Current Employment Commentary:
The U.S. Bureau of Labor Statistics (BLS) has released its “preliminary estimates” for the employment situation for the month of August 2014. The numbers are considered “preliminary” for two more months to adjust for late arriving data and will undoubtedly be
adjusted outside these guidelines once again come January.
On a monthly basis the finalized “Non-adjusted” employment numbers were 135.451 million for January, 136.192 million for February, 137.147 million for March and 138.265 million for April and 139.184 for May bringing employment to above the level in December 2013 when it was 138.266 million. In June employment rose to 139.776 million, while in July employment fell to 138.666 million. August employment levels rose slightly to 138.989 bringing nominal employment above the November 2007 peak. However, if we subtract the 513,000 phantom jobs that are now automatically added in… and if we subtract the 738,000 phantom jobs that are carried over from last year… From the Chart below we can see how the various sets of numbers compare. In addition to the fudging issue there is the fact that since November 2007 the population has increased by roughly 17 million so assuming a 50% payroll to population ratio we would need 8.5 million more jobs to be at the same level we were in 2007.
Employment peaked in November 2012 at 135.069 million (original numbers) or 136.014 (new numbers) and from November to January 2013 the number of jobs fell drastically… it rebounded a bit in February through April 2013 but still didn’t quite reach November 2012 levels. Finally, in May 2013 the employment levels exceeded November 2012 levels by 747,000. In May, June and September employment topped 136 Million while in July and August it was in the mid-135 million range. Then in October and November 2013 employment topped 137 million. So from November 2012 through November 2013 the number of jobs increased by 2.3 million which sounds good until you realize that the Civilian Non-institutional Population increased by 1.785 million, so even though it appears that there are more jobs in reality the country overall is really only slightly better off.
In November 2012- 135,636,000 (135.6 Million) were employed by June 2013 it was up to 136,805,000 (136.8 Million) an increase of 1.2 Million but in July employment levels fell back to 135,664,000 almost identical to November 2012 levels. August was only slightly better at 135.961 Million and in September the number had reached 136,600,000.
From the chart, we can see that employment in November 2013 was nearing levels reached in November 2007 when employment peaked at just over 139 million jobs. But then it fell sharply as it seems to do every January (which is why they “seasonally adjust the numbers”). Once again we need to note that the total U.S. population (not just the “civilian non-institutional population) has increased from about 305 million to about 317.5 million during that time. With about 50% of the population in the job market that would mean that about 6.25 million more people are looking for jobs while there are actually still a couple of million fewer jobs available than in 2007 or even in December.
BLS Changes Employment Numbers
Note: In January 2014 the “non-adjusted” numbers once again suffered their massive annual adjustment where the BLS goes looking for some “unreported” jobs and theoretically they found roughly 513,000 jobs this time. And even though they say they only go back three months with their regular adjustment, their annual adjustment can go back years. This time they went back and created more jobs out of thin air going all the way back to 1978. Just like with the “Ministry of Truth” in George Orwell’s Classic book “1984” it becomes increasingly difficult to determine where employment really stands and any trends, if the “yardstick” for measurement is constantly changing.
According to the BLS, “On an annual basis, the establishment survey incorporates a benchmark revision that re-anchors estimates to nearly complete employment counts available from unemployment insurance tax records. The benchmark helps to control for sampling and modeling errors in the estimates. For more information on the annual benchmark revision, please visit www.bls.gov/web/empsit/cesbmart.htm.” But that doesn’t explain why they would change data going back several years. They say the “benchmarking” goes back as far as January 2009 but in actuality they changed the numbers all the way back to January 1978 — 21 years further than they reported!
The newest change is on top of the change they made in January 2013, where the BLS changed the employment numbers back to July of 1991. At that time, I contacted the Bureau of Labor Statistics and they curtly pointed me to a short hidden blurb on their website that supposedly explains why they did it. See BLS Changes Employment Numbers for our full discussion of this (pseudo) BLS explanation. Their justification was that they hadn’t properly counted all the “Property and Casualty insurers”. And somehow Property and Casualty insurers increased the total number of jobs by 104,000 in August 2010 and by 738,000 in December 2012. Boy there must have been a lot of Property and Casualty insurers hired during that couple of years of recession!
Then in January of 2014 they once again adjusted the numbers. This time all the way back to April of 1979 adding another 513,000 magical jobs.
You can see the difference between the old numbers and the new numbers on the above chart.
Note: The Employment rate and the Unemployment rate are based on two entirely different surveys but theoretically they should be two sides of the same coin. If you look at the chart above it does look like the employment rate is climbing i.e. more people are getting jobs as the trend channel does seem to be up.
By looking at the employment rate we will know how many jobs there are in our economy, pure and simple. (As Detective Joe Friday in Dragnet would say, “Just the facts Ma’am”). Are there more jobs than last year? Good! Are there fewer jobs than last year? Not good. Simple as that! But things have gotten a bit more complex with the implementation of Obamacare. It has inadvertently created incentives for companies to switch from full time employees to part-time employees thus two people may be considered employed where there used to be only one… except there is no additional work being done… but the numbers look better.
We need to consider the population factor. If the number of jobs stays the same but the population increases drastically then the unemployment rate will rise even though the number of jobs stayed the same. So looking at the unemployment rate is also important. Unfortunately, it still doesn’t give us the full picture. If the U.S. population is growing (and it is) but the number of jobs only holds steady the number of people without jobs will increase. So in order for the real unemployment rate to stay the same the number of jobs has to increase at at least the same rate as the population. If the number of jobs increases at anything less than the rate at which the population is increasing, the unemployment rate will be increasing.
Gallup polls look at the “P2P Rate” or Payroll to Population and has found that the number is surprisingly level from July 2011 to July 2012 to July 2013 at 44.9%, 45% and 44.7% respectively and in December 2013 the P2P was 42.9% worse than the preceding years (higher is better). The P2P looks only at those working over 30 hours a week. So, in other words, when taking population increases and full-time employment into consideration, the P2P says that the employment situation has not improved no matter what the official Unemployment rate says.
To determine the employment rate the U.S. government surveys 390,000 businesses nationwide every month. The raw number is what we use here and it is not seasonally adjusted. You would think this number would be considerably more reliable than the 60,000 households that they survey to obtain the unemployment rate. And I prefer it to any seasonally adjusted numbers. This survey is submitted by the businesses monthly based on company employment on the 12th of the month but for some reason the first release is considered preliminary to allow for late arrivals and it often changes significantly in later months (when the public is no longer watching). For instance the October 2012 number originally said 134,792,000 (prior to the election) but then fell 90,000 to 134,702,000 just after the election. So rather than more jobs appearing due to late arrivals they somehow overestimated the number of jobs by 90,000. But of course unlike the IRS, the BLS couldn’t possibly be politically influenced, right?
See Current Unemployment Rate for an explanation of how the government calculates the official Unemployment rate.
Source: U.S. Bureau of Labor Statistics- Current Employment Rate Data
For more information See:
- Article: Employment vs. Unemployment how do they compare?
- Historical Employment Data Chart
- Current Unemployment Rate Chart
- Current Employment vs Unemployment Chart Are they really “two sides of the same coin”?
- What is U-6 Unemployment?
- The Misery index measures inflation plus unemployment and is a good measure of the discomfort of the country’s population.
- More Unemployment and Employment Charts
- 10 Awesome Jobs You Can Do From Home