March 7, 2014

The February Employment Situation Summary (030714): 175K SA Job Adds (Inflated); Raw Job Adds Worst of Any Post-Recession February; Unemployment Rate Ticks Up to 6.7%

Filed under: Economy,Taxes & Government — Tom @ 7:12 am

Topside conclusion: The reported seasonally adjusted jobs added figure of 175,000 and the private-sector’s 162,000 increase both vastly overstate the degree of improvement, and do not reflect the underlying raw numbers. The pace of job growth is deteriorating, not improving.

Biz-Econ catchup:

  • Feb. ISM Manufacturing — 53.2%, up from 51.3% in January, indicating stronger expansion.
  • Auto sales — Unchanged from year ago. Third straight month of weakness (January was down 3.1% year-over-year, December was +0.3%). Chrysler (+11.4%) and Nissan (+15.8%) shined; GM (-1.0%), Ford (-6.1%), Toyota (-4.3%), and Honda (-7.0%) didn’t. Among the smaller makers, Subaru (34.9K sales, +24.0%) leaped past Volkswagen (27.1K, -13.8%).
  • Feb. ISM Non-Manufacturing — 51.6%, down from 54.0% in January, indicating weaker expansion.
  • ADP February private-sector jobs — 139,000 jobs added, with the previous four months revised down by 138,000. Described as “somewhat disappointing” by Mark Zandi of Moody’s.
  • Initial unemployment claims — 323,000 seasonally adjusted claims in most recent week. The underlying trend is in the 330K – 340K range. Weekly raw (not seasonally adjusted) claims are on the rise.

Predictions:

Raw (not seasonally adjusted) Data:

Longtime readers know that I believe it’s very important to look at the underlying raw data before seasonal adjustments, i.e., what actually happened. This is especially true now because the Pelosi-Obama-Reid economy hasn’t demonstrated normal seasonal patterns during the entire five-year seasonal adjustment window. This can lead to seasonally adjusted results which don’t adequately reflect the raw data.

February is a very important month, because, as seen below, it’s when a five-month spree of net hiring begins:

NSAandSAjobsThruJan2014

February 2013 was probably the best single month in the job market since the recession ended. Unfortunately, things trailed off after that. While the 4.121 million jobs created from February through June of last year basically matched the totals seen in 2004 and 2006 (trailing 2005 by over 200,000 jobs), the good years of the previous decade took place when workforce participation levels were a lot higher.

At the very least, an economy which is good enough to be pulling people on the sidelines back into the workforce needs to be generating 5 million jobs during the next five months (5.5 million would really be more like it). That hasn’t happened in any year since the recession ended, and signs are pointing to it not happening again this year. Hence, the economic malaise continues.

In that context, for today’s report to be acceptable, we need to see actual job additions of 1.1 million in total jobs and with 600,000 jobs added in the private sector. The likelihood of either number occurring is quite remote.

Also worth watching: The direction and amount of prior-month revisions to job additions, continued increases in temp employment, any sign of people returning to the workforce, changes in average hours worked, and indications of more or less part-time hiring.

The report will be here at 8:30.

+++++++++++++++++++++++

HERE IT IS (permanent full report link): The surprises never cease —

Total nonfarm payroll employment increased by 175,000 in February, and the unemployment rate was little changed at 6.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services and in wholesale trade but declined in information.

Household Survey Data

Both the number of unemployed persons (10.5 million) and the unemployment rate (6.7 percent) changed little in February. The jobless rate has shown little movement since December. Over the year, the number of unemployed
persons and the unemployment rate were down by 1.6 million and 1.0 percentage point, respectively.

Among the major worker groups, the unemployment rates for adult men (6.4 percent), adult women (5.9 percent), teenagers (21.4 percent), whites (5.8 percent), blacks (12.0 percent), and Hispanics (8.1 percent) showed little
or no change in February. The jobless rate for Asians was 6.0 percent (not seasonally adjusted), about unchanged over the year.

The number of long-term unemployed (those jobless for 27 weeks or more) increased by 203,000 in February to 3.8 million; these individuals accounted for 37.0 percent of the unemployed. The number of long-term unemployed was down by 901,000 over the year.

Both the civilian labor force participation rate (63.0 percent) and the employment-population ratio (58.8 percent) were unchanged in February. The labor force participation rate was down 0.5 percentage point from a year ago, while the employment-population ratio was little changed over the year.

Establishment Survey Data

Total nonfarm payroll employment rose by 175,000 in February. Job growth averaged 189,000 per month over the prior 12 months. In February, job gains occurred in professional and business services and in wholesale trade, while information lost jobs.

Employment in professional and business services increased by 79,000 in February. Accounting and bookkeeping services added 16,000 jobs. Employment continued to trend up in temporary help services (+24,000) and in services to buildings and dwellings (+11,000). Over the prior 12 months, professional and business services added an average of 56,000 jobs per month.

… Employment in food services and drinking places continued to trend up in February (+21,000). Over the prior 12 months, this industry added an average of 27,000 jobs per month.

In February, employment in construction changed little (+15,000). Over the past year, construction has added 152,000 jobs. Within the industry, employment in heavy and civil engineering construction rose by 12,000 in February.

Employment in health care changed little in February (+10,000). This marks the third consecutive month of little employment change in this industry. Offices of physicians added 8,000 jobs in February. Employment in hospitals
changed little over the month but is down by 10,000 over the past 3 months.

… Information lost 16,000 jobs in February. Most of the decline occurred in motion picture and sound recording (-14,000); employment in this industry can be volatile from month to month.

The average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour to 34.2 hours in February. The manufacturing workweek was unchanged at 40.7 hours, and factory overtime edged down by 0.1 hour to 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls declined by 0.2 hour to 33.3 hours. For production workers, the manufacturing workweek has declined by 0.6 hour over the past 3 months.

The change in total nonfarm payroll employment for December was revised from +75,000 to +84,000, and the change for January was revised from +113,000 to +129,000. With these revisions, employment gains in December and January were 25,000 higher than previously reported.

Well, that’s consistent with the President’s budget, which predicts that the unemployment rate won’t drop below 6 percent until after President Obama’s second term ends.

Quick observations (seasonally adjusted unless otherwise indicated):

  • The civilian labor force grew by 264,000, and is only 213,000 larger than it was a year ago.
  • Unlike in most recent prior months, private-sector job additions were less than the total, coming in at 162,000.
  • There has been a significant move into the workforce on the part of African-American women in the past two months (+180,000, or well over 2%), increasing their labor force participation rate by a full percentage point to 55.8 percent.
  • Full-timers were up by 153K, part-timers were down by 210K, and multiple jobholders were up by 111K.
  • The fully-loaded U-6 unemployment rate dropped to 12.6 percent from 12.7 percent.
  • The temp agency job adds continue to be disportionate. The industry has added 228K seasonally adjusted jobs in the the past year (243K not seasonally adjusted). Despite the fact that it’s only about 2 percent of the total workforce, it continues to comprise about 10 percent of all job additions.
  • The average weekly hours drop is probably legitimately explained by February’s inclement weather.

Circling back to the raw data — the news is pretty bad really bad:

  • February’s actual job additions were only 750,000 — the worst February since the jobs recession ended in Feb. 2010 (the last month of seasonally adjusted job losses). The seasonally adjusted figure of 175,000 vastly overstates the degree of improvement. If 1.038 million job adds generated a 280K seasonally adjusted result last year, how can generating 288K fewer jobs lower this year’s figure compared to last year by only 105K?
  • The same problem is present in the private sector, where only 300,000 jobs were actually added but somehow turned into 162,000 after seasonal adjustment — again the worst since the jobs recession ended, and to a greater degree than the total nonfarm shortfall. If 553,000 job adds generated a 263K seasonally adjusted result last year, how can generating 253K fewer jobs lower this year’s figure compared to last year by only 101K?

The bottom line is that the administration caught a huge undeserved break in the seasonal adjustment calculations (assuming no manipulation, which is become more difficult given other recent developments). The probablity that the press will report this fact is virtually zero.

Addendum: Clarified the “worst since” stats above (worst since the “jobs recession” ended in February 2010).

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1 Comment

  1. I guess we’re defining success downward. It’s only good compared to expectations.

    Once again, the older generation gained employment at the expense of the younger generation. While the employment-population ratio among the 55-and-older crowd went up from 38.0% to 38.2% on a seasonally-adjusted basis, the same for the 16-19 crowd (down from 26.4% to 25.8%) and 20-24 crowd (down from 62.3% to 62.0%) collapsed.

    The trend is even worse for African Americans. The 53.5% employment-population ratio among all African Americans is, while an improvement from January’s 53.2%, worse than every month between August 1986 and May 2009. The participation rate of 60.8%, while an improvement over January’s 60.5%, is lower than every month between October 1983 (July 1982 if one wants to go under 60.8%) and July 2011, with only 5 months since as bad or worse (4 of them the prior 4 months).

    Comment by steveegg — March 7, 2014 @ 1:00 pm

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