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The BLS Jobs Report Covering April 2014: A Tale of Two Contradictory Reports And Deeply Mixed Messages

The Brief Version
This is a very schizophrenic jobs report. In the seasonally adjusted “official” data, the unemployment rate dropped an amazing four-tenths of a percent to 6.3% but this was accomplished completely by contraction in the labor force (-806,000) and employment actually fell slightly.

On the seasonally unadjusted side, the contraction in the labor force was of a similar magnitude (782,000). Employment grew by 677,000 but unemployment decreased by 1.458 million, again signaling a large scale exit or definition of workers out of the labor force. Signs of recovery among the unemployed were mostly absent. The number of workers confident enough of the job market to quit their job to look for a better or different one remained small, while those entering the labor force for the first time or rejoining it decreased.

Nevertheless, there were a few positive indications. The number of full time workers increased seasonally adjusted 412,000 and unadjusted 1.088 million.

My calculation of the BLS undercount, workers the BLS refuses to include in the labor force, is now at or higher than the number of the unemployed. That is the BLS is missing something like half of the unemployed in its measures.

In another schizophrenic turn, while the household survey is showing a shrinking labor market, the business survey is showing, at least on the surface, a red hot spring rebuild. Seasonally adjusted an increase of 288,000 jobs; unadjusted and even more impressive 1.152 million. But as usual, the jobs are mostly confined to low paying industries like retail, leisure and hospitality, and administrative and waste services. With improving weather, the seasonal construction sector also took off increasing by 212,000. Overall, the spring rebuild is similar in size to last year’s. On the other hand, hours and wages were stagnant, hardly what you would expect for a job market heating up (and at odds with the increases in full time work seen in the household report).

In essence, we have two contradictory reports. The household survey is fairly negative. Unemployment improved but only because the labor force shrank. This is not good news. The business survey is mixed, showing growth but in low paying sectors and with no significant growth in wages and hours.

Household/Employment Survey

Potential Labor Force

The potential labor force as represented by the Civilian Non-Institutional Population over 16 increased 181,000 from 247.258 million to 247.439 million. Multiplying this increase by the employment-population ratio (58.9%) yields a rough estimate of the number of jobs needed this month to keep up with population growth (107,000)

Labor Force
Seasonally adjusted, the floor fell out of the labor force which decreased 806,000 from 156.227 million to 155.421 million. Last month, the labor force grew by 503,000. That increase now looks anomalous. Some dropoff in the labor force this time of year is expected but not on this order.

Unadjusted, it decreased 782,000 from 155.627 million to 154.845 million.

Participation Rate
The participation rate is the ratio of the labor force to the potential labor force. Seasonally adjusted, the participation rate reflected the big drop in the labor force with a four-tenths percent to 62.8%.

Unadjusted, it fell three-tenths of a percent to 62.6%.

Employment
Seasonally adjusted, employment fell 73,000 from 145.742 million to 145.669 million. Last month, it grew by 476,000. It is still 709,000 below the January 2008 peak of 146.378 million.

Unadjusted, it increased 677,000 from 145.090 million to 145.767 million. Overall, the increase in the first four months of 2014 is in line with and slightly better than (131,000) last year.

Employment-Population Ratio
Seasonally adjusted, the E-P ratio remained unchanged at 58.9%. If the participation rate is falling and the employment ratio is holding steady, this means that unemployment must be falling and this fall is resulting from workers being defined out of the labor force.

Unadjusted, it grew two-tenths percent to 58.9%.

Unemployment
Seasonally adjusted, unemployment fell below 10 million for the first time since September 2008. It declined 733,000 from 10.486 million to 9.753 million. Again this decline results not from workers finding jobs, the employment level fell, but from them being defined out of the labor force.

Unadjusted, it declined 1.458 million from 10.537 million to 9.079 million. As employment increased 677,000 unadjusted, this indicates that 781,000 workers were defined out of the labor force in April.

Unadjusted, the change in unemployment looks like this:

Job losers -807,000
Job leavers -29,000
Re-entrants -504,000
New entrants -117,000

While the large decline in job losers is a positive sign (more people are keeping their jobs), the other categories are negative. If the job market was hot, we would expect more workers risking temporary unemployment to look for a better position. We are not seeing this. The number of job leavers is a small part of the overall unemployed (751,000). Consistent with this, the decline in re-entrants and new entrants indicates that these workers are not seeing jobs and so not seeking them. Unadjusted totals for the various categories are:

Job losers 4.972 million
Job leavers 751,000
Re-entrants 2.425 million
New entrants 932,000

Unemployment rate
Seasonally adjusted, unemployment declined four-tenths percent to 6.3%.

Unadjusted, it declined nine-tenths percent to 5.9%.

Full Time vs Part Time Employment
Seasonally adjusted, full time employment increased 412,000 from 118.003 million to 118.415 million. Part time employment declined 398,000 from 27.695 million to 27.297 million. It had increased 365,000 in March.

Unadjusted, full time employment grew 1.088 million from 116.985 million to 118.073 million. Part time employment decreased 413,000 from 28.106 million to 27.693 million.

Involuntary vs. Voluntary Part Time Employment
Seasonally adjusted, involuntary part time workers were relatively unchanged, increasing 54,000 from 7.411 million to 7.465 million. Voluntary part timers fell 330,000 from 19.216 million to18.886 million.

Unadjusted, involuntary part time employment declined 212,000 from 7.455 million to 7.243 million. Voluntary part time workers were little changed decreasing 25,000 from 19.732 million to 19.707 million. The January-April 2013 increase in voluntary part timers was 1.233 million. This year it was 234,000. So perhaps Social Security recipients aren’t rushing out to find part time work .

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The U-6
The U-6, the BLS’ broader measure of un- and under employment decreased 0.4% to 12.3%, seasonally adjusted.
The seasonally adjusted U-6 was composed of 9.753 million unemployed, 7.465 million involuntary part time workers, and 2.160 million of the marginally attached (those who have no job but looked for work in the last year but not the last month; a decrease of 8,000), or 19.378 20.065 million, a drop of 687,000 from last month.

The unadjusted U-6 decreased a full percent to 11.8%.

[Standard note]
The BLS uses a restrictive job seeker 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 April, this increased 97,000 to 6.088 million.

This BLS category does not often 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 Clinton boom was at or above this level for nearly 40 months). 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(247.439 million) = 165.784 million (where the labor force should be)

Trend Undercount:
165.784 million — 156.421 million = 9.363 million , a decrease of 73,000
Current Undercount:
165.784 million — 154.845 million = 10.939 million, an increase of 903,000
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Real Trend Unemployment (that is seasonally adjusted) :
9.753 million (U-3 unemployment) + 9.363 million (undercount) = 19.116 million, a decrease of 806,000
19.116 million / 165.784 million = 11.5%, down 0.5%

Real Unemployment Now (i.e. seasonally unadjusted) :
9.079 million (U-3 unemployment) + 10.939 million (undercount) = 20.018 million, down 555,000
20.018 million / 165.784 million = 12.1%, down 0.3%
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Real Trend Disemployment:
Real Trend Unemployment + involuntary part time workers seasonally adjusted = 19.116 million + 7.465 million = 26.581 million, down 752,000
26.581 million / 165.784 million = 16.0%, down 0.5%

Real Disemployment Now:
Real Unemployment Now + involuntary part time workers seasonally unadjusted = 20.018 million + 7.243 million = 27.261 million, down 767,000
28.028 million / 165.784 million = 16.4%, down 0.5%

The 903,000 increase in the current undercount reflects the large exit/defining out of workers from the labor force in April. Other than this, these numbers while remaining at crisis levels reflect the positive effects of the spring rebuild in jobs.

Other
The number of long term unemployed (6 months or more), as defined within the BLS job seeker model, decreased 287,000 to 3.452 million. The long term unemployed account for 35.4% of the U-3 unemployed, a decrease of 0.3%. The median number of weeks of unemployment, seasonally adjusted, was down slightly to 16.0 weeks (around 4 months) while the average declined 0.5 weeks to 35.1 weeks (about 9 months). What this means is that half the unemployed have been without a job for 4 months or less while the long term unemployed have been without work for a very, very long time.

White unemployment decline a half percent to 5.3%. However, white employment only increased by 20,000 to 116.601 million. So this decline comes almost entirely from whites leaving the labor force. White teen unemployment fell 2.4% to 15.9%. African American unemployment decreased 0.8% to 11.6%. African American teen unemployment increased 0.7% to 36.8% .

Seasonally unadjusted employment of women head of household (i.e. single moms) increased 258,000 to 9.602 million. This group comprised 38.1% of the increase in employment this month.

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Establishment/Business/Jobs Survey

Jobs
Seasonally adjusted, the number of private sector jobs increased 273,000. Government job numbers increased 15,000. February jobs were revised upward 25,000 to 222,000, and March, 11,000 to 203,000

Seasonally adjusted, total nonfarm jobs increased 288,000 to 138.252 million. Total private jobs increased 273,000 to 116.383 million.

Unadjusted, total nonfarm jobs grew 1.152 million to 138.288 million. Curiously, the number of jobs created January-April this year is exactly the same number as last year: 2.837 million.

Unadjusted, with better weather, construction increased by 212,000 jobs to 5.867 million. Manufacturing, on the other hand, only gained 27,000 to 12.044 million.

Unadjusted, the super sector of private service-providing jobs added 858,000 to 97.183 million,
of which
wholesale added 33,900 to 5.8332 million;
retail added 119,100 to 15.122 million;
professional and business services added 141,000 jobs to 19.074 million;
of which
administrative and waste services increased 194,200 to 8.5858 million;
temp jobs increased 55,100 to 2.7946 million;
healthcare increased 25,700 to 14.6526 million;
and leisure and hospitality increased 325,000 to 14.470 million

Hours and Earnings
Average weekly hours for all employees on private nonfarm payrolls were unchanged at 34.5 hours (0.1 hour ahead of a year ago). Average hourly earnings were also unchanged at $24.31/hour, and consequently, average weekly earnings were also unchanged at $838.70, a yoy increase of 2.2%.

Average weekly hours for production and nonsupervisory (blue collar and clerical) personnel were unchanged at 33.7 hours (same as a year ago). Average hourly earnings increased 3 cents to $20.50/hour. Average weekly wages increased $1.01 to $690.85, a 2.3% increase yoy.

Household data (Employment/unemployment)
Statistical significance: +/ - 300,000
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 9 Full time workers
A 11 Reason for unemployment
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: +/ - 90,000
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

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