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Thread: Looking under the hood at the latest US Unemployment Report

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    Default Looking under the hood at the latest US Unemployment Report

    from

    (snip)"Payroll Stunner in Today's "Pathetic" Jobs Report
    By Mike Mish Shedlock Jul 08, 2011 2:00 pm

    Few were prepared for today's grim numbers

    Thoughts on the Jobs Report

    Last month I commented that things are awful at first glance and simply bad beneath the surface. This month things took a huge turn for the worse.

    Three months ago I said, "It is very questionable if this pace of jobs keeps up." Clearly it didn't, for the second straight disastrous month. Certainly this cannot all be blamed on the Tsunami in Japan. The entire global economy is slowing rapidly.

    Economists projected a drop in the unemployment rate, I called for a rise to 9.2%.

    Few were prepared for today's grim numbers:

    •US payrolls +18,000
    •Last month quietly revised lower to +25,000 from +54,000
    •US unemployment unexpectedly rises +.1 to 9.2% despite drop in participation rate
    •Since March, number of unemployed rises by 545,000
    •Household survey number unemployed up 173,000
    •Household survey number of employed down 445,000
    •272,000 people dropped out of the labor force, reversing the labor force gain of 272,000 last month.
    •Average weekly workweek drops by 0.1 hours
    •Average manufacturing hours drops by 0.3 hours
    •Average private hourly earnings decrease 1 cent
    •There has been virtually no improvement in part-time employment in a full year. 8.5+ million workers want a full time job and cannot find one.
    Recall that the unemployment rate varies in accordance with the Household Survey, not the reported headline jobs number, and not in accordance with the weekly claims data.

    Digging deeper into the Household Survey, we see some more interesting data. In the last year, the civilian population rose by 1,799,000. Yet the labor force dropped by 263,000. Those not in the labor force rose by 2,063,000.

    Last month the labor force rose by 272,000. This month the labor force fell by 272,000. How's that for symmetry?

    The 6-month labor force total for 2011 is +4,000.

    Many of those millions who dropped out of the workforce would start looking if they thought jobs were available. Indeed, in a 2-year old recovery, the labor force should be rising sharply as those who stopped looking for jobs once again started looking. Instead, the labor force is not expanding at all.

    Were it not for people dropping out of the labor force for the past two years, the unemployment rate would be well over 11%.

    June 2011 Jobs Report

    Please consider the Bureau of Labor Statistics (BLS) June 2011 Employment Report:

    Nonfarm payroll employment was essentially unchanged in June (+18,000), and the unemployment rate was little changed at 9.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment in most major private-sector industries changed little over the month. Government employment continued to trend down



    (snip)Between January 2008 and February 2010, the US economy lost 8.8 million jobs.

    Ignoring the effects of the census, in the last 9 months of a recovery 2 years old the economy is averaging 130,000 jobs a month. That is very poor as recoveries go.

    Statistically, 127,000 jobs a month is enough to keep the unemployment rate flat.



    (snip)"Success" of QE2

    Average hourly earnings of all private-sector employees declined by 1 cent in June to $22.99; over the year, the series has increased 1.9 percent.

    The consumer price index for all urban consumers (CPI-U) was up 3.4 percent over the year ending in May.

    Not only are wages rising slower than the CPI, there is also a concern as to how those wage gains are distributed. (snip)

    (snip)"Distorted Statistics

    Given the total distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is hard to discuss the numbers.

    The official unemployment rate is 9.2%. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

    While the "official" unemployment rate is an unacceptable 9.2%, U-6 is much higher at 16.2%.

    Things are much worse than the reported numbers would have you believe, and for the second consecutive month the beneath the surface numbers were bad-to-awful.

    Note that U3 rose from 9.1% to 9.2% while U6 rose from 15.8% to 16.2%. Thus, the official measure rose .1, while the alternative measure rose .4.

    This is an "artifact" of 272,000 people dropping out of the labor force this past month.

    Also note that the unemployment rate is barely better than it was a year ago. It would actually be worse than a year ago were it not for people dropping out of the labor force.

    This was a pathetic jobs report(snip)


    A couple of important take-aways can be found in Mish's analysis. The first is that average hourly earnings are dropping. And that is pre-tax earnings they're talking about ... with increases in state and local income / sales taxes, the drop in net income is even larger. And this counterbalances against an official consumer price index rise of 3.5%. Obvious take-away is that, between shrinking paychecks and rising prices for necessary items, consumers ( thus strip club customers ) have even less money to spend on non-essential items ( like lap dances ).

    The second point concerns the growing number of Americans who are 'falling out of' the official US work force and unemployment statistics. In most cases, as their unemployment checks come to a stop their welfare checks will start. This of course only adds to federal and state budget deficits as well as leaving these 'permanently unemployable' Americans with essentially NO money to spend on non-essential items ( like lap dances ). It should also be pointed out that the 2 million Americans who 'dropped out' of the US labor force over the course of the past year, on top of the 5 million Americans who had already 'dropped out' in previous years, represents a huge 'stealth' number of unemployed Americans now dependent on social welfare programs as their sole ( legal ) means of support ... and probably permanently so.

    A third point involves the 'nature' of jobs being lost versus jobs being added. As the second chart shows, gov't workers took a huge hit this past month ... and I don't need to remind you that gov't workers are typically very well paid thus have a significant amount of discretionary income to spend on non-essential items ( like lap dances ). The same chart shows that leisure and hospitality workers added the lion's share of new jobs this past month. However, a good potion of these 'leisure and hospitality' jobs involve flipping burgers, waiting tables, selling tickets at amusement parks etc. i.e. low pay rates leaving very little money for spending on non-essential items.

    ~
    Last edited by Melonie; 07-10-2011 at 06:05 AM.

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