Wednesday, September 7, 2011

The new U.S. employment figures. . .some facts to consider

We usually restrict the information on this blog to the Utah economy, but all the gloom and doom about the latest U.S. employment figures calls out for comment. Now, I typically think of myself as a "glass-half-empty" sort of person. But, even I have a hard time buying the current rhetoric about the "alarming," "lousy," "scary,"  "dismal," and "bleak" jobs report released by the Bureau of Labor Statistics last Friday.

The Bureau of Labor Statistics reported that there was no change in U.S. nonfarm payroll jobs between July and August and that the unemployment rate held steady. And, all of a sudden we think our economy is headed for total annihilation. (See, I can exaggerate, too.) Here are some things to consider about the most recent jobs report:

  • One month does not make a trend. One month does not make a trend. One month does not make a trend.
  • Roughly 45,000 workers were on strike during the reference week in August. They've returned to work. Woohoo! A 45,000 month-to-month job gain in September--just like magic. In other words, if those workers hadn't been striking there would have been a 45,000 job gain in August.
  • The monthly jobs figures released by the Bureau of Labor Statistics are seasonally adjusted. Seasonally adjustment is a statistical procedure which helps eliminate the seasonal fluctuations in a data series and thus illuminate the underlying trend. This procedure relies on history. Past history may not be a perfect reflection of current seasonality. Take seasonally adjusted numbers with a grain of salt.
  • Declining month-to-month employment totals are not unheard of even during economic booms. During the longest U.S. expansion in modern history (1991-2001), the U.S. showed at least eight examples of month-to-month employment declines.
  • Year-to-year comparisons of nonfarm employment provide a much better indicator of the health of the labor market. Yes, I'm always nagging about this relationship--see my previous post. Between August of 2010 and August 2011, the U.S. created almost 1.3 million net new jobs for a growth rate of 1.0 percent. The average annual rate of U.S. job growth for the last three decades? 1.2 percent.
  • The number of discouraged workers (those who looked for work sometime in the last year, but not in the last four weeks) has dropped by about 14 percent. (To be considered unemployed, a person must have looked for work sometime in the previous four weeks.) It seems likely that as the labor market has improved many of these individuals have once again started looking for work.

Is the economy wonderful? No. Is it expanding? Yes. Is it time to throw in the economic towel and batten down for a recession? Since most economic indicators continue to show growth. . .I don't think so. Even in housing, the market continues to right itself. Right now the biggest threat of a downturn is related to our continued negativity and fear.

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