BLS Jobs Report Covering February 2013: A Solid Seasonal Rebound

In brief: Trendline, 236,000 jobs were added in February and the official unemployment rate fell to 7.7%. Actual jobs increased 959,000 but this followed a loss of 2.840 million last month. Similarly, employment rose 614,000 this month against a 1.446 million loss last month. However, notably the size of the labor force did not increase. The current rebuild and expansion of jobs should continue for the next two to three months. If this growth is choked off by the sequester or austerity, the consequences will extend through the rest of the year. My recalculated rate of unemployment remains high and declined only slightly to 12.5%. Hours increased this month which is good but wage gains taking inflation into account remain largely flat.

Looking first at revisions in the seasonally adjusted job numbers for the last two months:

January 157,000 > 119,000

December 155,000 > 196,000 > 219,000

meaning that December was somewhat better and January was worse than previously reported.

The potential civilian labor force as measured by the noninstitutional civilian population over 16 (NIP) increased 165,000 in February from 244.663 million to 244.828 million.

Multiplying the NIP by the employment-population ratio (58.6% unchanged from January) gives us an estimate of the number of jobs needed in February to keep up with population growth: 96,700.

Seasonally adjusted, the labor force decreased 130,000 from 155.654 million to 155.524 million. Unadjusted it decreased 67,000 from 154.794 million to 154.727 million. This bears watching because it could be the first signs of a boomer retirement effect.

Seasonally adjusted, the number of employed rose 170,000 from 143.322 million to 143.492 million.

Unadjusted, it rose 614,000 from 141.614 million to 142.228 million. As I pointed out last month, annual revisions make direct comparison with the December-January period difficult but the difference between the unadjusted employment numbers between December and January was -1.446 million, reflecting largely post-Christmas employment losses. So what we are seeing in the unadjusted February numbers is part of the expected early year rebound in employment, but importantly these employment gains came from almost entirely from shifts from unemployed to employed within the labor force and not an increase in the unadjusted labor force size. As noted above, the labor force actually shrank slightly. It may also be useful to note that last year the unadjusted increase in the employed January-February was 740,000.

The difference between the seasonally adjusted and unadjusted employment numbers again is the difference between a trendline (the adjusted numbers) which flattens peaks, and as here a major valley, and what actually happened in the economy in February (the unadjusted numbers). The trendline showed the flattening and largely offsetting of a 110,000 decrease last month and a 170,000 increase this month while, as I said, the unadjusted numbers showed a much larger drop with a while large, only partially offsetting increase this month.

Seasonally adjusted, unemployment decreased 300,000 from 12.332 million to 12.032 million. Unadjusted, it decreased 681,000 from 13.181 million to 12.500 million. As employment only rose 614,000, this means that net 67,000 people were defined out of or left the labor force in February.

As noted in the headline reporting, seasonally adjusted the official U-3 unemployment rate declined from 7.9% to 7.7%. Unadjusted, it decreased from 8.5% to 8.1%.

The broader U-6 measure of un- and under employment decreased seasonally adjusted 0.1% to 14.3%. Unadjusted, it declined 0.5% to 14.9%.

The adjusted U-6 was comprised of the 12.032 million U-3 unemployed, 2.588 million of the marginally attached (looked for work in the last year but not the last month), and 7.988 million involuntary part timers, or a total of 22.608 million, a decline of 140,000 from last month.

[Standard note] The BLS has a restrictive, though internationally recognized, definition of unemployment, that is without a job but have looked for one in the last 4 weeks. The marginally attached are not counted as part of the labor force and their use in the U-6 is an indication that this is what the BLS considers its functional undercount to be.

The BLS also has a more extended category: Not in Labor Force, Want a Job Now (seasonally unadjusted). In February, this increased 61,000 from 6.781 million to 6.842 million.

This category, however, does not reflect well actual movements in the economy. So I have developed a simple alternative to it. I calculate the size of where the labor force should be by multiplying the potential labor force of the NIP by a participation rate characteristic of a solid economic expansion (67%). The difference between this and the current labor force measures the size of the real BLS undercount, those who do not have jobs but would work if jobs were available to them. This then allows me to recalculate where real unemployment is and where real un- and under employment (disemployment) is.

.67(244.828 million) = 164.035 million (where the labor force should be)

Trend Undercount:
164.035 million — 155.524 million = 8.511 million
Current Undercount:
164.035 million — 154.727 million = 9.308 million
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Real Trend Unemployment (that is seasonally adjusted):
12.032 million (U-3 unemployment) + 8.511 million (undercount) = 20.543 million
20.543 million / 164.035 million = 12.5% down0.1%

Real Unemployment Now (i.e. seasonally unadjusted) :
12.500 million (U-3 unemployment) + 9.308 million (undercount) = 21.808 million
21.808 million / 164.035 million = 13.3% down0.3%
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Real Trend Disemployment:
Real Trend Unemployment + involuntary part time workers seasonally adjusted = 20.543 million + 7.988 million = 28.531 million
28.531 million / 164.035 = 17.4% unchanged

Real Disemployment Now:
Real Unemployment Now + involuntary part time workers seasonally unadjusted = 21.808 million + 8.298 million = 30.106 million
30.106 million / 164.035 = 18.4% down0.5%

In other words, actual (unadjusted) unemployment and disemployment decreased as expected while trendline (adjusted) they were little changed. All remained considerably higher than their U-3 and U-6 counterparts.

Long term unemployment, that is active job seekers out of work 6 months or more increased 90,000 to 4.797 million. The long term unemployed account for 39.9% of the U-3 unemployed.

Most of the improvement in the unemployment rate came from a decrease in white unemployment from 7.0% to 6.8%. African American unemployment was unchanged at 13.8%.

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In the business survey, seasonally adjusted jobs increased by 236,000 to 135.046 million. This represented a gain of 246,000 in the private sector and a loss of 10,000 in government. Big gainers were professional and business services (73,000), construction (48,000), and healthcare and social assistance (39,100).

Unadjusted, businesses reported creating 959,000 jobs in February going from 132.644 million to 133.603 million. While this is a large increase, it is important to remember that the economy lost 2.840 million jobs last month.

Average weekly hours for all employees increased 0.1 hour to 34.5 hours. Average hourly earnings for all employees increased 4 cents to $23.82. Average weekly earnings increased $3.76 to $821.79 or 1.8% since February 2012.

Average weekly hours for production and nonsupervisory personnel (blue collar) increased 0.2 hours to 33.8 hours. Average hourly earnings increased 5 cents to $20.04. Average weekly earnings increased $5.69 to $677.35 or 2% since February 2012

Household data (Employment/unemployment)
Statistical significance: +/ - 400,000
The A tables: http://www.bls.gov/cps/cpsatabs.htm
A 1 for most information and categories
A 2 Unemployment by race
A 8 Part time workers
A 12 Duration of unemployment
A 15 U 6 un- and under employment
A 16 Persons not in labor force

Establishment date (jobs)
Statistical significance: +/ - 100,000
The B tables: http://www.bls.gov/ces/cesbtabs.htm
B 1 Total jobs and jobs by industry/type
B 2 Weekly hours, all employees
B 3 Hourly and weekly earnings, all employees
B 6 Weekly hours, blue collar
B 7 Hourly and weekly earnings, blue collar