It was worse than the seasonalized numbers indicate.
It’s hard to decide which aspect of the horrid April employment report the government’s Bureau of Labor Statistics released on Friday is the most troubling: the understated unemployment rate, the awful raw number of jobs added, their suspect seasonal conversion, or the sickening attempt at positive spin by the Obama administration’s labor secretary.
As to the genuineness of the official seasonally adjusted unemployment rate, the jig is basically up. It’s clear that many Americans, even among the relatively disengaged, have long since figured out that the official figure, which dipped to 8.1% in April, doesn’t include an extraordinary and unprecedented number of those who have given up looking for work. At 63.6%, the labor force participation rate is back to where it was in the early 1980s. Qualitatively, and despite a few years during which baby boomers have begun to collect Social Security, today’s rate is worse, because the frequency of stay-at-home parenting was far higher three decades ago. Zero Hedge has calculated that a participation rate equal to its post-1980 average would have generated an unemployment rate of 11.4%. Even establishment media reports from the likes of the Associated Press, aka the Administration’s Press, acknowledged that April’s rate drop occurred “only because more Americans gave up looking for work.”
It’s hard to understate how deeply disappointing April raw numbers of jobs added were, and how lucky the administration was (at least I hope it’s luck) that the seasonal conversions to 115,000 and 130,000 jobs added overall and in the private sector, respectively, came in as high as they did.
In early February, I wrote: ”[T]he acid test for Team Obama’s claim that the economy is finally legitimately recovering will come during the next five months (February through June).”
Despite a clearly larger pool of people who want to work or could be looking for work, through three of the first five months of the acid test period, this year’s economy has added fewer raw jobs than the 2004-2006 average for those same months. It has also added fewer than last year. The trend this year is even worse: February was okay, March trailed where it needed to be, and April stunk to high heaven. Sadly, it all makes sense. Last year’s peak in gas prices came in early May, about a month later than what (we hope) was this year’s early-April high point. In 2011, job creation in May and June fell off badly compared to what was needed. May and June 2012 seem to be on track for a repeat — or worse, as gas prices will almost certainly be higher than what motorists paid last year.
Most Americans don’t appreciate how truly bad the situation is because April’s seasonal adjustments worked in the administration’s favor. Somehow, even though the economy really added 283,000 and 233,000 fewer jobs in April 2012 than it did in April 2011, and 2010, respectively, April’s seasonally adjusted result was only 136,000 lower than 2011 and 124,000 lower than 2010. I’m not saying that the calculations were cooked (seasonal adjustments in March made things look a bit worse than the really were that month), but it wouldn’t have been unreasonable to expect that the 896,000 jobs actually added in April would have generated a zero or even negative result after seasonal conversion. I’ve been saying for years that relying solely on seasonally adjusted numbers during a time of abnormal economic volatility is foolish, and that the press’s almost universal failure to even look at the raw numbers in such times is derelict.
Unfortunately, those who believe that the BLS is no longer walled off from political influence gained three forms of support for their argument this month.
First, the bureau’s “Birth/Death” adjustment, which incorporated 206,000 jobs into April’s raw number, seems abnormally high and without strong basis. The adjustment in April 2011 was 172,000. We’re really supposed to believe that thousands more Americans are starting up enterprises than were doing so a year ago, and that they generated 20% more jobs than such people did a year ago (net of bankruptcies and other business terminations)? Subtracting Birth/Death from April in both years means that the raw number of job additions the bureau found through its normal survey methods dropped by over 30%.
Second, the employment report’s verbiage seemed like an attempt to water down the bad news in a vain attempt to minimize the damage. Unlike the vast majority of previous months when the news was better, the authors failed to mention the particularly weak number of seasonally adjusted 130,000 private-sector jobs added (130,000). It made sure to remind us that there were “gains averaging 252,000 per month for December to February” (like we care now?). It also decided to trumpet the seasonally adjusted 62,000 jobs added in “professional and business services,” even though the raw gains in that broad category were less than in each of the previous two Aprils, and despite the fact that this April’s number included 21,000 positions added at temporary help services. (Temps, a segment which is barely 2% of the private workforce, have made up over 740,000, or almost 28%, of the 2.66 million jobs added to private-sector payrolls since the recession officially ended in June 2009.)
Finally, Labor Secretary Hilda Solis’s related press release was an arrogant exercise in see-no-evil partisanship, as seen in these excerpts (my comments are in italics):
“I would characterize our growth as durable and steady. For 26 straight months, we have added private sector jobs. The national unemployment rate has fallen a full point in the last eight months. Layoffs are continuing to come down and are now back to 2006 levels. (Mass layoffs may be down, but unemployment claims, the better indicator of overall layoffs, were lower during every week in 2006 than during any week so far this year.)
“In April, our largest gains — 62,000 new jobs — were in good-paying business and professional services careers, meaning more architects, engineers, computer programmers and consultants are finding jobs. (Uh, over one-third of them were temps, and most temps aren’t particularly well paid.)
… “We’re on the right path, and we know our recovery would be even stronger if Congress hadn’t blocked almost every single proposed investment in the American Jobs Act. (Because AJA will work just as well as the stimulus did — oh, wait a minute…)
… “Going forward, we have a choice to make. We can either make investments in things like education, transportation and new sources of energy … Or we give more tax breaks to wealthy Americans who don’t need them and didn’t ask for them. (Team Obama’s current solution is hundreds of billions of dollars in tax increases scheduled to kick in on January 1, 2013.)
This is delusional. All the lipstick in the world can’t disguise how ugly this pig is — and in case you’re wondering, I really am referring to the jobs report.
The only reasonable response to April’s employment report and the Labor Secretary’s reaction is “OMG.” As in, “Obama Must Go.”