Sunday, March 11, 2012

February Jobs Report: Upon Further Review

The Employment Situation Report – 02/2012 released Friday 03/09/2012 by the Bureau of Labor Statistics showed an unchanged unemployment rate as measured by U3 also known as “headline unemployment”. The rate remained at 8.3%. (1)

The report shows a 476,000 increase in the civilian labor force of which all gained employment hence the numerator and denominator of the unemployment formula increased equally, hence the U3 rate remains at 8.3%.

If one drills down into the data and applies “inflow rate to unemployment” and “outflow rate from unemployment” you find four items of interest:

(1) more people are staying in the same job for much longer periods,

(2) those leaving a current job can’t find a new job (few find a new job),

(3) those first time job seekers [high school and college graduates and those that have previous left the work force now returning to the work force] can’t find a job,

(3a) number 2 and 3 above is a 25 week average job seeking period [which is double the double dip recession of the early 1980's] which means 25 weeks is the average period to find a job -or- leave the work force (give up trying to find a job) i.e. become the discourage worker,

(4) job “trade up” aka “churn rate”, where a worker takes a higher paying/more opportunity job is very low. This situation, trade-up, is viewed as a better allocation of human resources aka more efficient allocation of human recourses…..and it is very, very low.

What does that mean?  It means two things:

(1) one is viewing a stagnant labor force, people don’t leave their current jobs, few can find new jobs, and the efficient allocation of human resources is very low,

(2) the current recession is not so much about losing one's job [although that did occur at the beginning], it’s much more about those that did/do loss a job not being able to find a new job and those first time job seekers [demographics yielding new labor participants] and or returning to the labor force job seekers not being able to find a job.

Drilling further down into the data and historical data, one finds this trend:

(1)    01/2009 there was somewhere in the vicinity of 142,000,000 employed. (2)

(2)    Total employment peaked in late 2007 at 146.5 million.(3)

(3)    Total employment as of Feb. 2012 Jobs Report were 142, 000, 0000.

(4)    That is, between 01/2009 and 02/2012 there was no change in total employment. (4)

Considering the trend of total employed from the discussion above one might want to consider the labor force participation rate in conjunction with total employment. Here is a definition of the labor force particpation rate:

Here is historical data on the labor force participation rate [note the bottom of the page you can click to go back into history]:

Hence combining/contrasting total employed with labor force participation rates one finds:

(1)    01/2009 employed was 142 million with a labor participation rate of 65.7%

(2)    02/2012 employed was 142 million with a labor participation rate of 63.9%

(3)    Looking at the recent peak in employed of 146.5 million in late 2007, the participation rate then was roughly 65.8%.

Implication and Summary

One then must ask the question of: is the employment/unemployment picture improving, stagnant or actually worse? If total employed is the same in 02/2012 as 01/2009 has improvement occurred? If labor participation rates have fallen between 01/2009 and 02/2012 is this an improvement trend? If the labor force is stagnant is this an improving picture?



(3)    Ibid.

(4)    Employment Situation Summary Table A. Household data, seasonally adjusted

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