Posts Tagged ‘unemployment rate’

Back to the Future?

Back to the Future?

Courtesy of Steve Keen in Debtwatch

HOLLYWOOD, CA - DECEMBER 16:  Actor Michael J Fox   who attended the launch party of the 'Back to the Future' DVD release held at Universal Studios on December 16, 2002 in Hollywood, California.  (Photo by Frazer Harrison/Getty Images)

Things are looking grim indeed for the US economy. Unemployment is out of control—especially if you consider the U-6 (16.7%, up 0.2% in the last month) and Shadowstats (22%, up 0.3%) measures, which are far more realistic than the effectively public relations U-3 number that passes for the “official” unemployment rate (9.6%, up 0.1%).

The US is in a Depression, and the sooner it acknowledges that—rather than continuing to pretend otherwise—the better. Government action has attenuated the rate of decline, but not reversed it: a huge fiscal and monetary stimulus has put the economy in limbo rather than restarting growth, and the Fed’s conventional monetary policy arsenal is all but depleted.

This prompted MIT professor of economics Ricardo Cabellero to suggest a more radical approach to monetary easing, in a piece re-published last Wednesday in Business Spectator (reproduced from Vox). Conventional “Quantitative Easing” involves the Treasury selling bonds to the Fed, and then using the money to fund expenditure—so public debt increases, and it has to be serviced. We thus swap a private debt problem for a public one, and the boost to spending is reversed when the bonds are subsequently retired. Instead, Caballero proposes

a fiscal expansion (e.g. a temporary and large cut of sales taxes) that does not raise public debt in equal amount. This can be done with a “helicopter drop” targeted at the Treasury. That is, a monetary gift from the Fed to the Treasury. (Ricardo Caballero)

The government would thus spend without adding to debt, with the objective of causing inflation by having “more dollars chasing goods and services”. This is preferable to the deflationary trap that has afflicted Japan for two decades, and now is increasingly likely in the US. So on the face of it, Cabellero’s plan appears sound: inflation will reduce the real value of financial assets, shift wealth from older to younger generations, and stimulate both supply and demand by making it more attractive to spend and invest than to leave…
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Anecdotes from Germany regarding ‘Kurzarbeit’ (Part-Time for Economic Reasons)

Anecdotes from Germany regarding ‘Kurzarbeit’ (Part-Time for Economic Reasons)

Courtesy of Mish 

Here is an interesting email from "Klaus" in response to Economists Surprised Again as German Factory Orders Unexpectedly Fall

Hey Mish,

I have a German friend visit whose family owns a small manufacturing company that makes the machinery to clean and refurbish commercial concrete forms.

This is his story: a few years ago business was steady and they had about 12 employees. They didn’t really see any slowdown in 2008. Moreover, 2009 was a bit of a boom year and they staffed up to about 15. That lasted for a while, but this spring (May) business fell off a cliff.

They are now down to about 3 people, the rest are on ‘Kurzarbeit’ (translated: ‘short work’), which is essentially a way to keep people on payroll while slashing their hours and pay.

A quick search shows ‘Kurzarbeit’ is being hailed as a model for other countries to follow. This makes me wonder how much ‘Kurzarbeit’ is masking unemployment problems in the US.

Klaus

Kurzarbeit in the US

Hello Klaus, thanks for the report and thanks for your question. I am quite certain Europe will slow much more than the mainstream talking heads realize.

In the US, "on Kurzarbeit" is known as "part time for economic reasons".

If you work as much as 1 hour you are considered employed.

Part-time census workers alone added 411,000 jobs in May. 225,000 of those jobs went away in June as noted in Jobs Decrease by 125,000, Rise by 100,000 Excluding Census; Unemployment Rate Drops to 9.5%; A Look at the Details

Table A-8 Part Time Status

click on chart for sharper image

The above table shows we have 8,627,000 "on Kurzarbeit".

Those "Not in the Labor Force"

Moreover, those "not in the labor force" rose by a whopping 842,000 in a single month. In the last 3 months, those "not in the labor force" rose from 82.6 million to 83.9 million, an increase of 1.3 million.

In the US, if you want a job, but do not report you looked for a job, you are not a part of the labor force and therefore are not considered unemployed. This explains how the unemployment rate dropped.

Most of those not in the labor force are under the age of 16, retired, or in prison. However, there are 2.6…
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Employment Data ABCs

Employment Data ABCs

Courtesy of John Lounsbury at Piedmonthudson’s Weblog

a young man sitting on steps holding his head

Comments on employment data, especially over the past few days, indicate that many are confused about what the data means, how reliable/unreliable it is, and whether or not it is politically motivated. I have written past articles in which many details of how the DOL (U.S. Dept. of Labor) numbers should and should not be used. One of these (here) was a very detailed examination of various aspects of DOL processes. In this article, I want provide a summary update of the earlier work and add some new details.

Political Manipulation

I will address the third concern first. I can find no evidence that there is any political influence whatsoever in the collection and analysis of the employment data. The processes are well defined and stable over long periods of time. In fact, this very stability can produce errors in analysis models that need to be corrected when the historical form of the models starts to deviate from new economic reality.

The Birth/Death Adjustment

The most notable example of model drift is the birth/death adjustment, which has recently overstated the estimate of jobs created by new business formation before the new companies actually show up in the DOL’s Establishment Survey. These estimates are adjusted for 12 month data intervals almost a year after the fact, when new business formation can be more accurately accounted for from state tax and business records.

The ex post facto corrections made necessary by this “wandering model” were applied this month to data for April 2008 through March 2009. A total of 930,000 non-farm payroll job losses were added to those twelve months. Interim adjustment corrections were also made this month for April through December 2009. This will presumably reduce the corrections needed in February 2011 for the period April 2009 through March 2010.

The Establishment Survey

This is one of two monthly surveys conducted by the DOL. It covers approximately 140,000 businesses and government agencies (~410,000 work locations). The output of this survey consists of employment analysis of various segments of the economy, such as retail, manufacturing, construction, mining, transportation, education and health services, government, etc. The average weekly hours worked is also determined by this survey. It is the data used to produce the non-farms payroll report.

In spite of the fact that the non-farms
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The Unemployment Rate is SO Misleading

Paco Ahlgren is an Austrian economist who worked as a financial analyst for many years. His expertise ranges from stocks, options, futures, interest rates and real estate.  Read more about Paco here, and here. – Ilene 

The Unemployment Rate is SO Misleading

Courtesy of Paco Ahlgren at THE  BOTTOM  VIOLATION

[click on chart to enlarge]

U.S. unemployment, jobs, joblessness, duration, job loss

It’s the duration, stupid.

PACO AHLGRENEven if it weren’t a lie, just look at that vertical line… 

1. The “unemployment rate” is a lie. It’s much higher than the government wants you to believe.

2. Even if it weren’t a lie, a 10% unemployment rate does not mean that the job market is 90% hot. Employment is absolutely frozen. 

3. Unemployment has a much more dangerous dimension: duration. Have a closer look at the chart above.

www.BottomViolation.com 

 


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Jobs Contract Yet Again; Unemployment Rate Drops To 9.7%

Here’s Mish’s detailed breakdown of the confusing unemployment numbers. – Ilene

Jobs Contract Yet Again; Unemployment Rate Drops To 9.7%

a young man lying on a sofa holding a glass of wine

Courtesy of Mish  

In the continuing theater of BLS absurdities, the unemployment rate fell to 9.7% in spite of a 25th consecutive month of job losses. Some stopped counting at 22 months in November. However, I find November questionable.

This month professional services contributed 44,00 jobs to the plus side, but 52,000 of them were part-time jobs. Amazingly a table below shows the number of part-time workers decreased by 849,000 from last month. Go figure.

Moreover, the so-called 64,000 rise in November can be attributed to the seasonally adjusted hiring of 94,000 temporary workers. Here is a look at revisions ….

BLS Revisions

[click on charts to enlarge]

Household Revisions

The above table does not affect the unemployment rate. Revisions to the Household Survey do. Here are the household revisions.

Bingo. Just like that the population shrank as did the civilian labor force.

For some reason the BLS does this in pieces. The following chart shows the result.

There are now a whopping 2.5 million people without a job but want one, yet are not counted as unemployed.

So yes, the "official unemployment rate" can hold its own or even drop with this kind of nonsense.

Now for a closer look at the report ….

This morning, the Bureau of Labor Statistics (BLS) released the January 2010 Employment Report.

The unemployment rate fell from 10.0 to 9.7 percent in January, and nonfarm payroll employment was essentially unchanged (-20,000), the U.S. Bureau of Labor Statistics reported today. Employment fell in construction and in transportation and warehousing, while temporary help services and retail trade added jobs..


Establishment Data

click on chart for sharper image

Highlights 

  • 20,000 jobs were lost in total vs. 150,000 jobs last month.
  • 75,000 construction jobs were lost vs. 32,000 last month.
  • 11,000 manufacturing jobs were added vs. 23,000 lost last month.
  • 48,000 service providing jobs were added vs. 69,000 lost last month.
  • 42,000 retail trade jobs were added vs. 18,000 lost last month.
  • 44,000 professional and business services jobs were added vs. 20,000 last month.
  • 16,000 education and health services jobs were added


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Non Farm Payrolls Benchmark Revision and the Unemployment Rate as Cruel Farce

Non Farm Payrolls Benchmark Revision and the Unemployment Rate as Cruel Farce

Courtesy of Jesse’s Café Américain

Well, we ‘hit’ the projected headline number on the nose, with a loss of 20,000 jobs. No credit to us, it was as much a judgement call (aka SWAG) as any product of careful measurement.

As you may have heard, the BLS did a ‘benchmark revision.’ This is Washingtonian for ‘revised the numbers back as far as anyone might care to remember.’

Here is a simple picture of the old and new headline numbers, back to the beginning of the spreadsheet we happen to be using these days.

non farm payrolls

[click on charts to enlarge]

The change is subtle, but pervasive. One thing of note is the shoving of more job losses into the past, setting up a more solid base for great job gains in the future, without embarrassing oneself by getting out of synchronization with the actual growth of the civilian population. There will be more ‘truing up’ of the numbers in the future.

Unemployment Rate as Cruel Farce

Regarding that ‘surprise drop’ in unemployment to 9.7%, this is wholly due to people falling off the unemployment benefits radar, and is essentially meaningless, if not downright misleading.

One may as well solve an unemployment problem by shipping people to Australia. Well, that has some historical precedent. Hard to tell who has gotten the better deal on that one, at least over time.

A better measure of unemployment is the Labor Force Participation Rate, which provides information about the total number of people employed as a percent of the population, without benefit of official banishment.

That number continued to drop again in January, from 64.9% to 64.6%.

 


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Consumer confidence sinking

Consumer confidence sinking

Courtesy of Edward Harrison at Credit Writedowns

Retailers Hope For A Busy Christmas As The UK Stays In Recession

From Bloomberg:

Confidence among U.S. consumers unexpectedly dropped in November as the loss of jobs threatened to undermine the biggest part of the economy.

The Reuters/University of Michigan preliminary sentiment index decreased to a three-month low of 66 from 70.6 in October…

Rising joblessness puts the economy at risk of slipping into a vicious circle of firings and declines in consumer spending that will limit the emerging recovery.

I don’t pay as much attention to consumer confidence as I do to some other economic data because I have yet to see enough statistically significant correlations between confidence and future economic paths.  However, I do realize there is a connection having recently posited the following about a term I coined unemployment rate illusion:

behavior changes in accordance with the nominal numbers used as economic signposts in an economy…

The parallel of money illusion to unemployment rate illusion is that a higher posted rate of unemployment can have a serious negative impact on consumer confidence and personal consumption (think balance sheet recession). All else being equal, higher unemployment rates mean lower confidence and consumption…

  • If people see 12-13% in 2010, they will be floored, angry, and looking for someone to blame. As Democrats control Washington, they will get the lion’s share of the blame and lose big time in 2010.
  • Making matters worse, this is the kind of shock that causes people to put their checkbooks away and go home for the night a.k.a sending us into a double dip recession.

So I am concerned that we are going to se a relapse. (Note: I have moved from seeing a double dip recession as a 1/3 chance to a base case scenario). My optimism about recovery is now fading.

Unfortunately, similar downbeat confidence numbers are also coming from the Conference Board index which unexpectedly fell in October:

The Consumer Confidence Index, released by The Conference Board, sank unexpectedly to 47.7 in October — its second-lowest reading since May.

Forecasters predicted a higher reading of 53.1. A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.

The index has seesawed since reaching a historic low of 25.3 in


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Rosenberg: U.S. unemployment rate headed for 12.0-13.0%

Rosenberg: U.S. unemployment rate headed for 12.0-13.0%

Courtesy of Edward Harrison at Credit Writedowns

David Rosenberg thinks the unemployment rate is headed much higher than anyone anticipates.  If you recall, back in January when the stimulus package was crafted, the Obama Administration felt that passing the bill would mean an unemployment rate which would top out at 8.0%. As the situation deteriorated, the President recognized that 10.0% was more likely – a number we just got last week. But Rosenberg is the only one (except Meredith Whitney) who is talking about 12-13%.

As an aside, it was interesting to hear Whitney at about 3:15 into the third video in the link above from July. Right before she gives us the dreaded 13% number, she admits to lowballing her house price decline estimates in order not to be dismissed as wildly out of step with consensus. That pressure is something I discussed here.

Here’s what Rosenberg says:

There are serious structural issues undermining the U.S. labour market as companies continue to adjust their order books, production schedules and staffing requirements to a semi-permanently impaired credit backdrop. The bottom line is that the level of credit per unit of GDP is going to be much, much lower in the future than has been the case in the last two decades. While we may be getting close to a bottom in terms of employment, the jobless rate is very likely going to be climbing much further in the future due to the secular dynamics within the labour market.

But in a nutshell, to be calling for a 12.0-13.0% unemployment rate is meaningless except that it is very likely going to be a headline grabber. The most inclusive definition of them all, the U6 measure of the unemployment rate, which includes all forms of unemployed and underemployed, is already at 17.5%. The posted U3 jobless rate that everyone focuses on is at 10.2% (though if it weren’t for the drop in the labour force participation rate, to 65.1% from 66.0% a year ago, the unemployment rate would be testing the post-WWII high of 10.8% right now). The gap between the U6 and the official U3 rate is at a record 7.3 percentage points. Normally this spread is between 3-4 percentage points and ultimately we


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Jobs Contract 22nd Straight Month; Unemployment Rate Hits 10.2%

Jobs Contract 22nd Straight Month; Unemployment Rate Hits 10.2%

Courtesy of Mish

This morning, the Bureau of Labor Statistics (BLS) released the October Employment Report.

The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm payroll employment continued to decline (-190,000), the U.S. Bureau of Labor Statistics reported today. The largest job losses over the month were in construction, manufacturing, and retail trade..


Establishment Data

click on chart for sharper image

Highlights

  • 190,000 jobs were lost in total vs. 263,000 jobs last month.
  • 62,000 construction jobs were lost vs. 64,000 last month.
  • 61,000 manufacturing jobs were lost vs. 51,000 last month.
  • 61,000 service providing jobs were lost vs. 147,000 last month.
  • 40,000 retail trade jobs were lost vs. 39,000 last month.
  • 18,000 professional and business services jobs were added vs. 8,000 lost last month.
  • 45,000 education and health services jobs were added vs. 3,000 added last month.
  • 37,000 leisure and hospitality jobs were lost vs. 9,000 last month.
  • 00,000 government jobs were lost vs. 53,000 last month.

A total of 129,000 goods producing jobs were lost (higher paying jobs). Retail and professional services contributed to to the plus side.

Last month I noted "The one cheery bit of news in the above numbers is the loss of 53,000 government jobs. Unfortunately, this trend is likely to reverse in a major way with as of yet unannounced son-of-stimulus and grandson-of-stimulus jobs packages."

On a month to month basis Government jobs were up by 53,000 even though they did not add any overall jobs. Government jobs, education, and to a lesser extent professional jobs accounted for all (and then some) of the improvement vs. last month.

Note: some of the above categories overlap as shown in the preceding chart, so do not attempt to total them up.

Index of Aggregate Weekly Hours

Work hours were flat at 33.0. Short work weeks contribute to household problems. Moreover, before hiring begins at many places, work weeks will increase.

Birth Death Model Revisions 2008

click on chart for sharper image

Birth Death Model Revisions 2009

click on chart for sharper image

Birth/Death Model Revisions

After the typical in January in which the Birth/Death Model revisions bore some semblance of reality, the Birth/Death numbers remain


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Unemployment Jumps to 9.7%… Broader Employment to 16.8%

Unemployment Jumps to 9.7%… Broader Employment to 16.8%

Courtesy of Jake at Econompic Data


 

Source: BLS

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Phil's Favorites

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Courtesy of Allan McCay, University of Sydney

The rise of artificial intelligence has led to widespread concern about the role of humans in the workplaces of the future.

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Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

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