Summary: The news media focuses on the month-to-month changes in the jobs report, which consist mostly of noise. Strong months confirm the optimists; weak months confirm the pessimists. In fact the trend of growth remains the real story, with the US economy near stall speed — supported only (like the other developed nations) by massive multi-year fiscal and monetary stimulus. Slow growth bought at great cost. A cost we cannot long continue to pay, borrowing and squandering the money ($ which instead could be rebuilding America). Just like Japan since 1989.
- About the recovery
- Household survey
- Establishment survey
- Other important metrics
- For more information about US economy
Here we examine the April employment report from the Bureau of Labor Statistics. They conduct two surveys: one of households, one of businesses. They are not directly comparable, each giving different perspectives on the US economy. This report paints a picture consistent with the many other streams of information about the economy: slow growth. Slowing slow growth, as shown by this from ECRI — through March. The April numbers (1.6%, 1.2%) are small ticks up in these lines.
(2) About the recovery
To understand the jobs report one must first understand the recovery of which it is one aspect: during this period the government’s public debt increased $1.03 trillion — 6.5% of GDP (see debt here and GDP here), one of the higher fiscal deficits in the world. Our shiny recovery results from massive borrowing and spending — plus increasingly unconventional monetary policy.
In other words, organic growth has not yet resumed. The US economy has stabilized and slowly improves only due to the massive “drugs” of monetary and fiscal stimulus (the former boosted with QE3 as the latter winds down). Both have severe side-effects, which at some unknown point in the future will become problematic or untenable. But the worst side effect was unexpected: the stimulus eliminated pressure for reform. We have had the New Deal stimulus without the New Deal reforms (some of which failed, but the others laid the foundation for the great post-war boom).
(3) The Household survey
The Current Population survey is a simple survey of households, with large error bars but no revisions. It’s worth watching because it’s the basis for the headline unemployment rate, it gives some useful data not in the more-accurate business (establishment) survey, and because some research suggests that the household report shows inflection points before the establishment survey.
Here are the numbers, in thousands, not seasonally adjusted. Note that 1/3 of the new jobs during the past year are part-time jobs.
|Description||April 2012||April 2013||Change||Change|
(3) The establishment survey
The second survey asks employers to report the number of jobs. Over one or more quarters it usually shows a similar pattern of growth as the household survey, giving us confidence in the results. During the past year it shows slow improvement at the roughly same rate as the household report (as usual). However, the household survey has shown slower growth during the past few months than the establishment survey.
These are in thousands, not seasonally adjusted numbers.
|Description||April 2012||April 2013||Change||Change|
(4) Measures of Unemployment
(a) New claims for unemployment insurance are one of the most accurate and useful real-time metrics
Compare the change in the seasonally adjusted numbers of the 4-week moving averages (source here) of April 2012 and 2013. Faster decline than either the CPS and CES surveys.
- April 2012: 378,500
- April 2013: 357,500 (-5.5% — weak improvement)
(b) The unemployment rate – a complex metric that gets far too much attention
The analysts at BLS calculate six measures of unemployment, from narrow to broad definitions. None is more real than the others; none are easily comparable to the rough estimates of unemployment during the 1930s (the first reliable surveys were in the early 1940s). Most people consider U-3, or U-4, or U-5 as the most useful measure. U-6 includes people with part-time jobs who prefer full-time work, and so includes underemployment.
Any way you count it, unemployment has decreased during the past year. Slowly. These are non-seasonally adjusted.
|Metric||April 2012||April 2013|
(5) Another important metric: wages and hours worked
April 2012 vs. 2013 (seasonally adjusted), from the Establishment Report:
- Average private nonfarm hours worked per week: 34.5 vs. 34.4 (no significant change)
- Average weekly earnings of nonfarm private workers: $808 vs. $821 (up 1.6% = no real change after inflation)
(6) For more information about the US economy
- A certain casualty of the recession: the US Government’s solvency, 25 November 2008
- Beginning of the end of the Republic’s solvency. Soon come the first steps to a reformed regime – or a new regime., 14 August 2009
- The Robot Revolution arrives, and the world changes, 20 April 2012 — about structural unemployment
- America is rich and powerful because we can borrow. Will this debt build a stronger America?, 5 June 2012
- US economic update. Everything that follows is a result of what you see here., 8 June 2012
- America’s strength is an illusion created by foolish borrowing, 10 October 2012
- Did the US fall into recession during 2012? Are we in recession today?, 6 March 2013
This piece is cross-posted from Fabius Maximus with permission.