Inside the BLS Employment Situation Report

This is my monthly look inside the BLS Employment Situation Report. There are two BLS Surveys: the Establishment and the Household. Establishment surveys about 141,000 businesses and government agencies, representing approximately 486,000 individual worksites. It is taken each month during the week which includes the 12th of the month. Household is a survey of 60,000 households taken each month during the week which includes the 12th of the month.

 

Each item below is suffixed with (H) if it is from the Household Survey, (E) if it is from the Establishment Survey, and (B) if it is from both.

 

– Nominal Nonfarm jobs was +248,000 (E). The two previous months’ gains were revised to +180,000 and +243,000. Those had been +142,000 and +212,000. That is a gain of 69,000 for those 2 months from the previous report making a net gain of +317,000 in jobs since the last report.

 

– the size of the civilian noninstitutional adult population increased by 217,000 to 248,446,000 (H).

– 97,000 fewer people were in the labor force last month. (H)

With a labor participation rate of 62.7% 136,000 more jobs were necessary to keep pace with population growth. We had 181,600 more jobs added than that. (H) The Employment/Population ratio was flat at 59.0%.

The Labor Participation Rate fell from 62.8% to 62.7%. It was 63.2% a year ago. It peaked at 67.3% in April 2000.

The civilian noninstitutional population is 2,278,000 (H) more than 12 months ago. With a labor participation rate of 62.7% we require 1,428,000 more jobs in the past 12 months to keep pace with population growth. We have 2,230,000 (H) more folks working. Real (population adjusted jobs growth in the past 12 months is 802,000.

 

– Real (population adjusted) job growth last month was 181,600. This accounts for the changes for the 2 previous months. – the Unemployment Rate rose fell from 6.1% to 5.9%. It was 7.2% a year ago.(B) – Average hourly earnings was $24.53 down from $24.54 the previous month. (E) – Average work week was 34.6 hours up from 34.5 hours the previous month. (E) – Private jobs were +236,000. Government jobs were +12,000. (E)

-Good producing jobs were +29,000. The two previous months were revised to +14,000 and +63,000 (E)

 

-The labor participation rate (percent of adult noninstitutionalized population who are part of the labor force) fell from 62.8% to 62.7%. It was 63.2% a year ago. (H) This, not the unemployment rate, is the number which should get everyone’s attention. It is this 62.7% of the adult noninstitutionalized population who get pay checks and contribute to GDP. The Labor Participation Rate is the lowest it has been since January 1978. Until 1970 the Participation Rate was almost always under 60.0. It started to increase as more women joined the labor force and as boomers started working. My concern in that the enormous obligations of Medicare and Social Security will be difficult to meet with a declining Labor Participation Rate.

 

Last month BLS measured 4 sets of people entering or leaving the jobs market:

– Job losers and persons who completed temporary jobs was 4,530,000 down 306,000 from previous month’s Job Losers and down 1,273,000 year-on-year. (H) This is a bright part of the report. Fewer people are losing their jobs.

– Job leavers was 829,000. This includes anyone who retired or voluntarily left working. This down 31,000 from previous month and down 155,000 year-on-year. (H)

-Reentrants was 2,809,000. Reentrants are previously employed people who were looking for a job and found one. This was -36,000 from the previous month and -346,000 year-on-year.(H)

-New entrants were 1,005,000. These are people who never worked before and who are entering the labor force for the first time. This was +39,000 from previous month and -106,000 year-on-year.

 

One line in the BLS Report is termed “people employed part-time for economic reasons.” These are people who want to work full time but their employer, for whatever reason, decide to employ them only part-time. In this month’s report there were 174,000 fewer people working part-time.

 

The presentation of the total change in jobs is like looking at the final score of a game. The details tell the story:

 

– 248,000 more people are working.

– 97,000 fewer people are in the civilian labor force.

The unemployment rate was down 0.2%

The Labor Participation Rate is the lowest since January 1978. There are 2 stories here: 1) we are adding jobs at a modest clip and 2) we are not adding jobs at a pace sufficient to generate tax revenue to meet the obligations of Medicare and Social Security. This is a better report than last month but a very ill omen for our ability to fund those “entitlements.”

For me the worst part of the reaction is the media’s unwillingness to understand or explain the nuances. Focusing merely on two numbers 1) the change in jobs and 2) the Unemployment Rate merely keeps the public ill-informed.

In any case, this in my view is a better report than we have been seeing recently. Fewer people are losing their jobs as in revealed in the weekly New Claims for Unemployment numbers. Wages are stagnant but that is hardly news. The headline unemployment rate even though less important that the Participation Rate will help equities for the day because this is what small investors are trained to Pavlov react to.

The Federal Reserve can feel good about the fact that the Unemployment Rate is below 6.0% even though they know that the labor Participation Rate is what is important. The Fed’s tapering will be justified. The big question about Monetary Base is how this gigantic increase will be dealt with. Increased Monetary Base threatens inflation while cutting back Monetary Base threatens recession.