Mish's Global Economic Trend Analysis |
| Startling Look at Job Demographics by Age Posted: 07 Dec 2012 02:08 PM PST ZeroHedge had an interesting set of charts of BLS data in his post Number Of Workers Aged 25-54 Back To April 1997 Levels. I picked up on that theme and put together this chart of BLS data showing various age groups.  click on chart for sharper image Demographic Points of Note
Reflections on the Recovery
Boomer demographics certainly explains "some" of this trend. For the rest of the trend, consider my comment in today's job report: Establishment Survey +146,000; Household Survey -122,000 Jobs; Unemployment 7.7% as Labor Force Shrinks by 350,000 In the last year, the civilian noninstitutional population rose by 3,733,000. Yet the labor force only rose by 1,354,000.Flashback May, 1 2008 For point of record, consider what I said on May 1, 2008 in Demographics Of Jobless Claims Ironically, older part-time workers remaining in or reentering the labor force will be cheaper to hire in many cases than younger workers. The reason is Boomers 65 and older will be covered by Medicare (as long as it lasts) and will not require as many benefits as will younger workers, especially those with families. In effect, Boomers will be competing with their children and grandchildren for jobs that in many cases do not pay living wages. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com "Wine Country" Economic Conference Hosted By Mish Click on Image to Learn More  Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.  |
| Posted: 07 Dec 2012 08:41 AM PST Initial Reaction The establishment report of +146,000 jobs was about what most expected. However, beneath the surface, this report looks grim. The household survey shows a loss of 122,000 jobs. The unemployment rate dropped by .2% because the labor force fell by 350,000 and those "not in the labor force" rose by a whopping 542,000. Thus, we are back to the previous 2012 pattern of witnessing unemployment rate drop largely because of a massive increase of those "not" in the labor force. No Effect From Hurricane Sandy Hurricane Sandy had no effect. The BLS reports "Our survey response rates in the affected states were within normal ranges. Our analysis suggests that Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November." November BLS Jobs Report at a Glance
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. Quick Notes About the Unemployment Rate
October 2012 Jobs Report Please consider the Bureau of Labor Statistics (BLS) November 2012 Employment Report. Total nonfarm payroll employment rose by 146,000 in November, and the unemployment rate edged down to 7.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in retail trade, professional and business services, and health care. Click on Any Chart in this Report to See a Sharper Image Unemployment Rate - Seasonally Adjusted  Nonfarm Employment - Payroll Survey - Annual Look - Seasonally Adjusted  Employment is above the total just prior to the 2001 recession, and about where it was in mid-2005. Nonfarm Employment - Payroll Survey Monthly Changes - Seasonally Adjusted  click on any chart for sharper image Between January 2008 and February 2010, the U.S. economy lost 8.8 million jobs. Since the employment low in February 2010, nonfarm payrolls have expanded by about 5.15 million jobs. Of the 8.8 million jobs lost between January 2008 and February 2010, approximately 58.5% percent have been recovered (not accounting for normal demographic-related job growth). Since the beginning of the year, job growth has averaged 151,000 per month, similar to the average monthly gain of 153,000 in 2011. Statistically, 125,000+- jobs a month is enough to keep the unemployment rate flat. For a discussion, please see Question on Jobs: How Many Does It Take to Keep Up With Demographics? Once again, recall unemployment is based on the household survey. Current Report Jobs  Average Weekly Hours  Index of Aggregate Weekly Hours  The index of aggregate hours paints a good picture of the stall in the recovery. Employment is up, but hours are not up proportionally. This reflects the trend to part-time workers and the reduction of hours in part-time workers. Average Hourly Earnings vs. CPI  Average hourly earnings has been falling for years and lagging CPI inflation since September 2009. Simply put real wages have been declining. Add in increases in state taxes and the average Joe has been hammered pretty badly. For further discussion, please see What's "Really" Behind Gross Inequalities In Income Distribution? BLS Birth-Death Model Black Box The BLS Birth/Death Model is an estimation by the BLS as to how many jobs the economy created that were not picked up in the payroll survey. The Birth-Death numbers are not seasonally adjusted, while the reported headline number is. In the black box the BLS combines the two, coming up with a total. The Birth Death number influences the overall totals, but the math is not as simple as it appears. Moreover, the effect is nowhere near as big as it might logically appear at first glance. Do not add or subtract the Birth-Death numbers from the reported headline totals. It does not work that way. Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another as noted by numerous recent revisions. Birth Death Model Adjustments For 2011  Birth Death Model Adjustments For 2012  Birth-Death Notes Once again: Do NOT subtract the Birth-Death number from the reported headline number. That approach is statistically invalid. Note the historically rare occurrence this month of a negative non-January adjustment. In general, analysts attribute much more to birth-death numbers than they should. Except at economic turns, BLS Birth/Death errors are reasonably small. For a discussion of how little birth-death numbers affect actual monthly reporting, please see BLS Birth/Death Model Yet Again. Household Survey Data  click on chart for sharper image In the last year, the civilian noninstitutional population rose by 3,733,000. Yet the labor force only rose by 1,354,000. Those "not" in the labor force rose by 2,380,000 to 88,883,000. The massive rise of those "not" in the labor force is primarily economic weakness, not demographics. Actually, older workers are returning to the work force because they cannot afford retirement. One look at the average age of Walmart greeters and those working in fast food restaurants tells a story itself. Decline in Labor Force Factors
Were it not for people dropping out of the labor force, the unemployment rate would be well over 10%. Part Time Status (in Thousands)  click on chart for sharper image There are 8,176,000 workers who are working part-time but want full-time work. This is a volatile series. BLS Alternate Measures of Unemployment  click on chart for sharper image Table A-15 is where one can find a better approximation of what the unemployment rate really is. Notice I said "better" approximation not to be confused with "good" approximation. The official unemployment rate is 7.7%. 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. U-6 is much higher at 14.4%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years. Duration of Unemployment  Long-term unemployment remains in a disaster zone with 40% of the unemployed in the 27 weeks or longer category. Median duration of unemployment has been rising for 3 months while the average has been hovering right around 40 weeks for a year. Grossly Distorted Statistics Given the complete distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is easy to misrepresent the headline numbers. Digging under the surface, the drop in the unemployment rate over the past two years is nothing but a statistical mirage. Things are much worse than the reported numbers indicate. Last month I said "before anyone gets too excited about this jobs report, note that it is just one month, and it may be revised away. Even if not, take another look at the index of aggregate hours and average wages vs. CPI because those charts reflect very important stories not at all seen in the headline numbers." This month shows pronounced weakness in the underlying numbers. For a look ahead to 2013, please see Small Business Owners' Hiring Intent Plunges to 2008 Lows; Don't Blame Sandy or Fiscal Cliff. Note: A scheduling conflict prevents me from being on Capital Account as expected later today. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com "Wine Country" Economic Conference Hosted By Mish Click on Image to Learn More Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.  |
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