by Calculated Risk on 8/03/2012 10:21:00 AM

The economy has added 1.06 million jobs over the first seven months of the year (1.12 million private sector jobs). At this pace, the economy would add around 1.9 million private sector jobs in 2012; less than the 2.1 million added in 2011. Also, at this pace of payroll job growth, the unemployment rate will probably still be above 8% at the end of the year.

Some numbers: There were 163,000 payroll jobs added in July, with 172,000 private sector jobs added, and 9,000 government jobs lost. The unemployment rate increased slightly to 8.3% (from the household survey), and the participation rate declined to 63.7%. Both are moving in the wrong direction.

U-6, an alternate measure of labor underutilization that includes part time workers and marginally attached workers, increased so 15.0%.

The change in May payroll employment was revised up from +77,000 to +87,000, but June was revised down from +80,000 to +64,000.

The average workweek was unchanged at 34.5 hours, and average hourly earnings increased slightly. "The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in July. ... In July, average hourly earnings for all employees on private nonfarm payrolls edged up by 2 cents to $23.52. Over the year, average hourly earnings rose by 1.7 percent." This is sluggish earnings growth.

There are a total of 12.8 million Americans unemployed and 5.2 million have been unemployed for more than 6 months.

Even though the number of payroll jobs added was more than expected, the bottom line is this was another fairly weak employment report. Here are a few more graph ...

Employment-Population Ratio, 25 to 54 years old

Click on graph for larger image.

Since the participation rate has declined recently due to cyclical (recession) and demographic (aging population) reasons, an important graph is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the employment-population ratio for this group was trending up as women joined the labor force. The ratio has been mostly moving sideways since the early '90s, with ups and downs related to the business cycle.

This ratio should probably move back to or above 80% as the economy recovers. So far the ratio has only increased slightly from a low of 74.7% to 75.5% in July (this was down slightly in July.)

Percent Job Losses During Recessions


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

In the earlier post, the graph showed the job losses aligned at the start of the employment recession.

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 at 8.2 million in July. 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 part time workers increased slightly in July to 8.25 millon.

These workers are included in the alternate measure of labor underutilization (U-6) that increased in July to 15.0%, up from 14.9% in June.

Unemployed over 26 Weeks

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

According to the BLS, there are 5.19 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 5.37 million in June. This is generally trending down, but very slowly. Long term unemployment remains one of the key labor problems in the US.

State and Local Government

So far in 2012 - through July - state and local government have lost 42,000 jobs (7,000 jobs were added in July). In the first seven months of 2011, state and local governments lost 205,000 payroll jobs - and 230,000 for the year. So the layoffs have slowed.

This graph shows total state and government payroll employment since January 2007. State and local governments lost 129,000 jobs in 2009, 262,000 in 2010, and 230,000 in 2011.

Note: Some of the stimulus spending from the American Recovery and Reinvestment Act probably kept state and local employment from declining faster in 2009.

Of course the Federal government is still losing workers (38,000 over the last 12 months and another 2,000 in July), but it looks like state and local government employment losses might be slowing - but the job losses haven't stopped yet.

Overall this was another fairly weak report.
All Employment Graphs

by Calculated Risk on 8/03/2012 08:30:00 AM

From the BLS:

Total nonfarm payroll employment rose by 163,000 in July, and the unemployment rate was essentially unchanged at 8.3 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in professional and business services, food services and drinking places, and manufacturing.
...
Both the civilian labor force participation rate, at 63.7 percent, and the employment- population ratio, at 58.4 percent, changed little in July.
...
The change in total nonfarm payroll employment for May was revised from +77,000 to +87,000, and the change for June was revised from +80,000 to +64,000.

Click on graph for larger image.

This was a somewhat better month, and the revisions for the previous two months were mostly offsetting.

This was above expectations of 100,000 payroll jobs added.

The second graph shows the employment population ratio, the participation rate, and the unemployment rate. The unemployment rate increased to 8.3% (red line).

The Labor Force Participation Rate declined slightly to 63.7% in July (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 most of the recent decline is due to demographics.

The Employment-Population ratio declined to 58.4% in July (black line).

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

This shows the depth of the recent employment recession - worse than any other post-war recession - and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis.

This was more payroll growth than expected, but still fairly weak. (expected was 100,000). I'll have much more later ...

by Calculated Risk on 8/02/2012 09:29:00 PM

From the Financial Times: Draghi kills hope of instant action

Financial markets recoiled on Thursday after Mario Draghi demanded eurozone governments turn to existing rescue funds before any intervention by the European Central Bank in bond markets to shore up Europe’s monetary union.
Excerpt with Permission

Some analysis from the Joseph Cotterill at Alphaville: Was Draghi really a disaster? and from Tim Duy at EconomistsView: Second Policy Failure of the Week

On Friday:
• At 8:30 AM ET, the Employment Report for July will be released. The consensus is for an increase of 100,000 non-farm payroll jobs in July, up from the 80,000 jobs added in June. The consensus is for the unemployment rate to remain unchanged at 8.2%.

Some thoughts: Employment Situation Preview and from Binyman Appelbaum at Economix: Beware the Jobs Report of July

As ... Floyd Norris explained last month, one possible distortion that has arisen in recent years, thanks to the weakness of the economy, is that “seasonal adjustments make things look better than they are in the winter, when fewer workers are being let go than the government expects, and worse in the spring and summer, when the workers who were not let go cannot be rehired.”

• 10:00 AM, the ISM non-Manufacturing Index for July will be released. The consensus is for a decrease to 52.0 from 52.1 in June.

For the economic contest in August:

by Calculated Risk on 8/02/2012 07:47:00 PM

For amusement ... from the LA Times: What's in your vault? Uncle Sam audits its stash of gold at the New York Fed

For decades, the U.S. government has stashed gold five stories beneath Manhattan in a vault under the Federal Reserve's fortress near Wall Street.

Or has it?

Some conspiracy theorists suspect that the billions of dollars' worth of bullion might have been looted in a dramatic heist, a la the movie "Die Hard: With a Vengeance." Others claim that the gold has been used in a shadowy government transaction, or swapped with gold-painted bars. It's even caught the attention of politicians like Rep. Ron Paul and members of Germany's Parliament.

Now all of us may finally get some answers.

The federal government has quietly been completing an audit of U.S. gold stored at the New York Fed. The effort included drilling small holes in the bars to test their purity.

The Treasury Department has refused to disclose what the audit has revealed so far, saying the results will be announced by year's end.

This will probably launch more conspiracy theories ...

by Calculated Risk on 8/02/2012 02:00:00 PM

The last three employment reports were very weak: 68,000 payroll jobs added in April, 77,000 in May, and 80,000 in June. Some of this recent weakness might have been "payback" for the mild weather earlier in the year. Also there is the possibility that the seasonal factors are a little distorted by the deep recession and financial crisis - this is the third year in a row we've some late spring weakness.

Bloomberg is showing the consensus is for an increase of 100,000 payroll jobs in July, and for the unemployment rate to remain unchanged at 8.2%.

Here is a summary of recent data:

• The ADP employment report showed an increase of 163,000 private sector payroll jobs in July. This would seem to suggest that the consensus for the increase in total payroll employment is too low, although the ADP report hasn't been very useful in predicting the BLS report for any one month.

• The ISM manufacturing employment index decreased in July to 52.0%, down from 56.6% in June. A historical correlation between the ISM index and the BLS employment report for manufacturing, suggests that private sector BLS reported payroll jobs for manufacturing decreased about 8,000 in July.

The ISM service index will be released tomorrow after the BLS report.

• Initial weekly unemployment claims averaged about 365,000 in July, down from the 382,000 average for April, May and June. This was about the same level as in March when the BLS reported 143,000 payroll jobs added (Note: weekly claims have apparently been impacted by the timing of auto plant shutdowns).

For the BLS reference week (includes the 12th of the month), initial claims were at 388,000; near the high for the year.

• The final July Reuters / University of Michigan consumer sentiment index declined to 72.3, down from the June reading of 73.2. This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors. This level - and the slight monthly decline - suggest a weak labor market.

• The small business index from Intuit showed 35,000 payroll jobs added, down from 40,000 in June.

• And on the unemployment rate from Gallup: U.S. Unadjusted Unemployment Rate Increases in July

U.S. unemployment, as measured by Gallup without seasonal adjustment, was 8.2% in July, up slightly from 8.0% in June, but better than the 8.8% from a year ago. Gallup's seasonally adjusted number for July is 8.0%, an increase from 7.8% in June.

Note: Gallup only recently has been providing a seasonally adjusted estimate for the unemployment rate, so use with caution (Gallup provides some caveats). Note: So far the Gallup numbers haven't been useful in predicting the BLS unemployment rate.

• Conclusion: The overall feeling is that the economy weakened further in July, and that would seem to suggest another weak employment report. However, if the weather "payback" is over (as several analysts have argued), the number of payroll jobs could be better than the last few months. And it is possible that there have been some seasonal factor distortions.

The ISM manufacturing report suggest a loss of manufacturing jobs, however the ADP report (private only), suggests the consensus is too low. Initial weekly unemployment claims were mixed too: the monthly average was near the low for the year, but the reference week was near the high.

Other negatives include the weak small business numbers from Intuit, and the decline in consumer sentiment.

Overall it seems like the July report will be weaker than expected.

For the economic contest in August: