Jobs! Jobs! Jobs!
Today's monthly employment report from the Bureau of Labor Statistics was surprisingly positive. Meaning only that it was less negative than most people expected it would be. Nonfarm employment, the number worth paying the most attention to, was down 247,000 in July—compared with 395,000 in June and an average of 645,000 during the dark months of November through April. (Props to Jan Hatzius at Goldman Sachs and Samuel Coffin at UBS, who both sent out e-mails yesterday afternoon/evening predicting that the number would be around 250,000). The unemployment rate, which is derived from a different survey and is a less reliable indicator, was down a tenth of a percent to 9.4%.
So that's the good news. The bad news is that there are no real signs of economic life in the details of the employment report, just a slowdown in the pace of losses in most of the big categories. The most significant job creation was in health care, which added 19,600 jobs. But that's nothing new, and it's not unmitigated good news—we want to cut health care spending, don't we? The federal government added 12,000 jobs, "arts, entertainment, and recreation" added 10,000 (who knew?). Oh, and the auto industry supposedly added 28,000 jobs, but I'll let the BLS explain that away:
In motor vehicles and parts, fewer workers than usual were laid off in July for seasonal retooling. ... In large part, July's seasonally-adjusted increase reflects the fact that previous job cuts had been so extensive that there were fewer workers to lay off during the seasonal shutdown.
The above numbers are seasonally adjusted—which is necessary to do, but adds lots of potential for weird statistical quirks like the auto employment increase. Without the seasonal adjustments, employment fell a whopping 1.3 million in the month. And there were 5.9 million fewer jobs in July 2009 than in July 2008.
Now back to some slightly better news. All that jobs information comes from the BLS's establishment survey of about 150,000 businesses, nonprofits, government agencies, etc. The unemployment rate comes from a Census Bureau survey of 60,000 households. Because of the smaller sample size and other factors, the household survey is generally seen as a less reliable indicator of month-to-month changes in the job market. But because the establishment survey can miss new businesses, the household survey sometimes provides signs of an employment turning point before the establishment survey does. Unreliable signs, but nonetheless, here they are: Employment was up 113,000 in July (sorry, got my numbers mixed up) down just 155,000, seasonally adjusted, according to the household survey. And in case you don't trust those seasonal adjustments, it was up 229,000 unadjusted. So hooray for that.
Update: The charts are done!
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1
Justin,
I don't quite understand, How can the unemployment rate dip when there has been a job loss of 247000?
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2
@matt1974: Magic!
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First of all, the unemployment rate is derived from the household survey—not the establishment survey that showed a loss of 247,000 jobs. But the household survey showed a loss of 155,000 jobs, so the same point applies. The reason the unemployment rate dropped despite a fall in employment is that, according to the household survey, the civilian labor force shrank even more. How can that be? It's because a smaller percentage of the people surveyed said they were actively looking for work. That's right—people getting discouraged and giving up on their job hunt decreases the unemployment rate.
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This is one of several reasons why the unemployment rate doesn't tell you much about the month-to-month state of the job market. When the job market really begins to improve, in fact, the unemployment rate will probably rise as people who had given up start actively looking for jobs again.-
2.1
Thanks Justin
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3
dude, where's your graph?!?! (please!)
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4
Well, it could be other than discouraged workers. Those college students who weren't able to get jobs in May or June have surely consigned themselves to the beach in July. Illegal aliens (not sure how they or their jobs are counted) may have returned to their country of origin.
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And as Justin points out, let's not forget the fact that we are doing seasonal adjustments. What does that mean? Let's say that typically the auto industry has temporarily laid off 400K workers in the summer for retooling for the next model year. Our statisticians have decided that this doesn't reflect a long term reality, so they add back in those 400K workers to smooth out that reality. This year, because most of those workers have already been laid off permanently, we have only temporarily laid off 100K. Guess what? Given our existing methodology, we are 300K workers net improvement in autos. But it only lasts a month or two.
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But Justin's overall point is still valid. We have two more-or-less independent measures of unemployment, each of which has separate inaccuracies built into their methodologies. That's why we tend to focus on trends rather than numbers. And this trend was modestly upbeat. -
5
Hooray, the economy isn't tanking as fast as it was last month!? Kind of hard to get too excited about these numbers.
Why does the media emphasize U-3 instead of U-6, including discouraged, and other workers who want to work full-time? Doesn't their existence and size provide a more comprehensive indicator of the health of the economy? July's U-6 is at 16.3% unemployment, slightly better than June's 16.5%. -
6
If we only lost 247,000 jobs, and we needed to create 250,000 for people entering the job market for the first time, we are now short a half a million more jobs!
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7
Counter to the expected increase of unemployment rate in July, the report shows a slight drop to 9.4% from 9.5%.
But 9.4% remains scary, in fact, very threatening.
The oil market continues to fluctuate, hanging around $70 at the moment, getting ready to shoot up anytime when the global economic recovery is deemed to be more certain.
Governments keep pumping money to help reviving the economy. As a result, stocks respond quickly by moving further north. Good sign, but has the crisis actually passed the bottommost point?
Are most nations already steadily embarking on the road to full recovery?
Or are we again blurred by speculative and deceptive forces that may lead to compulsive and lavish consumerism one more time, bringing forth a second wave of economic tsunami in the not so distant future? -
8
Your engaging and realistic analysis is most timely. It reflects aptly my concern made in the article "Massive jobs loss in pretty colors".
Readers ought to be provided with greater details than just percentages. PERCENTAGES can always be most misleading if not confusing.
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9
[...] 3:10 pm: More at Economist’s View, CR [1], [2], [3], WSJ RealTime Economics, Justin Fox, [...]
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10
Let's hope this is the end of the downward trend! I'm a recruiter and definitely seeing more jobs open and positive employment activity the past few months. I am optimistic!
fightunemployment.com is helping job seekers take control of their own job search with advanced tools and tips. Job seekers can start by optimizing their resume with ResuWe.com. ResuWe is launching Labor Day 2009!
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11
[...] morning will probably be that the unemployment rate rose to 9.7% (from 9.4% in July). But as I've written before, the better month-to-month measure of the state of the job market is the change in nonfarm payroll [...]
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