by Calculated Risk on 6/03/2011 03:21:00 PM

Last month I mentioned that anyone who subtracts the Not Seasonally Adjusted (NSA) birth/death model numbers from the headline SA payroll employment is making a mistake. Unfortunately some sites are still making this error.

Here is a post I wrote last month Employment: A comment on the Birth/Death Model. The key point is that the Birth/Death model minimizes the primary sampling error due to employment growth generated by new business formations. The model does miss turning points, but the BLS is now updating the estimation quarterly, and this should minimize the errors.

Second, the graph server took the surge in traffic this morning as an "attack". This unfortunately caused some errors when clicking on the graphs for larger images (many readers just saw text). I apologize for the inconvenience.

Here is a repeat of the offending graph. If you click on the graph, the graph gallery should open with all of the employment related graphs (the tabs at the top of the gallery are for other topics: housing, house prices, manufacturing, etc.)

Here are a few more graphs based on the employment report ...

Duration of Unemployment
This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more.

In general, all four categories are trending down, although the "27 weeks and over" category increased sharply this month.

Note that the "less than 5 weeks" used to be much higher, even during periods of strong job growth. This is probably because of a change in hiring practices that resulted in less turnover.

Unemployment by Education
This graph shows the unemployment rate by four levels of education (all groups are 25 years and older).

Unfortunately this data only goes back to 1992 and only includes one previous recession (the stock / tech bust in 2001). Clearly education matters with regards to the unemployment rate - and it appears all four groups are generally trending down, although only "High School Graduates, No College, 25 yrs. & over" decreased in May.

Although education matters for the unemployment rate, it doesn't appear to matter as far as finding new employment (all four categories are only gradually declining).

Diffusion Indexes
This is a little more technical. The BLS diffusion index for total private employment was at 53.6 in May, and for manufacturing, the diffusion index decreased to 54.9.

Think of this as a measure of how widespread job gains 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 decline in both indexes was another negative in the May employment report.

Best to all

Here are the earlier employment posts (with graphs):
• May Employment Report: 54,000 Jobs, 9.1% Unemployment Rate
• Employment Summary, Part Time Workers, and Unemployed over 26 Weeks
• Employment graph gallery

by Calculated Risk on 6/03/2011 12:28:00 PM

Note: The traffic this morning overwhelmed the graph server. I'm working with the provider, and it appears everything is OK now. Here is the Employment graph gallery.

The May ISM Non-manufacturing index was at 54.6%, up from 52.8% in April. The employment index increased in May at 54.0%, up from 51.9% in April. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: May 2011 Non-Manufacturing ISM Report On Business®

activity in the non-manufacturing sector grew in May for the 18th consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee. "The NMI registered 54.6 percent in May, 1.8 percentage points higher than the 52.8 percent registered in April, and indicating continued growth at a faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased 0.1 percentage point to 53.6 percent, reflecting growth for the 22nd consecutive month, but at a slightly slower rate than in April. The New Orders Index increased by 4.1 percentage points to 56.8 percent. The Employment Index increased 2.1 percentage points to 54 percent, indicating growth in employment for the ninth consecutive month and at a faster rate. The Prices Index decreased 0.5 percentage point to 69.6 percent, indicating that prices increased at a slightly slower rate in May when compared to April. According to the NMI, 16 non-manufacturing industries reported growth in May. Respondents' comments are mostly positive about overall business conditions. There is a sentiment that there is a degree of stability in the economy; however, a continued concern exists over fuel costs and various volatile commodities."
emphasis added

Click on graph for larger image in graph gallery.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

Both moved up slightly in May, and this was slightly above expectations (a first for this week!)

Earlier Employment posts:
• May Employment Report: 54,000 Jobs, 9.1% Unemployment Rate
• Employment Summary, Part Time Workers, and Unemployed over 26 Weeks
• Employment graph gallery

by Calculated Risk on 6/03/2011 10:15:00 AM

Note: Apparently the graph server had a problem this morning. It appears to be working now (all the links were OK). Here is the employment graph gallery. Sorry for the inconvenience.

This was a very disappointing report.

There were few jobs created (only 54,000 total and 83,000 private sector). The unemployment rate increased from 9.0% to 9.1%, even though the participation rate was unchanged at 64.2%. Note: This is the percentage of the working age population in the labor force. I expect the participation rate to move a little higher as the job market improves, and that will keep the unemployment rate elevated all year.

The average workweek was unchanged at 34.4 hours, and average hourly earnings increased slightly. "In May, average hourly earnings for all employees on private nonfarm payrolls increased by 6 cents, or 0.3 percent, to $22.98. Over the past 12 months, average hourly earnings increased by 1.8 percent."

We have to remember that this is just one month - even if the numbers were dismal. So far the economy has added 908,000 private sector jobs this year, or about 181 thousand per month. There have been 783,000 total non-farm jobs added this year or 157 thousand per month. This is a better pace of payroll job creation than last year, but the economy still has 6.95 million fewer payroll jobs than at the beginning of the 2007 recession. At this pace (157 thousand jobs per month), it will take almost 4 years just to get back to the pre-recession level, or sometime in late 2014 or early 2015!

There are a total of 13.9 million Americans unemployed and 6.2 million have been unemployed for more than 6 months. Very grim numbers.

Overall this was a weak report and reminds us that unemployment and underemployment are critical problems in the U.S.

Percent Job Losses During Recessions

Click on graph for larger image in graph gallery.

This graph shows the job losses from the start of the employment recession, in percentage terms - this time aligned at the start of the recession.

In the previous post, the graph showed the job losses aligned at maximum job losses.

In terms of lost payroll jobs, the 2007 recession is by far the worst since WWII.

Part Time for Economic Reasons

From the BLS report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged in May at 8.5 million. 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) decreased slightly to 8.548 million in May from 8.6 million in April.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased slightly to 15.8% in May from 15.9% in April. This is very high.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 6.2 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 5.839 million in April. This remains very high, and long term unemployment is one of the defining features of this employment recession.

• Earlier Employment post: May Employment Report: 54,000 Jobs, 9.1% Unemployment Rate

by Calculated Risk on 6/03/2011 08:30:00 AM

From the BLS:

Nonfarm payroll employment changed little (+54,000) in May, and the unemployment rate was essentially unchanged at 9.1 percent, the U.S. Bureau of Labor Statistics reported today. Job gains continued in professional and business services, health care, and mining. Employment levels in other major private-sector industries were little changed, and local government employment continued to decline.
...
The change in total nonfarm payroll employment for March was revised from +221,000 to +194,000, and the change for April was revised from +244,000 to +232,000.

The following graph shows the employment population ratio, the participation rate, and the unemployment rate.

Click on graph for larger image in graph gallery.

The unemployment rate increased to 9.1% (red line).

The Labor Force Participation Rate was unchanged at 64.2% in May (blue line). This is the percentage of the working age population in the labor force. The participation rate is well below the 66% to 67% rate that was normal over the last 20 years, although some of the decline is due to the aging population.

The Employment-Population ratio was unchanged at 58.4% in May (black line).

The second graph shows the job losses from the start of the employment recession, in percentage terms aligned at maximum job losses. The dotted line is ex-Census hiring.

The current employment recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only the early '80s recession with a peak of 10.8 percent was worse).

This was well below expectations for payroll jobs, and the unemployment rate was higher than expected (both worse). I'll have much more soon ...

by Calculated Risk on 6/02/2011 09:31:00 PM

From the LA Times: Foreclosure settlement to come in a 'matter of weeks,' HUD secretary says

A settlement between a coalition of federal and state agencies and banks over foreclosure practices will come in a “matter of weeks,” Shaun Donovan, secretary of Housing and Urban Development, told the Los Angeles Times.
...
Banks have said they are willing to pay a settlement of $5 billion, according to Bloomberg News, while government officials have pushed for a settlement of as much as $25 billion, according to Times reporting.

This isn't just about the amount, but also how the money is counted. The banks want to count "cash for keys" payments and possibly even principal reduction - in other words for costs they are already paying. Not much of a penalty.