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Today's Commentary: 09.06.04
Lacking Luster: A Look at the Jobs Report
It would be very easy to say that I was right, although some among you would be quick to point out that the generality of a statement like "far below expectations" is not exactly a prediction in the numerical sense. Many learned scholars of the economic condition use a wide variety of measures to arrive at their often missed predictions. On Friday of last week, they came remarkably close to the published - as yet to be revised - 144,000 new jobs. Only they were wrong again.
There are certain criteria applied to these reports that will always lead to a number of conclusions and often, the ones that lack the luster needed for a political bounce are swept aside. Jobs were created, they will say, and the numbers prove it. By saying that the report would be far below expectations, even I was unprepared just how far below the report it actually was.
There are 150,000 adults entering the workforce every month. These folks are willing to work although, as Gene Epstein of Barron's was quick to observe, these future workers might be picky about work if a job was offered on the spot. He takes to task the claim that part-time workers, if asked, will take full time work if it were offered to them on the spot. But since this is not part of the survey and the surveyors have no such jobs to offer, the legions of part time workers who make up the lion's share of the newly hired should be counted as workers who work without any disqualifiers.
Perhaps that would work if we are looking at the total jobs added over the last twelve months. But we aren't looking at the big picture just yet.
Looking at the smaller more recent report, the actual number of jobs added was a much smaller one than the reported 144,000. Subtract the 150,000 new workers from the amount of work available and then take away the number of recently disparaged workers - another 150,000. These people fell from the ranks of unemployed by simply stopping the search for gainful employment.
To be fair, we need to add back in the number of manufacturing jobs created. This number - 22,000 - carries a certain falseness to it as well. Several months back, Detroit laid off a sizable amount of workers to retool their plants for the new models. This European style vacation during the month of August created two different results. The industry shutdown raised the the unemployment ranks if only temporarily and saved the car companies a boatload of cash. But these are not new jobs nor are they much of a surprise in the report either.
Now for the shocker! These numbers come courtesy of the payroll survey, the often maligned report taken of 400,000 businesses. The household survey barely added 25,000 new jobs in August.
With all of that information loaded into our trusty calculator, that leaves a net loss for the month of 134,000 jobs. So how did the unemployment rate fall a tenth of percentage point to 5.4%?
Disparaged workers are not counted. This leaves the unemployment rate looking number far more lustrous than the actual number that includes those who no longer are looking for work, 9.5%.
But these monthly snapshots do not tell the whole tale. The panoramic picture is much more difficult to nail down. With an average of 104,000 jobs created over the last year, well below what is needed in a robust recovery, the state of employment is much more bleak than bright.
So once again, the recovery in labor shines differently depending on who is doing the buffing. Critics will point to overall, long term averages as a better indicator of the recovery's stamina. Without the months of March through May, the averages would be decidedly lower leaving economist searching even further back than the last several decades looking for similar trends.
It is, however difficult to factor in the kind of accommodative monetary growth, the willingness for Americans to pile on more debt, and the subtle increases in wages they have received for their efforts that gave us this recovery in the first place. The fact of the matter is, this recovery in jobs is not what it seems to be no matter who is doing the polishing.
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