RSS Feed by Calculated Risk on 2/05/2010 03:19:00 PM
Friday, February 05, 2010
Consumer Credit Declines for Record 11th Straight Month
The Federal Reserve reports:
Consumer credit decreased at an annual rate of 4-3/4 percent in the fourth quarter of 2009. Revolving credit decreased at an annual rate of 13 percent, and nonrevolving credit was unchanged on net. In December, consumer credit decreased at an annual rate of 3/4 percent.
Click on graph for larger image in new window.This graph shows the year-over-year (YoY) change in consumer credit. Consumer credit is off 4.0% over the last 12 months.
Consumer credit has declined for a record 11 straight months - and declined for 14 of the last 15 months and is now 4.8% below the peak in July 2008. It is difficult to get a robust recovery without an expansion of consumer credit - unless the recovery is built on business investment and exports (seems unlikely to be robust).
Note: The Fed reports a simple annual rate (multiplies change in month by 12) as opposed to a compounded annual rate. Consumer credit does not include real estate debt.
Employment Diffusion Index
by Calculated Risk on 2/05/2010 01:37:00 PM
Usually I include a graph of the employment diffusion index in one of my employment posts - a measure of how widespread job losses (or gains) are - but the BLS moved everything around today, so it took me some time to find the data. 
Click on graph for larger image in new window.
The BLS diffusion index for total private employment increased to 46.8 from 41.3 in December. This is the same level as in November.
Think of this as a measure of how widespread job losses are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS. From the BLS:
Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.The diffusion index had been trending up, meaning job losses are becoming less widespread.
However a reading of 46.8 still shows a minority of industries are adding workers, and I'd expect the diffusion index to be at or above 50 when the employment recovery begins.
Earlier employment posts today:
Unemployed over 26 Weeks and Seasonal Adjustment
by Calculated Risk on 2/05/2010 11:16:00 AM
Unemployed over 26 Weeks
Click on graph for larger image in new window.
The blue line is the number of workers unemployed for 27 weeks or more. The red line is the same data as a percent of the civilian workforce.
According to the BLS, there are a record 6.31 million workers who have been unemployed for more than 26 weeks (and still want a job). This is a record 4.1% of the civilian workforce. (note: records started in 1948)
The number of long term unemployed is one of the key stories of this recession. Last year, David Leonhardt at the NY Times wrote an excellent piece about this: Wages Grow for Those With Jobs, New Figures Show
In the job market, at least, the recession’s pain has been unusually concentrated.Seasonal Adjustment
...
People who have lost their jobs are struggling terribly to find new ones. Since the downturn began in 2007, companies have been extremely reluctant to hire new workers, and few new companies have started. The economy and the job market are churning very slowly.
...
Try thinking of it this way: All of the unemployed people in the country are gathered in a huge gymnasium that’s been turned into a job search center. The fact that this recession is the worst in a generation means that there are many, many people in the gym. The fact that the economy is churning so slowly means that there is not much traffic into and out of the gym.
If you’re inside, you will have a hard time getting out. Yet if you’re lucky enough to be outside the gym, you will probably be able to stay there. The consequences of a job loss are terribly high, but — given that the unemployment rate is almost 10 percent — the odds of job loss are surprisingly low.
Back in November, Floyd Norris at the NY Times asked: Did Unemployment Really Rise?
The economic reactions over the weekend to Friday’s employment report all started from the assumption that things grew much worse in October. The unemployment rate leaped to 10.2 percent from 9.8 percent. Another 190,000 jobs vanished.Norris was referring to the "Not Seasonally Adjusted" (NSA) number. I suppose now Norris will ask "Did unemployment really fall?". The NSA number for unemployment was 10.6% in January - a sharp increase from December, as opposed to the 9.7% SA headline number.
Actually, none of that happened.
In reality, the government report says unemployment rates remained steady at 9.5 percent.
HOWEVER, as I pointed out when Norris wrote his article, there is a strong seasonal pattern to employment (and unemployment), and the Seasonally Adjusted number is the one to use. So if you see analysis featuring the NSA number (without pointing out the seasonal pattern to employment), just ignore it.
Earlier employment posts today:
Employment-Population Ratio, Part Time Workers, Temporary Workers
by Calculated Risk on 2/05/2010 09:39:00 AM
A common question is: how could there be fewer payroll jobs, but the unemployment rate declined? This is because the data comes from two separate surveys. The unemployment Rate comes from the Current Population Survey (CPS: commonly called the household survey), a monthly survey of about 60,000 households.
The jobs number comes from Current Employment Statistics (CES: payroll survey), a sample of approximately 400,000 business establishments nationwide.
The establishment survey showed a loss of 20,000 payroll jobs in January, but the household survey showed an increase in the employment level of 541,000. The number to use for jobs is the establishment survey, but the unemployment number is based on the household survey and the surveys can diverge over the short period, but over time this will work out (for more on the differences, see: Jobs and the Unemployment Rate).
Here are a few more graphs based on the employment report ...
Employment-Population Ratio
The Employment-Population ratio ticked up slightly to 58.4% in January, after plunging since the start of the recession. This is about the same level as in 1983.
Click on graph for larger image in new window.
This graph shows the employment-population ratio; this is the ratio of employed Americans to the adult population.
Note: the graph doesn't start at zero to better show the change.
The general upward trend from the early '60s was mostly due to women entering the workforce.
The Labor Force Participation Rate increased slightly to 64.7% (the percentage of the working age population in the labor force). This is at the level of the early 80s.
Temporary Workers
From the BLS report:
In January, temporary help services added 52,000 jobs. Since reaching a low point in September 2009, temporary help services employment has risen by 247,000.
This graph shows temporary help services (seasonally adjusted) and the unemployment rate. Unfortunately the data on temporary help services only goes back to 1990, but it does appear temporary help and the unemployment rate have been inversely correlated.The thinking is that before companies hire permanent employees following a recession, employers will first increase the hours worked of current employees and also hire temporary employees. Since the number of temporary workers increased sharply, some people think this might be signaling the beginning of an employment recovery.
However, there has been some evidence of a shift by employers to more temporary workers, and the saying may become "We are all temporary now!", so use this increase with caution.
Note: the Census Bureau hired 9,000 temporary workers in January as part of the decennial census, and now employs 24,000 temporary workers.
Part Time for Economic Reasons
From the BLS report:
The number of persons who worked part time for economic reasons (sometimes referred to as involuntary part-time workers) fell from 9.2 to 8.3 million in January. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
The number of workers only able to find part time jobs (or have had their hours cut for economic reasons) declined sharply to 8.3 million. The all time record was set in October.
Overall there were some positives in the report: the unemployment rate declined, average hours worked increased slightly, part time workers declined, and the employment-population ratio ticked up slightly (after plunging sharply). This is just one month - and January is the always a little tricky because of the heavy seasonal adjustment. I'll have even more later ...
Earlier employment post today:
Employment Report: 20K Jobs Lost, 9.7% Unemployment Rate
by Calculated Risk on 2/05/2010 08:30:00 AM
From the BLS:
The unemployment rate fell from 10.0 to 9.7 percent in January, and nonfarm payroll employment was essentially unchanged (-20,000), the U.S. Bureau of Labor Statistics reported today. Employment fell in construction and in transportation and warehousing, while temporary help services and retail trade added jobs.
Click on graph for larger image.This graph shows the unemployment rate and the year over year change in employment vs. recessions.
Nonfarm payrolls decreased by 20,000 in January. The economy has lost almost 4.0 million jobs over the last year, and 8.42 million jobs since the beginning of the current employment recession. (note: job losses were 7.2 million before benchmark revision).
The unemployment rate declined to 9.7 percent. (I'll have more on that soon)
The second graph shows the job losses from the start of the employment recession, in percentage terms (as opposed to the number of jobs lost).For the current recession, employment peaked in December 2007, and this recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only early '80s recession with a peak of 10.8 percent was worse).
I'll have much more soon ...
