Category Archives: Jobs

June jobs report: Unemployment rate irrelevance

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Austin, July 10, 2014 —The U.S. Labor Department released the all-important Employment Situation Report last Thursday afternoon, just before the long Fourth of July holiday weekend.

At the surface, things could not look better. There were 288,000 new nonfarm jobs created in June and the unemployment rate dropped two tenths to 6.1 percent, over a one percentage point drop just since last October, now to its lowest level since September 2008.

Given the timing, the report almost went unnoticed, except by President Obama who hastily threw together an afternoon appearance to trumpet the new numbers.

However, things aren’t always how they appear to be.

275,000 new part-time jobs

275,000 of the 288,000 net new jobs created last month were part-time taken “for economic reasons”, according to Labor Department Report A-8.

In June, there was a net gain of just 13,000 full-time nonfarm jobs.

In his 7-minute speech, President Obama apparently celebrated the loss of 275,000 full-time jobs in favor of 275,000 part-time jobs taken for economic reasons by desperate Americans.

We’ve now seen the fastest job growth in the United States in the first half of the year since 1999 (applause)… We’ve seen the quickest drop in unemployment in 30 years… 10 million jobs created over the course of the last 52 months
-President Obama, 1776, 7/3/2014

The Administration has viewed job creation through rose-colored glasses for so many years it is incapable of facing reality. Reality is that seven million jobs were permanently lost in the Great Recession, never to return. Reality is that many of the new jobs are low paying or part-time. Reality is that millions of discouraged Americans have simply dropped out of the workforce entirely.

Author/BLS data: Most June job growth was part-time for “economic reasons”

Is the unemployment rate losing its meaning?

The unemployment rate isn’t what it used to. For proof, compare it to the last time the unemployment rate was 6.1 percent: September 2008.

September 2008 is special. It’s the last month of a booming economy. By month’s end the housing bubble burst, Lehman-Brothers filed for bankruptcy, stocks plummeted and the world’s economy teetered precariously on the brink of total financial collapse.

Important differences show up when comparing the time before the Great Recession with today. Those differences highlight how the unemployment rate has become less relevant.

Population growth

The first thing to do is pull the working age population of the United States from this month’s A-1 population survey. It has grown by 13.5 million since September 2008 and is 5.4 percent higher today.

Aspects of the economy that should grow should be at least 5.4 percent higher today.

But the total number of Americans employed has grown by only a 0.8 percent. If the number of employed Americans matched population growth then there should be 6.8 million more Americans employed today than there are right now in order to match 2008’s 6.1 percent unemployment rate.

Also, the civilian labor force has grown only 0.7 percent. If labor force growth matched population growth then there should be 7.3 million more workers in the labor force today than there are.

The vanished workers plummeted the labor force participation rate from 66 percent to 62.8 percent. The last time it was this low was March, 1978 – over 36 years ago!

Where did all the workers go?

Labor force shrinkage

Perhaps the most revealing statistic from the A-1 population survey this month is the increase in Americans not in the labor force. That number, since September 2008, has leaped by 12.3 million, up a disturbing 13.4 percent!

Millions of workers have simply vanished from the labor force. Poof! Gone. Labor force dropouts since 2008 have made today’s unemployment rate a shadowy remnant of its former self.

When looking deeper at hours worked and wages earned (LEU0252881600), the lucky ones that still have full-time jobs are putting in longer hours for less weekly take-home pay than in September 2008, after adjusting for inflation. Women have fared far between than men in this recession.

Forced part-time for economic reasons

Not only is the unemployment rate artificially low, but the quality of jobs distressed workers are forced to taking today are lower, too. This is shown in the A-8 report.

Of the workers still in the labor force, 1.4 million took part-time work for economic reasons. That is a disturbing 18.5 percent increase since September 2008, three times higher than population growth. It’s where most of June’s 288,000 new jobs came from.

Workers are not choosing to work part-time because they want to, they are working part-time because they have to.

The most startling statistic in the A-8 report has to be that, since September 2008, there has been an alarming increase of 41 percent in the number of workers taking part-time jobs because that is all they can find! It makes up 1.1 million of those who took part-time jobs for economic reasons.

On the other hand, the number of workers who took part-time work for non-economic reasons has risen by just 3 percent. That is below population growth.

Workers are not choosing to work part-time because they want to, they are working part-time because they have to.

Conclusions

Since the Great Recession began, the unemployment rate has become almost meaningless because so many millions have left the labor force. And many of the jobs ordinary Americans can find are low paying or part-time taken out of desperation.

Adjusting for inflation, those fewer who are working full-time are working longer hours for less weekly take-home pay.

During his remarks, made to enthusiastic audience applause, President Obama boasted there have been 10 million jobs created in the last 52 months. What he didn’t point out is that the United States should have 6.8 million more jobs today than in September 2008, just through population growth alone. The President also omitted accounting for the 629,000 government jobs that have been lost.

The President also didn’t point out that 275,000 of the 288,000 new jobs created last month were part-time taken by distressed workers because that is all they could find.

The monthly jobs report mainstays – unemployment rate and job creation – could hardly look better for June. However, things aren’t always how they appear to be.

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