by Calculated Risk on 3/08/2013 10:30:00 AM

The 236 thousand payroll jobs added in February is from the establishment survey (a survey of businesses for payroll jobs), but the unemployment rate is from the household survey.   To help understand the decline in the unemployment rate, here is some data from the household survey.

The "Population" is the Civilian Noninstitutional Population, or the number of people 16 and over who are "not inmates of institutions (for example, penal and mental facilities and homes for the aged) and who are not on active duty in the Armed Forces".  This is increasing every month, and increased 165 thousand in February.

The Civilian Labor Force is based on the percentage of people who say they are either employed or unemployed.  This yields the participation rate (the percentage of the civilian noninstitutional population that is in the labor force).  The participation rate has declined recently due to both demographic reasons and the weak recovery from the financial crisis.  Separating out the two reasons is difficult, see: Understanding the Decline in the Participation Rate and Further Discussion on Labor Force Participation Rate and Labor Force Participation Rate Update.

If the participation rate increases, then it would take more jobs to reduce the unemployment rate.  If the participation rate continues to decline (or just flat lines for a couple of years), then it takes fewer jobs to reduce the unemployment rate.

According to the household survey, the economy added 170 thousand jobs (the establishment survey is better for jobs added), and there were 300 thousand fewer people unemployed - so the unemployment rate declined to the lowest level since 2008.

Employment Status, Household Data (000s)
	Jan	Feb	Change
Population	244,663	244,828	165
Civilian Labor Force	155,654	155,524	-130
Participation Rate	63.62%	63.52%	-0.10%
Employed	143,322	143,492	170
Unemployed	12,332	12,032	-300
Unemployment Rate	7.92%	7.74%	-0.19%

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 close to 80% as the economy recovers. The ratio increased in February to 75.9% from 75.7% in January. This has generally been trending up - although the improvement stalled in 2012 - and the ratio is still very low.

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.

This financial crisis recession was much deeper than other post WWII recessions, and the recovery has been slower (the recovery from the 2001 recession was slow too). However, if we compare to other financial crisis recoveries, this recovery has actually been better than most.

Part Time for Economic Reasons

From the BLS report:

The number of persons employed part time for economic reasons, at 8.0 million, was essentially unchanged in February. 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 in February to 7.99 from 7.97 million in January.

These workers are included in the alternate measure of labor underutilization (U-6) that declined slightly to 14.3% in February.

Unemployed over 26 Weeks

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

According to the BLS, there are 4.8 million workers who have been unemployed for more than 26 weeks and still want a job. This was up slightly from 4.71 million in January. This is generally trending down, but is still very high. Long term unemployment remains one of the key labor problems in the US.

State and Local Government

This graph shows total state and government payroll employment since January 2007. State and local governments lost jobs for four straight years. (Note: Scale doesn't start at zero to better show the change.)

In February 2013, state and local governments lost another 10,000 jobs and have lost 27,000 jobs so far in 2013.

I think most of the state and local government layoffs are over, however state and local government employment is still trending down.

Of course the Federal government layoffs are ongoing with many more layoffs expected due to the sequestration spending cuts.

Overall this was a fairly solid report, but with the high unemployment rate, many workers unemployed for a long time, and the large number of part time workers, there is a long way to go.

All Employment Graphs

by Calculated Risk on 3/08/2013 08:30:00 AM

From the BLS:

Total nonfarm payroll employment increased by 236,000 in February, and the unemployment rate edged down to 7.7 percent ...
...
The change in total nonfarm payroll employment for December was revised from +196,000 to +219,000, and the change for January was revised from +157,000 to +119,000.

Click on graph for larger image.

The headline number was above expectations of 171,000 payroll jobs added.  Employment for January was revised lower, but jobs added in December was revised higher.

NOTE: This graph is ex-Census meaning the impact of the decennial Census temporary hires and layoffs is removed to show the underlying payroll changes.

The second graph shows the unemployment rate.

The unemployment rate decreased to 7.7% from 7.9% in January.

The unemployment rate is from the household report and the household report showed only a small increase in employment.


The third graph shows the employment population ratio and the participation rate.

The Labor Force Participation Rate decreased slightly to 63.5% in February (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 a significant portion of the recent decline is due to demographics.


The Employment-Population ratio was also unchanged at 58.6% in February (black line). I'll post the 25 to 54 age group employment-population ratio graph later.


The fourth graph shows the job losses from the start of the employment recession, in percentage terms, compared to previous post WWII recessions. 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 a fairly solid employment report and better than expectations. I'll have much more later ...

by Calculated Risk on 3/07/2013 08:18:00 PM

Two comments: Net petroleum imports, and a house price forecast.

Early this morning I posted a graph showing the large net imports of petroleum. Many people have heard the the US is now a net exporter, but that is just of refined petroleum products.  The US is still a very large importer of crude oil. For an explanation, see Jim Hamilton's U.S. net exports of petroleum products

"The first thing to understand about this number is that it refers only to net exports of refined petroleum products, calculated for example by subtracting the amount of gasoline that the U.S. imports from the amount of gasoline that we export. These imports or exports of refined products are far smaller in magnitude than the imports of crude oil, which is the raw material from which refined products are made."

And a research note from Chris Flanagan, Michelle Meyer and Justin Borst at Merrill Lynch: Someone say house party?

Home prices continue to show momentum amid shrinking inventory and record high affordability, prompting us to revise up our forecast for home prices this year. We now expect national home prices, as defined by the S&P Case Shiller home price index, to increase 8.0% this year (q4/q4). This follows the 7.3% gain in 2012. ... our forecast now assumes faster near-term appreciation, but slower growth in the out years. Our forecast for the cumulative appreciation over the next ten years is little changed.

Friday economic releases:
• At 8:30 AM ET, Employment Report for February will be released. The consensus is for an increase of 171,000 non-farm payroll jobs in February; the economy added 157,000 non-farm payroll jobs in January. The consensus is for the unemployment rate to decrease to 7.8% in February.

• At 10:00 AM, Monthly Wholesale Trade: Sales and Inventories for January. The consensus is for a 0.4% increase in inventories.

by Calculated Risk on 3/07/2013 04:38:00 PM

On Friday, at 8:30 AM ET, the BLS will release the employment report for February. The consensus is for an increase of 171,000 non-farm payroll jobs in February, and for the unemployment rate to decrease to 7.8% (from 7.9% in January).

Here is a summary of recent data:

• The ADP employment report showed an increase of 198,000 private sector payroll jobs in February. This was above expectations of 173,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, although the methodology changed last year. In general this suggests employment growth somewhat above expectations.

• The ISM manufacturing employment index declined in February to 52.6%, down from 54.0% in January. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS reported payroll jobs for manufacturing declined slightly in February.

The ISM non-manufacturing (service) employment index decreased slightly in February to 57.2%, down from 57.5% in January. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for services, suggests that private sector BLS reported payroll jobs for services increased about 250,000 in February.

Added together, the ISM reports suggests about 245,000 jobs added in November.

• Initial weekly unemployment claims averaged about 355,000 in February. This was up slightly from January, but near the lowest level since early 2008.

For the BLS reference week (includes the 12th of the month), initial claims were at 366,000; up from 335,000 in January.

• The final February Reuters / University of Michigan consumer sentiment index increased to 77.6, up from the January reading of 73.8. This is frequently coincident with changes in the labor market and stock market, but also strongly related to gasoline prices and other factors. This might suggest some increase in employment, but the level still suggests a weak labor market.

• The small business index from Intuit showed 15,000 payroll jobs added, down from 25,000 in January. This is disappointing.

• And on the unemployment rate from Gallup: Gallup's U.S. unemployment rate, without seasonal adjustment, increases to 8.0%

Gallup's unadjusted employment rate for the U.S. workforce was 8.0% for the month of February, a slight uptick from 7.8% in January, but down markedly from 9.1% in February 2012.

Gallup's seasonally adjusted U.S. unemployment rate for February was 7.6%, a modest increase from 7.3% in January, but down a full percentage point from February 2012.

Note: So far the Gallup numbers haven't been very useful in predicting the BLS unemployment rate.

• Conclusion: The employment related data was mixed in February.  The ADP and ISM reports suggest an increase in hiring, but the small business index was weak, and weekly claims were slightly higher in February than in January when the BLS reported 157,000 payroll jobs were added.  There is always some randomness to the employment report, but my guess is around the consensus of 171,000 jobs.

by Calculated Risk on 3/07/2013 03:15:00 PM

Analyst Ivy Zelman was one of the few to correctly call both the top and bottom for housing (Tom Lawler and your humble blogger were also correct). Today, on CNBC, Zelman made several very positive comments on housing:

"I think we are in Nirvana for housing."

"I'm probably the most bullish I've ever been fundamentally [on housing], and I'm dating myself, but I've been around for over 20 years and I've seen a lot of ups and downs".

[We are in] "the first or second inning of the fundamental recovery that could be five to ten years in duration ..."

"I think home prices could go up for four to six years in duration ..."

CR Note: Obviously I'm also very positive on housing. And I'm positive on the overall economy too -  and a key reason is, historically, housing is the best leading indicator for the economy.  In the Business Insider interview late last year, I said: "I’m not a roaring bull, but looking forward, this is the best shape we’ve been in since ’97". Obviously the economy is still sluggish, and the unemployment rate is very high at 7.9%, but I was looking forward - and housing is one of the key reasons The future's so bright, I gotta wear shades.