Record 88 Million not in Labor Force -- Complete Employment Analysis

"Speaking of controlling information, here is one of the best pieces I've encountered recently about how the federal government & its house "economists" systematically deceive a gullible public about the unemployment situation in this country, presenting us with an "unemployment rate" that ignores entire groups of people that are technically classified as Not In the Labor Force when they gave up finding work, when their unemployment benefits ran out, etc. At present, a record 88 MILLION PEOPLE are unemployed but not counted in the "official" unemployment number of 8.3%. Here is an illustration of the illogic of the "official" numbers: the country lost 8.8 million jobs from Jan 2008 to Feb 2010. Of those 8.8 million jobs, 41% have been recovered (that's 3.6 million jobs). The economy must create 125,000 jobs per month just to keep up with demographics. Our "recovery" has created an average of 143,000 jobs over the past 25 months. Yet the "unemployment rate" has fallen from 9.8% to 8.3%. Do the math." -- Steven Yates

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Record 88 Million not in Labor Force -- Complete Employment Analysis
By Mike Shedlock
4/7/2012

Quick Notes About the Unemployment Rate

• US Unemployment Rate dropped .01 to 8.2% 
• In the last year, the civilian population rose by 3,604,000. Yet the labor force only rose by 1,315,000. Those not in the labor force rose by 2,289,000.  
• The Civilian Labor Force fell by 164,000.  
• Those "Not in Labor Force" increased by 310,000. If you are not in the labor force, you are not counted as unemployed. 
• Those "Not in Labor Force" is at a new record high of 87,897,000.  
• By the Household Survey, the number of people employed fell by 31,000. 
• By the Household Survey, over the course of the last year, the number of people employed rose by 2,270,000. 
• Participation Rate fell .1 to 63.8% 
• Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

Over the past several years people have dropped out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low. Some of this was due to major revisions last month on account of the 2010 census finally factored in. However, most of it is simply economic weakness.

Jobs Report at a Glance

Here is an overview of today's release.

• US Payrolls +120,000 - Establishment Survey
• US Unemployment Rate dropped .01 to 8.2% - Household Survey
• Average workweek for all employees on private nonfarm payrolls fell .1 to 34.5 hours
• The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.8 hours.
• Average hourly earnings for all employees in the private sector rose by 5 cents.

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.

March 2012 Jobs Report

Please consider the Bureau of Labor Statistics (BLS) March 2012 Employment Report.

Nonfarm payroll employment rose by 120,000 in March, and the unemployment rate was little changed at 8.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in manufacturing, food services and drinking places, and health care, but was down in retail trade.

Unemployment Rate - Seasonally Adjusted



Nonfarm Employment - Payroll Survey - Annual Look - Seasonally Adjusted



Actual employment is about where it was just prior to the 2001 recession.

Nonfarm Employment - Payroll Survey - Monthly Look - Seasonally Adjusted



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Between January 2008 and February 2010, the U.S. economy lost 8.8 million jobs.

Since a recent employment low in February 2010, nonfarm payrolls have expanded by 3.6 million jobs. Of the 8.8 million jobs lost between January 2008 and February 2010, 41 percent have been recovered.

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?

The average employment gain over the last 25 months has been 143,000, barely enough (statistically speaking) to make a dent in the unemployment rate.

Yet, the civilian unemployment rate has fell from 9.8% to 8.3%.

Current Report Jobs



Average Weekly Hours

 

Index of Aggregate Weekly Hours



Average Hourly Earnings vs. CPI



"Success" of QE2 and Operation Twist

• Over the past 12 months, average hourly earnings have increased by 2.1 percent.
• In February, the Consumer Price Index for All Urban Consumers (CPI-U) had an
• over-the-year increase of 2.9 percent; growth in prices has recently been
• outpacing growth in earnings.  
• Not only are wages rising slower than the CPI, there is also a concern as to how those wage gains are distributed.

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 out 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 Note

Once again: Do NOT subtract the Birth-Death number from the reported headline number. That approach is statistically invalid.

Household Survey Data



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In the last year, the civilian population rose by 3,604,000. Yet the labor force only rose by 1,315,000. Those not in the labor force rose by 2,289,000.

That is an amazing "achievement" to say the least, and as noted above most of this is due to economic weakness not census changes.

Decline in Labor Force Factors

1. Discouraged workers stop looking for jobs
2. People retire because they cannot find jobs
3. People go back to school hoping it will improve their chances of getting a job
4. People stay in school longer because they cannot find a job

Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

Part Time Status



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There are 7,672,000 workers who are working part-time but want full-time work.

Table A-15



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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 8.2%. 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 14.5%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

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.

Note the drop in U-6 unemployment this month as the Civilian Labor Force fell by 164,000. This is beyond statistical noise, to the point of pure statistical bullsheet.

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