The Real Jobs Report: November 2013
When it comes to job creation in the United States, appearances can be deceiving.
For example, the BLS Monthly Jobs Report for November was released last Friday. Unemployment dramatically dropped from 7.3% to 7.0%. +203,000 new nonfarm jobs were created. That was pleasantly higher than expected.
The stock market was ecstatic. The Dow jumped nearly +200 points on the good news. CNN suggested Obama economic policies might deserve credit for the improvement.
Closer examination of BLS data, however, shows the good numbers result artificially from statistical artifacts related to the federal government shutdown in October.
Big numerical dips during the shutdown in October were followed by counteracting big jumps in November in several important population survey categories – total employed, employment-population ratio, labor force participation rate and the “Not in Labor Force” tally. Their zig-zags falsified most of this month’s happy results.
Combining the net changes for the last two month’s data instead of just comparing to last month’s numbers leads to a more accurate trend and, unfortunately, throws cold water on a positive report.
Job Creation and Population Growth
First off, there has to be a net gain in jobs above those generated by population growth for real economic recovery to occur. Job creation must exceed that number for there to be enough new jobs for previously unemployed people to find work again.
Is that happening? The surprising answer is that it depends on which BLS survey you look at.
For unknown reasons, the employer survey yields a much higher job growth average than the population survey.
The Federal Reserve Bank of Atlanta (FRBA) created a useful little web page that, among other things, can calculate the average monthly employment growth needed to match population growth. According to the FBRA it currently takes 111,113 new jobs/month to maintain today’s 7.0% unemployment rate.
As shown in the above graph, nonfarm job growth has averaged +195,000/month over the last 13 months. That is well above population growth and the unemployment rate dropped as expected.
However, total employment from the larger population survey shows job growth at only +81,000/month over the exact same 13 month period. That is well below population growth.
For the last two months the employer survey reports a hefty +403 jobs were created. The population survey reports an increase of only +83,000 jobs despite work-eligible population growth of +399,000. One survey looks like the job market is booming while the other looks exceptionally bleak.
How can that be? Why are they so different? Which is right?
Nonfarm jobs from the employer survey, with about 137 million total jobs, is a subset of the 155 million total jobs reported in the more comprehensive population survey. Nonfarm jobs is considered more accurate than that obtained from the population survey because it has a higher sampling rate. That is why it is widely reported and the population survey employment isn’t.
Close examination shows that unique circumstances this month shows improvements where none really exist.
Job growth from the population survey looks entirely different from the total nonfarm job growth from the employer survey. In both cases numbers are seasonally adjusted.
Employment figures from the population survey are not reported but unemployment and other crucial metrics related to workforce growth and participation are reported.
Population survey employment stats shows what appears to be a dramatic effect caused by the federal government shutdown in October and November.
A huge drop in October jobs was followed by a huger jump in November. The effect is artificial because, unlike in the private-sector, furloughed workers were paid for their days off. Thus, there was no net economic impact. It shouldn’t affect overall reporting, but does.
The big jump in employment in November was largely responsible for the drop in the unemployment rate to 7.0%.
The Two-Month Effect
The news media reported that the Civilian Labor Force, Labor Force Participation and the Employment-Population Ratio were all up in November. Also reported is folks “not in the workforce” dropped by 268K. All that is great news.
Though accurately reported, the good news evaporates away once the shutdown effect is subtracted.
Combine both October and November figures to remove shutdown effects and the jobs report looks very different:
- Population growth: 399K
- Civilian Labor Force: -265K
- Labor Force Participation Rate: -0.2%
- Employment-Population Ratio: Unchanged at 58.6
- Not in Labor Force: +664K
- Population Survey Job Growth: 83K
These dramatically dismal data show that a shrinking labor force is continuing unabated.
In the last two months the Civilian Labor Force is down. The Labor Force Participation Rate is down. The Employment-Participation Ratio is unchanged near its 30 year low. The number of workers “not in the workforce” instead grew by +664K!
Even though the eligible worker population increased by +399K, the population survey shows just +83K jobs created! That puts a great big fat asterisk after the very good nonfarm jobs numbers.
Practically every bit of optimistic news about jobs this month disappears if the October government shutdown is taken into account. Looking at the last two months statistics provides a more realistic picture of job market trends. It isn’t pretty.
Combining the last two months shows that the U.S. labor force is still continuing to shrink. Regardless of reason, workers are simply dropping out of the workforce by the hundreds of thousands.
Nonfarm job growth is very encouraging but the drop in unemployment to 7.0% was driven by workforce dropouts instead of workforce growth.
Chronic, systemic unemployment left over from the Great Recession remains the single greatest challenge facing the United States today.
This month’s jobs report doesn’t change anything.