This is my monthly look inside the BLS Employment Situation Report. There’s a separate piece on the rate reaction here.
Keep in mind that there are two BLS Surveys: the Establishment and the Household.
The Establishment surveys about 141,000 businesses and government agencies, representing approximately 486,000 individual worksites. It is taken each month during the week which includes the 12th of the month.
The Household Survey is a survey of households taken each month during the week which included the 12th of the month. It is a survey of 60,000 households.
Each item below is suffixed with (H) if it is from the Household Survey and (E) if it is from the Establishment Survey and (B) if it combines the two.
– Headline Nonfarm jobs was +80,000 (E)
– Unemployment Rate was 8.2% the same as May 2012 (B)
– Average hourly earnings was $23.50 up from $23.41 in May 2012 (E)
– Average work week was 34.5 hours up from 34.4 hours in May 2012 (E)
– Private jobs were +84,000. Government jobs were -4,000 (E)
Reading beneath the surface:
-Good producing jobs were +13,000. The two previous months were -21,000 and +4,000. (E)
-The size of the civilian labor force increased from 155,007,0000 to 155,163,000 an increase of 156,000. (H)
-The labor participation rate (percent of adult non-institutionalized population who are part of the labor force) was 63.8%, the same as May. It was 64.1% a year ago. (H) This, not the unemployment rate, is the number which should get everyone’s attention. Some of this is structural and some is cyclical.
– the size of the civilian noninstitutional population rose by 189,000 in March. With a labor participation rate of 63.8% 120,580 more jobs were necessary to keep pace with population growth. We had 40,580 fewer jobs added than that. (H) This deficit of 40,480 jobs is adding to the number of people needing employment.
According to the 4 week moving average of Initial Jobless Claims, 1,543,000 people lost their jobs in the last 4 weeks. That normalizes to 1,671,600 lost jobs in a calendar month (there are about 13 4 week periods in a 12 month year.) This is up from the previous month’s 1,622,600 lost jobs/month.
The labor market is extremely dynamic. The number of people moving in an out of it each month is almost 100 times as large as the net change in jobs. Each month we try to look here at the dynamics of this market.
If 1,671,600 people lost their jobs last month and we gained 80,000 jobs, how did that happen? The answers are in the Household Survey.
In June 2012 BLS measured 4 sets of people entering or leaving the jobs market:
– Job losers and persons who completed temporary jobs was 7,207,000 up 218,000 from May’s Job Losers and down 1,026,000 from June 2011. (H)
-Job leavers was 936,000. This includes anyone who retired or voluntarily left working. This was up 45,000 from previous month and down 35,000 from June 2011.(H)
-Reentrants was 3,227,000. Reentrants are people who were looking for a job a found one. This was -212,000 from previous month and -204,000 from June 2011.(H)
-New entrants were 1,331,000. These are unemployed persons who never worked before and who are entering the labor force for the first time. This was -36,000 from previous month and +104,000 from June 2011.
The presentation of the total change in jobs is like looking at the final score of a game. The details tell the story:
– 80,000 more people are working
– 156,000 more people are in the civilian labor force
– 218,000 more people lost their jobs
– 45,000 more people left their jobs
– 212,000 fewer reentrants obtained jobs.
The May report showed a large increase in the labor force (643,000) which resulted in a higher unemployment rate. The increase in the labor force in June was 487,000 less.
The fact that the increase in jobs was insufficient to cover the number needed to keep pace with population growth was the most discouraging item.
This is the 4th consecutive weak jobs report. Coupled with the very weak GDP revision of yesterday it paints a very bleak landscape considering that we are so far into a recovery which featured massive deficits and extraordinarily accommodative monetary policy.
What should get the headline is the percentage of the population working and this number has been pathetic of late. The NYT headlines with:
“The economy added 80,000 jobs last month, the Labor Department reported on Friday, which is not enough to significantly reduce the backlog of unemployed workers.”
This misses the point. Job growth has been so weak that the backlog of unemployed people is increasing. +80,000 jobs is not slightly better, it is slightly worse.
Rate Reaction To June Jobs Report (7/6/12)