Friday, February 03, 2012

Employment: The "Not in Labor Force" actually declined in January

by Bill McBride on 2/03/2012 06:23:00 PM

Some readers sent me a link to some terrible analysis that argued over 1 million people left the labor force in January. I pointed out the error. Apparently Rick Santelli at CNBC made the same mistake and reads the wrong blogs!

The Bonddad blog points out the error: No Rick Santelli and Zero Hedge, One Million People Did Not Drop Out of the Labor Force Last Month (CR note: I never read zero).

This does bring up an important point: The BLS updated the population estimates today based on the 2010 Census. I mentioned this in the preview yesterday and in the posts this morning. For whatever reason, the Census Bureau doesn't go back and revise the earlier population estimates, but they do provide analysis of the changes in several key numbers if the population estimate hadn't been changed.

Below is the table from the BLS:

With the 2010 population controls, the "not in labor force" appeared to have increased by 1.2 million in January, and the working age population jumped 1.7 million. That didn't happen last month; the numbers changed because of the new population estimate. This does suggests there are 1.2 million more people out of the labor force than we originally thought, but that is because the working age population is larger than previously estimated.

As the BLS points out, without the population change the "not in labor force" actually declined.

A couple other key points:
1) The decline in the participation rate was entirely due to the population change.
2) The employment-population ration would have increased 0.3 (good news) without the population change.

Category Dec.-Jan. change, as published2012 population control effect Dec.-Jan. change, after removing the population control effect1
Civilian noninstitutional population1,6851,510175
Civilian labor force508258250
Participation rate-0.3-0.30
Employed847216631
Employment-population ratio0-0.30.3
Unemployed-33942-381
Unemployment rate-0.20-0.2
Not in labor force1,1771,252-75
1This Dec.-Jan. change is calculated by subtracting the population control effect from the over-the-month change in the published seasonally adjusted estimates.

Earlier Employment posts:
January Employment Report: 243,000 Jobs, 8.3% Unemployment Rate
Graphs: Unemployment Rate, Participation Rate, Jobs added
Employment Summary, Part Time Workers, and Unemployed over 26 Weeks
Construction Employment, Duration of Unemployment, Unemployment by Education and Diffusion Indexes
All Employment Graphs

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