April 2012 Jobs Report: a jobs situation which is an abysmal failure of monumental proportions.

‘Mr. Obama argues that the economy is recovering slowly from a deep recession, and Congress should do more to spur growth. On Friday, he noted that the report continued more than two years' worth of job growth, while acknowledging the lingering weakness.

"After the worst economic crisis since the Great Depression, our businesses have now created more than 4.2 million new jobs over the last 25 months—more than one million jobs in the last six months alone," he told students at a suburban Virginia high school. "But there's still a lot of folks out of work, which means that we've got to do more."

He said he would urge Congress to "take some actions on common-sense ideas that can accelerate even more job growth." He didn't say what he would propose. Most of the ideas he has put forth in the past have gone nowhere, including more infrastructure spending and aid to states to keep public employees such as teachers employed.’ - Jobs Engine Sputters Again in April, WSJ, 05/05/2012 (1)

　

Robert Higgs of the Independent Institute has been pointing out that one should by-pass the “unemployment number” and focus on “total employed”. Total employed has not changed since the official end of the recession [06/2009]. Hence if one argues “..have now created more than 4.2 million new jobs over the last 25 months…” then somewhere in the vicinity of 4.2 million jobs have been destroyed. In the famous words of Billy Preston: nothing from nothing equals nothing.

Then we see the wonderful political phenomena of do something appear: ‘He said he would urge Congress to "take some actions on common-sense ideas that can accelerate even more job growth." ‘ That is, politicos need to show the voting public they are “doing something”.

Hence we have nothing to show for doing something [stimulus, cash-for-clunkers, extended unemployment benefits, etc., etc.] therefore we need to do something about the something. -Or- “Government is the only enterprise on earth, that when it fails, it merely does the same thing over again, just bigger”. - Don Luskin

Then we have “how you feel about it today” economics:

“The job market was soft in April, given the tepid payroll job gain and the decline in labor force participation. But it isn't as soft as the data suggest, as it reflects payback from the very warm winter, which juiced up job gains earlier in the year,” said Mark Zandi, the chief economist for forecaster Moody's Analytics. “Underlying job growth, abstracting from the temporary effects of the weather, is over 175,000 per month. This isn't boom times, but it is solid enough to bring down unemployment further.”

“The decline in unemployment also reflects the expiration of the emergency unemployment-insurance program in an increasing number of states. Older workers losing unemployment insurance are leaving the workforce, contributing to the decline in labor force participation, and younger workers that were slow to take a job now have no choice,” Zandi said. “I expect the job market to reaccelerate later this summer and fall.” - The Sun News, Myrtle Beach, SC, 05/05/2012 (2)

　

　

Beyond Zandi being Zandi, think for a moment what he is alluding to when he states: “The decline in unemployment also reflects the expiration of the emergency unemployment-insurance program in an increasing number of states. Older workers losing unemployment insurance are leaving the workforce…”. That means that these older workers that were collecting unemployment benefits were only doing so to bridge to retirement with no intention of looking for/find a job in many, many cases. That is, he is confirming what many believe i.e. extremely extended unemployment benefits are a disincentive. However he is also raising the phenomena of “strategically unemployed” (akin to strategic default). That some of the unemployed remained strategically unemployed to gain maximum benefits before they qualified for yet another program e.g. social security.

If one takes job creation, plots it on a graph, and takes the twenty year historical trend, projects the trend forward from the end of the recession until today, we are 4.1 million jobs below trend. That is, one would need to create 4.1 million jobs today, right now, instantly to return to the twenty year job creation trend line! Then one would need to continue the job growth to continue on the trend line. Stated alternatively, the lack of job creation has created a very deep hole from which to climb out.

One finds oneself 4.1 million jobs below trend, finds an army of discouraged workers approaching 4 million, finds still millions counted as unemployed actively seeking jobs, extended unemployment benefits causing disincentives as well as shenanigans and the same number are employed today as the number employed at the end of the recession [06/2009] .....all of which exists despite the political maneuvers of "doing something" over and over again. In other words, the political mantra of “the economy recovering slowly” is political speak for a jobs situation which is an abysmal failure of monumental proportions.

Notes:

(1)http://online.wsj.com/article/SB10001424052702304743704577383713904032818.html

　

(2)
http://www.myrtlebeachonline.com/2012/05/04/2810374/april-jobs-report-suggests-slowing.html









　

Five Stimulus and Jobs Bills: Measuring the Abysmal Keynesian Results

'Even before the 2010 midterm elections, with Democrats controlling massive supermajorities in both the House and Senate, President Obama had passed five stimulus and jobs bills. If you add up the promises, he boldly promised well over 5.5 million jobs “created or saved.” But reality turned out very differently: There were 2 million fewer people working in September 2011 than when Obama took office. On top of that, population growth by itself should have generated more than 3 million new jobs.'

'By the end of the summer, in August 2011, the unemployment rate was still at 9.1 percent. It was no longer possible to claim the Stimulus had worked well. Obama claimed that the sluggish economic growth wasn’t the fault of his own economic policies; it was the fault of other circumstances that he had no control over. It was either events outside the United States or the irresponsible political behavior of others in Washington. Obama claimed:

"In the last few months, the economy has already had to absorb an earthquake in Japan, the economic headwinds coming from Europe, the Arab Spring and the [rise] in oil prices—all of which have been very challenging for the recovery. But these are things we couldn’t control. Our economy didn’t need Washington to come along with a manufactured crisis to make things worse. That was in our hands. It’s pretty likely that the uncertainty surrounding the raising of the debt ceiling—for both businesses and consumers—has been unsettling, and just one more impediment to the full recovery that we need."

There are a couple of problems with his argument. Economic growth had already ground to a halt during the first three months of 2011—with GDP growing by just 0.1 percent. This was well before the Arab Spring, the renewed debt crisis in Greece and other countries, and the July and August 2011 debate over the debt ceiling. And whatever the impact of the March 2011 earthquake, its initial impact during the first quarter in the United States would have been very limited. The president also blamed Republicans for not passing his new legislation when they took over the House of Representatives in January 2011. But with Democratic supermajorities in both the House and Senate for the two previous years, it is pretty hard to blame for the slow growth in the first half of 2011.

In addition, it seems a little hard to blame the Japanese earthquake for our poor unemployment rate when the Japanese unemployment rate fell and ours rose in the five months following the earthquake. Nor is it clear how we can blame “economic headwinds” from Europe when our unemployment rate from January to August 2011 rose while it fell for European countries such as Germany, Italy, and Sweden and stayed the same in France.'

'No matter how you cut it, 3 million jobs have not been added since the recession ended. The recession officially ended in June 2009, and at that time 130.49 million people held jobs according to the Bureau of Labor Statistics’ Establishment Survey. The numbers for September 2011 show 131.33 million, an addition of just 840,000 jobs. But with the working-age population having grown by 4.6 million people in the same period, this should be viewed as a miserable failure. Furthermore, out of the 840,000 additional jobs, the vast majority—540,000—were merely “temporary help” service jobs.' - Debacle: Obama's War on Jobs and Growth and What We Can Do Now to Regain Our Future, Grover G. Norquist and John R. Lott, Jr.

The entire excerpt from the book Debacle: Obama's War on Jobs and Growth and What We Can Do Now to Regain Our Future can be read at the following link:

http://www.foxnews.com/opinion/2012/03/15/read-excerpt-from-john-r-lott-jr-and-grover-g-norquists-new-book-debacle/

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:

http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=labor+force+participation+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]:

http://ycharts.com/indicators/labor_force_participation_rate/historical_data

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?

Notes:

(1)    http://www.bls.gov/news.release/pdf/empsit.pdf

(2)    http://gregor.us/economics/total-employment-in-the-us-falls-again/

(3)    Ibid.

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

http://www.bls.gov/news.release/empsit.a.htm

Unemployment Calculations: the “see-you-later-bye” total labor force of the state of Michigan

When determining the unemployment rate the denominator of the calculation is: total labor force. Some media reports of the current/recent decline in unemployment rates as measured by U3 [headline unemployment rate] have pointed out that 5.4 million discouraged workers, relating to some degree to the historically low labor participation rate, has caused the denominator of “total labor force” to shrink hence causing unemployment rates to fall which is causing an unemployment rate which becomes a false measurement.

Stated alternatively, U3 headline unemployment is registering a declining unemployment rate that causes a false picture of the true unemployment picture as one needs to strongly consider the calculation of unemployment, specifically the army of discouraged workers [5.4 million] and the historically low labor participation rate. That during times of robust GDP growth unemployment should actually rise before it falls as the discouraged workers are attracted back to the labor force due to improving economic conditions which means the denominator of the calculation is flooded with new participants causing unemployment to rise is the short and medium term. Hence the current U3 unemployment rate measurement is argued as merely improving, in part, due to people leaving the work force [the rise of the discouraged worker]. Therefore, an improving headline unemployment rate is matched by a rise in the discouraged worker population meaning the unemployment rate yielded by the U3 calculation tells a false story.

Enter the state of Michigan! The denominator discussion above regarding the unemployment calculation goes to a new zenith in Michigan. What if a particular state’s unemployment rate, the calculation thereof , in particular the denominator “total labor force”, yields an improving unemployment rate due to entire households leaving the state at a rate on one every twelve minutes? Yes, a rate of 43,200 households per year leaving the state of Michigan! (1) (2) (3)

Hence the “total labor force” in Michigan is shrinking an incredible rate leading to a shrinking total labor force denominator in the unemployment rate calculation resulting, in part, to an improved unemployment rate. That is to say, the Michigan example goes beyond discouraged workers to the phenomena of “see-you-later-bye” workers.

Notes:


(1) Leaving Michigan Behind: Eight-year population exodus staggers state, The Detroit News, 04/02/2009

http://www.detroitnews.com/article/20090402/METRO/904020403/Leaving+Michigan+Behind++Eight-year+population+exodus+staggers+state?fark



(2) Muskegon County schools lose 800 students as families move out, Mlive, 09/30/2010


http://www.mlive.com/news/muskegon/index.ssf/2010/09/muskegon_county_schools_lose_8.html

(3) Michigan Unemployment Rate Below 10 Percent, Lowest Since 2008, Yahoo News, 12/17/2011


http://news.yahoo.com/michigan-unemployment-rate-below-10-percent-lowest-since-145700889.html







　

　

Upon Further Review: ‘Employment’ is Currently 5 Million Persons Less Than Pre-Recession Peak.

“As the most widely reported rate of unemployment (U-3) has fallen in recent months, people with a political agenda served by painting a rosy picture of the recovery have made considerable noise about this decrease. Their political opponents have responded that one reason for the decline is that the labor force has fallen as more people have given up looking for work, some of them going into retirement sooner than they would have if the labor market had been more robust.

The best way to avoid the parsing and cherry-picking that plague such debates is to look not at unemployment, but at employment. After all, it’s employment that contributes to the production of goods and services and generates earnings for the job holders. Employment is less subject to interpretive ambiguity than unemployment is.

The most recently reported data on private nonfarm employment, for January 2012, show that employment has indeed continued its recovery. Since reaching its current-recession trough about two years ago, it has increased by about 3 million persons. Before starting a celebration, however, we should recognize that private nonfarm employment is still about 5 million persons less than it was at its pre-recession peak in 2008.” - Private Employment Has Recouped Only Three-Eighths of Its Recent Loss, Robert Higgs, 02/19/2012

Link to the entire article appears below:

http://blog.independent.org/2012/02/19/private-employment-has-recouped-only-three-eighths-of-its-recent-loss/

The Labor Market “Churn Rate”: The Seen and the Unseen.

“Job churning—the voluntary movement of workers from one job to another similar job—is an important but seldom noted factor in the labor market. Churning creates badly needed job opportunities when growth slows and unemployment rises.” (1)

In labor economics the observation above is referred to as the “churn rate”.  The churn rate is the measurement of the voluntary termination by the worker/employee (resignation) and re-employment of the same worker/employee by an alternate firm at a higher level of compensation. The higher level of compensation is considered to be an indicator of a better allocation of labor resources.

Why examine the labor market “churn rate”? One must endeavor to go beyond the seen, to the unseen. Recent improvements in the headline unemployment figures (the U3 measurement) and the decline in jobless claims are put forth by many pundits, talking heads, and media types as an indicator of a much improved economy and hence a much improved employment picture. However, another school of thought is that jobless claims is an overrated indicator especially with historically low labor participation rates, 5.4 million discouraged worker, and an SGS alternative unemployment rate standing at 22.5%. (2) (3) (4) (5)

　

FIGURES on employment tend to encourage a black-or-white view of an economy. Either conditions are worsening and firms are shedding workers, as they did by the hundreds of thousands in 2008 and 2009, or times are improving and businesses are creating new jobs. Spirits leapt on February 3rd on news that America’s private businesses boosted their payrolls by 257,000 jobs in January, capping the country’s best 12-month employment performance in the private sector for over five years. But the headline figures represent just the tip of a large labour-market iceberg. Data provided by the relatively new Jobs Openings and Labour Turnover Survey (JOLTS) illuminate these depths.

Even in the darkest of days, labour markets remain busy. Growing firms hire to expand and even shrinking businesses seek out workers to fill important vacant positions. In December 2008, for instance, overall American employment dropped by nearly 700,000 jobs. Yet in that month more workers—over 4.1m in total—were hired into new positions than in December of last year, when net payrolls grew by 203,000. During a relatively placid economic period like the mid-2000s, about 65% of all hiring is associated with what economists have dubbed “churn”—the job-to-job movement of workers through the labour force, which neither adds to nor subtracts from total employment. Of the 12m or so hires that occurred in a typical pre-recession quarter, some 8m came from firms luring workers away from other firms.

Churn is a mechanism by which labour markets reallocate workers towards more efficient ends. In the typical job-to-job move (that is, without any intervening stint of unemployment) an American worker can expect a rise in wages of over 8%. This gain represents, at least in part, an improvement in productivity. As workers obtain skills and find better job matches, their output and earnings rise. And as firms obtain ever more suitable labour, they can afford to pay higher wages. In this way, the churning of the labour market contributes to growth in the potential output of the economy. - The Economist, Go for the Churn, 02/11/2012


Link to the entire article appears below:

http://www.economist.com/node/21547224


Notes:

(1) http://www.incontext.indiana.edu/2009/jan-feb/article1.asp

(2) http://www.econlib.org/library/Bastiat/basEss1.html

(3) http://economics.about.com/od/unemploymentrate/f/labor_force.htm

(4) http://www.zerohedge.com/news/labor-force-participation-rate-drops-639-lowest-january-1984

(5) http://www.shadowstats.com/alternate_data/unemployment-charts

SGS Alternate Unemployment Rate (the measurement you rarely see)

The headline unemployment rate is the U3 measurement which current stands between 8-9%. U3 is argued by many as a political unemployment rate in that the measurement has become an unreliable measurement due to arbitrary adjustments.

U6, also known as the real unemployment rate, stands at 15%. Many people suggest that U6 is a better measurement of unemployment as it includes short-term discouraged workers, marginally-attached workers, and those workers which work part-time as full-time employment is unavailable.

However, in the current economic situation, if one is faced with 5.4 million discouraged workers, an army of discouraged workers, made up of short-term and long-term discouraged, one surely has to consider this standing army of discouraged workers. (1)

Enter the SGS alternate unemployment rate which adds in the long-term discouraged worker. We then find a measured rate of roughly 22.5%. (2)

　

Notes:

(1) http://www.headlightllc.com/avalanchebrief1/

(2)
http://www.shadowstats.com/alternate_data/unemployment-charts