THE BASIS POINT

Weak Jobs Report Reflects Weak GDP Growth.

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, seasonally adjusted, was +160,000 (E). Revisions to the two previous months subtracted 19,000 making the total increase since the last report 141,000.

Not seasonally adjusted jobs was +1,057,000. March, April, and May typically have large seasonal jobs gains.

– the size of the civilian noninstitutional adult population increased by 201,000 to 252,969,000 (H).

– 362,000 fewer people were in the labor force last month. These are people who are now working or, at least, state that they are looking for jobs (H)

With a labor participation rate of 62.8% 126,200 more jobs were necessary to keep pace with population growth. With the adjustments for the previous 2 months we had 14,800 more population-adjusted jobs added than that. (H) The Employment/Population fell to 59.7%

The Labor Participation Rate fell from 63.0% to 62.8%. It was 62.7% a year ago. It peaked at 67.3% in April 2000. While much of the downward trend in Participation Rate is demographic (aging population) the underlying fact is that this smaller participating percentage is going to have to carry the economy and generate tax revenue to pay for the increasing cost of Social Security and Medicare.

– Nominal job growth last month was 141,000. This accounts for the changes for the 2 previous months.
– the Unemployment Rate was the same at 5.0%. It was 5.4% a year ago.(B)
– Average hourly earnings was $25.53 up from the previous month’s $25.45. (E)
– Average work week from from 34.4 hours to 34.5. (E)
– Private jobs were +171,000 (without adjustments for previous 2 months). Government jobs were -11,000. (E).

– Good producing jobs were -3,000. The two previous months were revised to zero and -20,000 (E). This reflects the continuing weak Fed regional manufacturing survey data.

-The labor participation rate (percent of adult noninstitutionalized population who are part of the labor force) fell from 63.0% to 62.8%. It was 62.7% a year ago. (H) This, not the unemployment rate, is the number which should get everyone’s attention. It is this 62.8% of the adult noninstitutionalized population who get pay checks and contribute to GDP.
Last month BLS measured 4 sets of people entering or leaving the jobs market:
– Job losers and persons who completed temporary jobs was 3,855,000 up 20,000 from previous month’s Job Losers and down 275,000 year-on-year. (H)

– Job leavers was 851,000. This includes anyone who retired or voluntarily left working. This is up 18,000 from previous month and up 27,000 year-on-year. (H)

-Reentrants was 2,357,000. Reentrants are previously employed people who were looking for a job and found one. This was -138,000 from the previous month and -292,000 year-on-year.(H)

-New entrants were 839,000. These are people who never worked before and who are entering the labor force for the first time. This was +61,000 from previous month and -28,000 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 this figure was down 161,000 at 5,962,000.
Professional and Business Services added 65,000. Health care added 44,000.

This is weak report reflecting the fact that jobs gains in the past 2 years have been concentrated in low-paying jobs which fail to generate sufficient GDP growth to create second order effects. The story that the Fed has been successful in the sense that monetary policy has strengthened the jobs market and that was sufficient to strengthen the economy is no longer believable. A recovery based on creating jobs for waitresses and bartenders was a bogus recovery.