Jobs Contract 20th Straight Month; Unemployment Rate Hits 9.7%
Courtesy of Mish
In January I forecast the unemployment rate would hit 9.8% by August. Meanwhile, even though it was clear the Fed was wildly off base in its adverse scenario, the Fed upped it total to a mere 9.2% to 9.6% for the year as noted in Fed’s Economic Forecast Worsens; Still Ridiculously Optimistic.
The Fed’s forecasts, released as part of the minutes from its April meeting, show that its staff now expects the unemployment rate to rise to between 9.2% and 9.6% this year. The central bank had forecast in January that the jobless rate would be in a range of 8.5% to 8.8%, but the unemployment rate topped that in April, hitting 8.9%.
Given that unemployment is likely to continue rising through the end of the year, and probably for another six months to a year after that, it can be seen the Fed is still ridiculously optimistic, unless they revised higher again and I missed it.
This morning, the Bureau of Labor Statistics (BLS) released the August Employment Report.
Nonfarm payroll employment continued to decline in August (-216,000), and the unemployment rate rose to 9.7 percent, the U.S. Bureau of Labor Statistics reported today. Although job losses continued in many of the major industry sectors in August, the declines have moderated in recent
months..
Establishment Data
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Highlights
- 216,000 jobs were lost in total vs. 247,000 jobs last month.
- 65,000 construction jobs were lost vs. 76,000 last month.
- 63,000 manufacturing jobs were lost vs. 52,000 last month.
- 80,000 service providing jobs were lost vs. 119,000 last month.
- 10,000 retail trade jobs were lost vs. 44,000 last month.
- 22,000 professional and business services jobs were lost vs. 38,000 last month.
- 52,000 education and health services jobs were added vs. 17,000 added last month.
- 21,000 leisure and hospitality jobs were lost vs. 9,000 added last month.
- 18,000 government jobs were lost vs. 7,000 last month.
A total of 136,000 goods producing jobs were lost (higher paying jobs). It was nearly a clean sweep again this month with education and health services jobs the only real winner for the month.
Note: some of the above categories overlap as shown in the preceding chart, so do not attempt to total them up.
Index of Aggregate Weekly Hours
Work hours were flat at 33.1. Short work weeks contribute to household problems.
Birth Death Model Revisions 2008
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Birth Death Model Revisions 2009
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Birth/Death Model Revisions
After the typical in January in which the Birth/Death Model revisions bore some semblance of reality, the Birth/Death numbers remain in deep outer space.
At this point in the cycle birth death numbers should have been massively contracting for months. The BLS is going to keep adding jobs through the entire recession in a complete display of incompetence.
The Birth/Death numbers have been a joke for at least two years now.
BLS Black Box
For those unfamiliar with the birth/death model, monthly jobs adjustments are made by the BLS based on economic assumptions about the birth and death of businesses (not individuals). Those assumptions are made according to estimates of where the BLS thinks we are in the economic cycle.
The BLS has admitted however, that their model will be wrong at economic turning points. And there is no doubt we are long past an economic turning point.
Here is the pertinent snip from the BLS on Birth/Death Methodology.
- The net birth/death model component figures are unique to each month and exhibit a seasonal pattern that can result in negative adjustments in some months. These models do not attempt to correct for any other potential error sources in the CES estimates such as sampling error or design limitations.
- Note that the net birth/death figures are not seasonally adjusted, and are applied to not seasonally adjusted monthly employment links to determine the final estimate.
- The most significant potential drawback to this or any model-based approach is that time series modeling assumes a predictable continuation of historical patterns and relationships and therefore is likely to have some difficulty producing reliable estimates at economic turning points or during periods when there are sudden changes in trend.
Household Data
In August, the number of unemployed persons increased by 466,000 to 14.9 million, and the unemployment rate rose by 0.3 percentage point to 9.7 percent. The rate had been little changed in June and July, after increasing 0.4 or 0.5 percentage point in each month from December 2008 through May.
Since the recession began in December 2007, the number of unemployed persons has risen by 7.4 million, and the unemployment rate has grown by 4.8 percentage points.
The civilian labor force participation rate remained at 65.5 percent in August. The employment population ratio, at 59.2 percent, edged down over the month and has declined by 3.5 percentage points since the recession began in December 2007.
In August, the number of persons working part time for economic reasons was little changed at 9.1 million. These individuals indicated that they were working part time because their hours had been cut back or because they were unable to find a full-time job. The number of such workers rose sharply in the fall and winter but has been little changed since March.
Persons Not in the Labor Force
About 2.3 million persons were marginally attached to the labor force in August, reflecting an increase of 630,000 from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.
Among the marginally attached, the number of discouraged workers in August (758,000) has nearly doubled over the past 12 months. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The other 1.5 million persons marginally attached to the labor force in August had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.
Table A-5 Part Time Status
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The chart shows there are 9.1 million people are working part time but want a full time job. A year ago the number was 5.9 million. This series has stabilized for the last 6 months.
Table A-12
Table A-12 is where one can find a better approximation of what the unemployment rate really is. Let’s take a look
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Grim Statistics
The official unemployment rate is 9.7% and rising. 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.
It reflects how unemployment feels to the average Joe on the street. U-6 is 16.8%. Both U-6 and U-3 (the so called "official" unemployment number) are poised to rise further although most likely at a slower pace than earlier this year.
Looking ahead, there is no driver for jobs and states in forced cutback mode are making matters far worse.
Unemployment is likely to continue rising until sometime in 2010.
Depression Level Statistics
I consider these job losses to be depression level totals. Admittedly conditions are not as bad as the great depression, but this is certainly no ordinary recession by any economic measure including lending, housing, bank failures, jobs, the stock market, commodity prices, treasury yields etc. For more on this idea please see Humpty Dumpty On Inflation.
