Thursday, October 11th, 2012 and is filed under Blog, Economy, News
Last week, we pointed out that the decline in the unemployment rate reflected data from an obviously defective household survey from the BLS. I never really suspected any malice in the report, just a statistical anomaly. However, today the BLS just released the weekly jobless claims, and I’m not sure what to conclude. Jobless claims tumbled to 339k from roughly 370k. At first, I didn’t think much of it; I thought it was just one good week. The I came across this observation from Tyler Durden at Zero Hedge:
This is just getting stupid. After expectations of a rebound in initial claims from 367K last week (naturally revised higher to 369K), to 370K (with the lowest of all sellside expectations at 355K), the past week mysteriously, yet so very unsurprisingly in the aftermath of the fudged BLS unemployment number, saw claims tumble to a number that is so ridiculous not even CNBC’s Steve Liesman bothered defending it, or 339K. Ironically, not even the Labor Department is defending it: it said that “one large state didn’t report some quarterly figures.” Great, but what was reported was a headline grabbing number that is just stunning for reelection purposes. This was the lowest number since 2008.
Remember, this is not some conspiracy theory. The BLS is actually drawing attention to itself by pointing out that there is missing data from some unspecified “large state.” I can guarantee you that it’s not a job growing state like Texas.
Sunday, October 7th, 2012 and is filed under Blog, Economy
Over the weekend, we taped a segment for the NRA News radio on Sirius discussing the statistical improbabilities and contradictions of this month’s jobs report.
To download the audio of our segment, click here and go to the October 5 show. We’re on the last segment at the 2:36 hour mark.
Friday, October 5th, 2012 and is filed under Blog, Economy
Every month, we try to break down the monthly employment report from the BLS and analyze it in plain English. Today’s report of September employment is so bizarre that it’s hard to comprehend, much less give over.
The BLS puts out two surveys: 1)the establishment survey, which shows the growth in non-farm payroll jobs (as well as a breakdown by specific industry), surveys businesses and 2) the household survey, which measures broad census data, such as total number of employment-age population, size of the labor force, the U3 unemployment rate, and total number of employed and unemployed, surveys individual households. It’s always hard to get a precise picture of the employment situation because you need to conflate data from both surveys; however, the surveys usually complement one another in a coherent fashion.
That is not the case with today’s report.
To begin with, we must recognize that we are coasting along near the bottom of the employment nadir – a steep trench that was created by the 2008-2009 recession. Unlike every other recession, including the one in the early 80s, this one was not followed by a steep climb out of the trench. We’re not even creating enough jobs per month to keep up with the population growth, much less recover the millions of jobs lost in the recession.
Yet, despite the fact that we’ve added less than 150k jobs during most months of the recovery, and less than 100k during many of them, the U3 rate has steadily declined. This all made sense because there was an unprecedented shrinkage of the labor force – a symptom of a permanently lethargic economy. Paradoxically, this led to a steady decline in the unemployment rate as the universe of the job market shrunk. It’s not that the BLS was purposely making Obama look better. You just needed to look beyond the U3 number to understand how the unemployment rate dropped.
Friday, September 7th, 2012 and is filed under Blog, Economy
The question everyone is asking is where are the jobs three years after the end of the recession? Here’s one paragraph from Ed Pozzuoli writing at Forbes, which illustrates exactly why there are no new jobs:
In 2011 alone, regulators largely operating free of Congressional oversight issued 3,807 new rules. With the economy still struggling to re-enter the fast lane one might assume that the regulatory burden would have been lightened in 2012. You would assume incorrectly. So far, 2,298 new rules have been added, and Crews notes that we’re “on a trajectory to beat 2011 rather handily.”
Obama complains that he inherited a recession. But the reality is that the recession ended 5 months into his term. The economy was on the road to recovery, albeit a slower one by historical standards. There is no doubt that the torrent of crushing regulations on businesses, most prominently, Obamacare, Dodd-Frank, labor red tape, and sundry environmental rules, have precluded the recovery. Additionally, the monetary and fiscal stimulus, the bailouts, and the subsidies have distorted the market so as to ensure that our economy will never return to its original strength.
Friday, September 7th, 2012 and is filed under Blog, Economy
Well, the Democratic Convention began with a Jimmy Carter endorsement of Obama and ended with a Jimmy Carter jobs report.
Here is some Obama magic for you. The unemployment rate ticked down to 8.1%; the broader U6 rate ticked down to 14.7% from 15%. Yet there is not a shred of good news in this report. How so?
- Jobs created: The net increase in nonfarm payroll in August was 96,000, according to the BLS Establishment Survey. For some perspective, the employment-age population grew by 212,000, as reported by the BLS Household Survey. So we are nowhere near keeping up with the population growth, much less recovering the millions of old jobs lost during the recession. Additionally, June jobs growth was revised down from 64,000 to 45,000, and July was revised down from 163,000 to 141,000.
Construction jobs increased by just 1,000, while manufacturing jobs fell by 15,000. 10% of the August gains, 9,000 jobs, came from the resolution of the Con Edison utility strike.
- Size of civilian labor force: So why did the unemployment rate drop? Well, if you shrink the size of the pool, the unemployment rate will actually go down. While a net-96,000 jobs were added in August, the civilian labor force shrunk by 368,000! The Labor Participation Rate is down .2% to 63.5%, lowest participation rate in 31 years. Moreover, the Civilian noninstitutional population grew by 212,000. So when population growth is factored with the shrinking labor force, there are now 581,000 more people not in the Labor Force relative to the previous month. That’s why, according to the Household survey, 119,000 total jobs (including non-payroll) were lost in August.
- “People who aren’t in the labor force but want a job” at the highest level since records began
- According to AEI’s James Pethokoukis, the unemployment rate would be 11.2% if the labor force participation rate was the same as when Obama took office
- Comparison to January 2009-Obama’s inauguration date: The size of the working age population grew over 8.8 million from 234.739 million at the time Obama was sworn in. Due to the lack of job growth to keep up with the population growth, there are 8.419 million more individuals who are not in the labor force then when Obama took office. That is the real casualty of his presidency. The labor-participation rate has shrunk from 65.7% to 63.5%. The employment population ratio has gone down from 60.6% to 58.3%.
Tuesday, September 4th, 2012 and is filed under Blog, Economy
Here are two headlines you won’t hear tonight at the Democrat National Convention.
Food Stamp Usage Climbs to Record High
Manufacturing Shrinks for Third Month
There is nothing better for the Democrat Party than more people out of work and more people dependent upon government programs. The latest Institute for Supply Management report indicates that manufacturing has contracted for 3 months in a row and has dipped to the lowest level in 3 years.
Concurrently, food stamp usage has risen to 46.7 million, according to government reports. The price-tag for the program has doubled since Obama has assumed power.
Folks, there’s something fundamentally wrong when the debt stands at $16 trillion, underemployment is at 15%, food stamp usage is at record highs, poverty is at a record high, gas prices have doubled, income has contracting….yet Obama is neck and neck with Mitt Romney.
Monday, August 6th, 2012 and is filed under Blog, Economy
It’s no secret that we’re experiencing the third period of job stagnation within the so-called recovery. As such, the news that 163,000 jobs were created in July might sound like a moderately positive report. Don’t be fooled. There is no good news in last week’s jobs numbers from the BLS.
As we’ve noted throughout the year, the real indication that our economy is still sick is the fact that the labor force is shrinking. Worse, our population is simultaneously growing, engendering a nightmare scenario in which the job creation will never catch up to the population growth, leaving millions shut out of the labor force.
Despite the fact that 163,000 new jobs were created, the labor force shrunk by 150,000, all but wiping out the gain. And what about the population? According to the BLS Household Survey, the civilian employment-age population grew by 200,000! So we actually lost jobs relative to the population growth. As a result, there are 195,000 more people not employed, and a whopping 348,000 more people who are not in the labor force. The labor force participation rate is down to 63.7% and the employment-population ratio is down to 58.4%, both near record lows.
Friday, July 6th, 2012 and is filed under Blog, Economy
The June jobs report from the BLS is out this morning, and the findings are not pretty. The headline number of the establishment survey is that only 80,000 net jobs were created last month, about 100k under the requisite amount to accommodate the population increase. The working-age population grew by 189k in June, according to the household survey. As such, there are now 29 thousand more unemployed than there were last month. The U6 rate also ticked up to 14.9%.
Also, the labor participation rate and population-employment ration remain near all-time lows. There are now 1.82 million more people not in the labor force now than just 12 months ago. If you go back to January 2009, the month Obama took office, that number is a whopping 5.48 million! This comes after several months of dismal jobs reports. We’ve been averaging just 75,000 new jobs over the past three months. What about minorities? According to the household survey, unemployment among blacks ticked up almost a full point to 14.4%.
It‘s hard to articulate just how terrible and ominous these numbers are for the future of our economy. Remember that just in order to break even with pre-recession levels, we need to create about 9 million jobs, at a clip of 300-500k per month. The deeper the recession, the more robust of a recovery that is needed to break even. Also, keep in mind that the population is still growing, so we must create even more jobs to accommodate that increase.
The miracle of the American economy throughout the post-WWII era is that we have recovered from every recession stronger than we were before each downturn. At this point in the Reagan recover, we were creating over 300k new jobs each month – and that was when the population was much smaller.
Take a look at this chart comparing selected employment indicators from the time Obama took office in January 2009. As you can see, the population has grown by over 8 million, yet employment has remained stagnant.
Tuesday, June 12th, 2012 and is filed under Blog, Economy
When observing the chaos that big union bosses have interleaved into the labor market, you instinctively think of the above-market wages that are forced upon employers (and taxpayers, in the case of public-sector unions) as a result of the monopolistic collective bargaining contracts. However, what is even more deleterious is the limitation on paying individual workers more than their contract dictates.
Believe it or not, under current labor laws, employers cannot pay individual employees more than their union contracts stipulate. Union contracts tend to reward seniority over merit and performance. This is part of our broader problem with collective bargaining laws. These laws disincentivize good performance on the job and reduce productivity. The egregious labor laws block any merit-pay system – the foundation of our free market system.
Unfortunately, Big Labor has helped perpetuate this travesty because a merit-pay system would dissuade many rank-and-file members, especially those who are particularly talented, from remaining in the union system and paying dues. What’s good for the individual and the economy at large is bad for Big Labor. Not surprisingly, The National Labor Relations Board (NLRB) and the courts have consistently sided with the union bosses in striking down proposed merit-based salary increases from employers.
In order to restore our free market economy, Congressman Todd Rokita (R-IN) and Senator Marco Rubio have introduced the Rewarding Achievement and Incentivizing Successful Employees (RAISE) Act (S. 2371, HR 4385). This bill reforms the collective bargaining process allowing employers to give merit-based increases in compensation, irrespective of any collective bargaining agreement in place. This will change the current dynamic in which union bosses, not employers, decide how much the worker is paid. Every worker would retain the minimum salary agreed upon in the collective bargaining contract, but would be entitled to raises and bonuses over and beyond that amount at the discretion of the employer.
Monday, June 4th, 2012 and is filed under Blog, Economy
Throughout the campaign, you will constantly hear Obama and the media claim that 2 million jobs were created since the end of the recession. As we’ve noted many times before, you have to view a recovery the same way you would view digging out of a trench. The incline out of the trench has to be just as steep as the original decent just to break even. Historically, we have not only recovered all the lost jobs within 2 years; we added new jobs. This is not the case with the current recession. The RSC has a great chart out today showing how we should have created an additional 4.3 million jobs based upon the average recovery from post-WWII recessions:
Source: Republican Study Committee