Below is my monthly look inside the BLS Employment Situation Report. And here’s an accompanying piece on the rate reaction to today’s report.
Keep in mind that there are two BLS Surveys: the Establishment and the Household. The 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. The Household Survey is a survey of households taken each month during the week which included the 12th of the month. It is a survey of 60,000 households.
Each item below is suffixed with (H) if it is from the Household Survey and (E) if it is from the Establishment Survey and (B) if it combines the two.
– Headline Nonfarm jobs was +96,000. (E)
– Unemployment Rate was 8.111% down from 8.253% in July 2012 (B)
– Average hourly earnings was $23.51 down from $23.52 in July 2012 (E)
– Average work week was 34.4 hours the same as July 2012 (E)
– Private jobs were +103,000. Government jobs were -7,000 (E)
Reading beneath the surface:
-Good producing jobs were -16,000. The two previous months were +23,000 and +9,000. (E)
-The size of the civilian labor force fell from 155,013,000 to 154,645,000 a decrease of 368,000. (H)
-The labor participation rate (percent of adult non-institutionalized population who are part of the labor force) was 63.5% down from 63.7% in July. It was 64.1% a year ago. (H) This, not the unemployment rate, is the number which should get everyone’s attention.
– the size of the civilian noninstitutional population increased by 212,000 in July to 243,566,000. With a labor participation rate of 63.5% 134,600 more jobs were necessary to keep pace with population growth. We had 38,600 fewer jobs added than that. (H) The Employment/Population ratio is exactly the same as it was in August 2011 58.3% and the labor participation rate has dropped in that year from 64.1% to 63.5%. All of the gain in jobs in the last year is attributable to population growth.
According to the 4 week moving average of Initial Jobless Claims, 1,481,000 people lost their jobs in the last 4 weeks. That normalizes to 1,604,400 lost jobs in a calendar month (there are about 13 4-week periods in a 12 month year.) This is up from the previous month’s 1,583,800 lost jobs/month.
Folks always scratch their head and ask “If 1,604,400 people filed unemployment claims last month how did we gain 96,000 jobs?” The answer is that the labor market is extremely dynamic. The number of people moving in an out of it each month is almost 100 times as large as the net change in jobs. Each month we try to look here at the dynamics of this market.
The answers are in the Household Survey.
In August 2012 BLS measured 4 sets of people entering or leaving the jobs market:
– Job losers and persons who completed temporary jobs was 7,003,000 down 120,000 from July’s Job Losers and up down 1,017,000 from August 2011. (H)
– Job leavers was 942,000. This includes anyone who retired or voluntarily left working. This was up 64,000 from previous month and down 29 ,000 from August 2011. (H)
-Reentrants was 3,318,000. Reentrants are previously employeed people who were looking for a job and found one. This was -62,000 from previous month and -301,000 from August 2011.(H)
-New entrants were 1,277,000. These are unemployed persons who never worked before and who are entering the labor force for the first time. This was -34,000 from previous month and +28,000 from August 2011.
The presentation of the total change in jobs is like looking at the final score of a game. The details tell the story:
– 96,000 more people are working
– 368.000 fewer people are in the civilian labor force
– 120,000 fewer people lost their jobs
– 64,000 more people left their jobs
– 62,000 fewer reentrants obtained jobs.
This month’s reports may sound confusing on the surface. More people are working, the Civilian labor force was down by 368,000 and the unemployment rate went down. The unemployment rate is the number of people from the Household Survey who say they are unemployed (12,544,000) divided by the Civilian Labor Force (154,645,000) or 8.111% which was rounded down to 8.1%. Last month’s unemployment rate was 8.253% which was rounded to 8.3%.
This report is weak. The number of jobs was less that what is needed to keep pace with population growth. The unemployment rate fell because a net of 368,000 people left the labor market.