August Jobs Report

Definitely a bad one. Only 169,000 jobs were added in August. The unemployment rate dropped to 7.3% due to people leaving the labor force. And the past two months of lackluster job growth were revised down by a total of 74,000 jobs. The last three months have been the worst since the recent round of Quantitative Easing (QE) began.

Coincidentally, this comes as the Fed has been making noises about "tapering" or removing stimulus in the near future. Unexpectedly, after this began, around March, inflation expectations dropped (and were never high anyway). This is the same pattern as the previous rounds of QE: as their end became apparent inflation and hiring declined, leaving the economy stagnant and making future rounds of stimulus necessary. 

That being said employment data is always volatile, and other data such as car sales and new Unemployment Insurance claims still point to strong growth. But as long as inflation, and inflation expectations aren't high, and wages aren't rising, the Fed clearly has room to stimulate without much downside risk[1]. And the fastest way to stop using unconventional monetary policy, and thus reduce that risk, is to use it correctly the first time. Withdrawing stimulus in the near future would be a mistake, at least one person at the Fed understands this.

July Jobs Report

162,000 jobs were added in July. It's neither relatively good nor bad. The previous two months were revised down by 26,000 jobs total.

It's a mixed signal, and there have been a lot of mixed signals in the economy lately. The good part is that the innovative Fed policy we currently have automatically adjusts to economic conditions. If the economy slows down it means monetary stimulus will last longer. And the mixed signals in the economy have already triggered some subtle but telling word changes in Fed policy statements, which point to the need for continued stimulus.

June Jobs Report

195,000 jobs were added in June. A relatively good number given the recent past. The labor force participation rate stayed about the same. Furthermore, both April and May were revised upward to nearly 200,000 jobs added.

Current job numbers represent a break with the previous post-recession trend of relatively strong winters and weak summers. 2013 is on track to be the  strongest year of the recovery. All this despite fiscal austerity, and weaker growth in Europe and developing countries. Monetary policy, however, has been at its most expansionary of the recovery.

May Jobs Report

The Economy added 175,000 jobs in May. A very average number. The unemployment rate went up 0.1% to 7.6% due to more people entering the labor force. 

Not much more to say / gonna be lazy on this one. Sorry I'm not sorry.

April Jobs Report

165,000 jobs were added in April. A number that is neither good nor bad. The unemployment rate went down to 7.5% and not because people were leaving the labor force this time. In better news, March's terrible number has been revised up to a less bad 138,000 jobs added. February's numbers were revised up to 332,000 jobs added, the highest number since May of 2010.

Another Labor Market Graph

Here's another useful graph for understanding the current state of the labor market. It's known as the Beveridge Curve, which graphs the relationship between job vacancies and the unemployment rate. With no changes in the efficiency of a labor market, a given level of openings should correspond with a given unemployment rate. For example, 2005 and 2006 in the graph below have roughly the same number of vacancies and similar unemployment rates.

There has been a noticeable shift in the curve, indicating a less efficient labor market. In the 2000s labor market, the rate of vacancies we have today would correspond with an unemployment rate of around 5.5 to 6%. 

More (and better) Unemployment Indicators

In addition to the monthly job growth numbers, I felt it would be nice to give some greater detail of unemployment through this recover. First, a couple graphs showing the increase in long term unemployment.

And last, a graph of the best unemployment indicator, the Employment to Population Ratio. It is presented as the number of people 16 and older employed over the number of people 16 and over multiplied by 100. The benefit is that, unlike the unemployment rate, people leaving the labor force doesn't make the statistic look better. Most OECD countries have an upper age limit, which is smarter. Retiring baby boomers would bring down the ratio all else remaining constant (notice that the ratio was decreasing slowly before the recession hit). 

So the reality is slightly better than the graph would initially indicate.

March Jobs Report

March employment growth was the worst since June of 2012. 88,000 jobs were added, and the unemployment rate decreased to 7.6% due to people leaving the labor force. 

Naturally, the fact that the sequester hit in March comes to mind for a potential cause. While the amount of spending cut so far is bound to be tiny (due to lags in appropriations and spending only $41 billion of the $85 billion in cuts for 2013 will take effect in 2013), there is no longer any optimistic uncertainty that they will happen. 

On the other hand, bad reports have come and gone and sometimes been revised away, so it can't be said with certainty that the report really was this bad, or that it was caused by any one thing specifically. Numbers for January and February were revised up somewhat.

February Jobs Report

236,000 jobs were added in February, a relatively good number for the recovery. The unemployment rate went down to 7.7%, while the labor force participation rate was steady. November job growth was revised upward 23,000 to 219,000 jobs added. December job growth was revised down by 38,000 to 119,000 jobs.

Again, the job numbers show an improving labor market that has seemingly ignored the headwinds of tax increases[1] and the uncertainty of repeated deadline fiscal bargaining. While the cuts from the sequester have not yet impacted the economy, the uncertainty of them and expectations that they might happen already have. This suggests markets either didn't expect the cuts to happen or don't think they'll have much of an impact. We'll see what happens when the cuts are actually occurring.

January Jobs Report

The January Jobs report came out Friday along with annual revisions to past jobs numbers. Job growth in January was 157,000, a relatively average number for the current recovery. The unemployment rate went up by 0.1% due to revisions to population and labor force estimates. The better news is the direction of the revisions to past numbers. November was revised up from 161,000 to 247,000 jobs added, a strong performance in the context of the recovery. December was revised up from 155,000 to 196,000. Generally speaking, the revisions to older months were upwards in direction. There were even a couple months of job growth above 300,000.

The graph below shows the revised numbers in white, and the previous numbers in red.




The jobs report gives further evidence in conflict with the fourth quarter contraction in GDP indicated in the BEA's preliminary estimates. As I noted in the previous post, these estimates are always revised to some degree, sometimes by over a percentage point. When looking at other indicators of economic strength, it seems very likely that GDP did in fact expand in the fourth quarter.

December Jobs Report

155,000 jobs were created in December. The number is incredibly average for the disappointing recovery. The monthly average for 2012 was 152,900; the average for 2011 was 153,300. Such weak and consistent job growth puts the economy on track to recover all the jobs lost in the recession by March of 2015. But the population will be larger, so recovery to the rate of unemployment seen before the recession will take even longer.

November Jobs Report

Middling is a good way to put it. 146,000 jobs were added in November, which is pretty close to average. In the face of the uncertainty of the fiscal cliff, depending what effect that uncertainty has, average could be better than it seems. According to the BLS, hurricane Sandy had little effect on employment. 

But the situation looks a bit worse once one looks deeper. The labor force participation rate declined, off-setting October's increase. This, and the added jobs, has brought the unemployment rate down to 7.7%. The data for the months of September and October were revised down by a combined 49,000 jobs, the first downward revision since April. The revision brings the monthly average job growth so far this year to 151,000, compared to 2011's 153,000. 

October Jobs Report

It's the last jobs report before the election, 171,000 jobs were added in October. A number that is only good relative previous jobs reports and the pessimistic expectations of market watchers. If this stayed the level of job growth we would return to pre-crisis unemployment by 2018ish. But the figure is an improvement, and furthermore, the numbers for the previous two months have been adjusted upwards by a combined 84,000 jobs. The unemployment rate increased to 7.9% due to an increase in people actively looking for jobs, a good sign.

As an example of how large future revisions can be, when the August jobs report came out the BLS reported a paltry increase of 96,000 jobs. By this report that number had be revised to 192,000 jobs added.

September Jobs Report

There's some unusual news in the area of unemployment statistics. First, in late September, the BLS issued a preliminary revision to their March 2011 – March 2012 numbers; they underestimated job growth by about 20%. In a way this is news only a statistician could love, the effect of these job gains won't change because the measurement is more accurate. And it does make the apparent slowing down of the economy look more pronounced. But it's still good news that we weren't doing as poorly as thought. The figure below shows the gains since March starting from where the revision put the total increase in jobs ending March 2012. 

The news for September in particular is complicated. The increase in total non-farm jobs was reported at 114,000. A lame number, not terrible but not any good either. The numbers would be terrible if the government was still shedding jobs, instead government employment is creeping up. On the good side the numbers for July and August were revised upwards by a total of 86,000 jobs. 

Further complicating things is the fact that the unemployment rate dropped, from 8.1% to 7.8%, and not from people leaving the labor force. It is the first time the unemployment was below 8% since January 2009. The unemployment rate is calculated using a different survey, of households rather than businesses. The household survey shows an astonishing 873,000 more jobs than in August. The household survey numbers are volatile, and the two numbers often diverge, but over time are similar in aggregate. As Floyd Norris (Chief Financial Correspondent for the New York Times) points out,
“A year ago, the the establishment numbers were looking better than the household numbers. Now the reverse is true...Over the last 24 months, however, the two reports are virtually identical, showing an additional 3.6 million jobs and workers." 

I really don't have the expertise to shed any more light on the confusing batch of statistics today. But the take away message seems to be that the economy is and was doing better than we thought, but it's still slowing down.

August Jobs Report

The economy added 96,000 jobs in August. A lower number than last month was expected, by me at least for no other reason than it fits the pattern (see last report). But it seems that the continuing/worsening crisis in Europe and the slow down of Emerging Economies (most notably China) has taken its toll in slowing down US job growth even more.

Worse, the number of people looking for work declined as well, bringing the Unemployment Rate down to 8.1%. Previous month's numbers were revised downward a total of 41,000, as indicated by the red line (which shows figures from before the last revision).

July Jobs Report

Better than last month but not good pretty much sums it up. 163,000 non-farm jobs were added in July. Previous months were little revised and the labor force shrank slightly. It's further evidence that this is just what the pace of recovery will be; the jobs market has produced these results for three years now.

It is almost uncanny how repetitive the process has been. Encouraging job growth over the winter followed by months of disappointingly low numbers, followed by a upward blip in late summer before diminishing until winter. This is the late summer blip, last year it came in August, the year before in September. It's slightly good news in that following months shouldn't be as disappointing as previous months, until next spring.

What this means for policy is that nothing will change there either. Policy has remained essentially unchanged since the recovery started. In fact, job growth is slightly higher. Since February 2010 job growth has averaged around 138,000 per month, while in the past year it has averaged 153,000 per month. This certainly means that the Fed won't act, if conditions aren't changing their policies won't change. But the Fed does expect growth to pick up next year, not that their forecasts have been all that accurate. Generally speaking that puts the unemployment rate reaching 2008 levels in 2016.

June Jobs Report

 
Another terrible jobs report, only 80,000 jobs were added in June. The numbers for previous months were barely changed (red line). Just like last year, the economy has stagnated after a strong winter. The trend is now pretty ingrained and growth forecasts the world over are being cut. In other news inflation has decreased and is below the Fed’s low 2% target. So unemployment is above target (ie. “The natural rate”) and inflation is below target. The Fed is now missing on both ends of its mandate rather than just the employment side, yet it doesn’t act. And crazy people continue to worry about inflation.

At the end of this year we face what is being appropriately called a “fiscal cliff”. Taxes across the board are going to go up and discretionary spending (the part that isn’t contributing to our unsustainable debt) will be slashed. The combined effect of this will likely put us back into a recession. The CBO recently estimated that the full effect of the fiscal cliff will cut growth to 0.5% of GDP next year (it is currently around 2%). And unemployment will rise above 9%. What CBO projections don't include is psychology. If growth decreases that suddenly and unemployment increases the negative effect on confidence and expectations could easily put the economy into a recession. If politicians continue to fail us, this may be the best economy we'll see for years.

May Jobs Report

The May Jobs Report has come out and it’s certainly bad news. Only 69,000 jobs were added in May; the unemployment rate stands “essentially unchanged” at 8.2%. Long term unemployment increased by 300,000. Additionally, the numbers for March and April were revised down. March job growth was revised from 154,000 jobs added to 143,000; April was revised from 115,000 jobs added to just 77,000 (the red line shows the unrevised numbers). The only piece of not terrible news is that the participation rate (people who have jobs plus people who are actively looking for jobs) increased. 

If numbers like these continue, job growth won’t even keep pace with population growth. Factoring in population growth the economy needs to add roughly 200,000 jobs a month to return to levels of unemployment seen in early 2008 by 2015, and recent growth is nowhere close.

April Jobs Report

Job growth continued to slow in April to a disappointing 115,000 jobs added. There is some not bad news: more jobs were added in February and March than originally reported (red line on the graph). Though that isn't all that significant.

The unemployment rate dropped 0.1%, which was due mostly to the fact that around 340,000 people dropped out of the job market.

March Jobs Report

The economy in the United States added only 120,000 jobs last month according to the BLS. Many analysts and forecasters had expected over 200,000 jobs added, but anyone keeping track knows they have been uselessly inaccurate as of late. The numbers for January were revised down, and the numbers for February revised up, for a net of basically no change. The unemployment rate dropped due to people dropping out of the labor force. While there were many encouraging signs and statistics over the past month, GDP growth had slowed from the annualized rate of 3% seen in the fourth quarter of 2011. There was a disconnect between job numbers and GDP numbers, and it turns out now that the job numbers were the ones out of sync.

The same thing happened last year; a winter of solid job numbers ended with spring. So this past winter’s numbers seem to be more of a seasonal phenomenon rather than a lasting improvement in the economy and labor market. Additionally, the unusually warm winter could have thrown off seasonally adjusted figures to overstate growth. It’s certainly bad news, when this happened last year it was explained away by harsh winter weather in the northeast and the tsunami in Japan. Neither of which happened this year. A bumpy recovery was to be expected, but the further out we are from the recession, the worse it is to be standing in the same place.