The Real Jobs Report: May 2013
The network airwaves today are smothered in scandal reports. They are every which way we turn. The jobs pictures is being ignored.
But not by Wall Street. It remains laser-focused on the Monthly Jobs Report released this morning. They are happy. As of this writing the DOW is up +191 points and flying like an eagle!
Jobs are up by +175,000 and the unemployment rate remains steady at 7.6%. A unexpected glimmer of good news is that the Labor Force Participation Rate inched up a tick for the first time since October and workers only marginally attached to the labor force fell by 200k.
However, it is always a good idea to dig deeper into the monthly jobs report to find out what it is really telling us.
+175,000 New Jobs Put into Perspective
According to this month’s Population Survey, the U.S. civilian labor force grew by +420,000. That means nearly 2.5 times more Americans became eligible to enter the labor force than actually got jobs.
That might seem pretty bad to some folks, but is about an average job growth rate you’d expect for a total labor force of 155 million.
By comparison, during the 8 years of the Clinton Administration an average of 230,000 jobs were created each and every month when the labor force was only 130 million. That, friends, is what a healthy and growing economy looks like.
Obviously, nowadays, long-term unemployed workers are NOT finding jobs.
The United States remains in a jobs depression.
Numbers to Notice
Two days ago Edward Lazear in the Wall Street Journal suggested that the ’employment rate’ is a much better economic indicator than the usual “U3” unemployment rate highlighted in each monthly jobs report.
Lazear says the proportion of the population that is actually working is the better measure of economic health. His suggestion came in this article, “The Hidden Jobless Disaster“.
Lazear says that the ’employment rate’ is more revealing. He says the much ballyhooed and talked about “U3” unemployment rate is only an approximation of economic health and breaks down during severe recessions, like the one we are still suffering.
Lazear suggests looking at these population survey numbers from this month instead:
- Employment-Population Ratio (Table A-1) – 58.6%
- “U6” Unemployment Rate (Table A-15) – 13.8%
What Lazear’s Numbers Reveal
The numbers add a third dimension to economic reporting. “U6” unemployment includes workers only marginally attached to the workforce for economic reasons and discouraged workers who have dropped out of the labor force entirely.
Before the Great Recession “U6” was at 8.2%. It shot up to 17.1% by October 2009 and still remains at 13.8%.
The Employment-Population Ratio was at 63.3% in early 2007 and has dropped ever since, now down to 58.6%. That difference roughly translates into 7 million lost jobs!!!
Retirements and the aging of America are playing a roll in that loss of jobs. The decline started before the Great Recession way back during the 2001 tech-bubble recession.
Both numbers tell us how bad off this nation’s economy still remains.
Lazear presents this graph as the basis of his suggestion that ’employment rate’ is a more accurate indicator of economic health than the usual unemployment rate.
From 1979 to 2009, the unemployment rate and the Employment-population ratio were basically mirror images. When the Employment-population ratio went up, meaning more people were working, then the unemployment rate went down. Makes sense.
Marked in yellow on the far right, though, we can see that relationship completely broke down at the end of the Great Recession. The percentage of people working remained unchanged, yet the unemployment rate dropped over 3.5%. That doesn’t make sense.
It happened, though, because so many people permanently dropped out of the workforce and/or never entered the workforce in the first place that the traditional unemployment rate no longer reflects the true state of the jobs situation in this country.
Alan Kreuger, President Obama’s White House Chief of Economic Advisers, once again mindlessly said, “While more work remains to be done… yada-yada… economy is continuing to recover from the worst downturn since the Great Depression… yada-yada… recovery gaining traction… yada-yada-yada”.
The man needs a new script.
The economy is not good. It is in terrible shape. It remains stagnant at best. Everyone in America instinctively knows that without being told numbers.
Lasear masterfully proves it numerically in his article. He graphically shows the invisible loss of around 7 million jobs.
President Obama is running around all over the country talking about almost anything to avoid talking about the scandals. What he isn’t talking about, but should be, is creating jobs.
Mr. President, if you talk 24X7 about nothing other than fixing the economy and creating jobs, and then work tirelessly to do something about it then you will win the hearts and minds of a grateful nation and be cut some slack on the scandals.