Opinonated Vogon — January 10, 2014 @ 4:19 pm

  7. I’ve been meaning to find that thing. Hopefully someone has done that for me. :—>

    Comment by Tom — January 10, 2014 @ 4:46 pm

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