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April Jobs: More is Less

By: Daniel Horowitz (Diary)  |  May 4th, 2012 at 09:38 AM  | 

RESIZE: AAA

The headline number from the BLS’s Establishment Survey was an addition of 115,000 jobs for the month of April.  That is a terrible number for this far into the recovery, as it fails to keep up with population growth.  At this time in the Reagan recovery, the economy added a population-adjusted 480,000 jobs.  So why did the unemployment rate (U3 number) drop another 0.1% to 8.1%?  Let’s delve through some of the data from the Household Survey:

  • Size of civilian labor force:  So why did the unemployment rate fall?  Well, if you shrink the size of the pool, the unemployment rate will actually go down.  While a net-115,000 jobs were added in November, the civilian labor force shrunk by 342,000.  In March, the civilian labor force stood at 154.707 million.  Now, there are only 154.365 million in the labor force.  Moreover, the Civilian noninstitutional population grew by 180,000, yet there are now 522,000 more people not in the labor force than there were in October.  Consequently, the labor participation number dropped from 63.8% to 63.6%.  That is the lowest rate since 1981. This has caused the U3 rate to drop by .1%.  The broader U6 number is unchanged at 14.5% – still amazingly high for this long after the official end of the recession.
  • Duration of unemployment: The average (mean) duration of unemployment is 39.1 weeks, a record high. By comparison, the average duration was 19.9 weeks in January 2009.
  • Comparison to January 2009- The size of the working age population grew over 8 million from 234.739 million at the time Obama was sworn in.  Yet, the labor force has grown by just 130,000.  The labor-participation rate has dropped 2.1%.  Also, there are still 325,000 less people in raw numbers that hold jobs than there were at the time of his inauguration.  Overall, there are almost 8 million more people not in the labor force relative to January 2009.  So we have a larger population, a smaller workforce (resulting from discouraged workers), and more unemployed.  As AEI’s James Pethokoukis points out, if the labor force was the same size as when Obama took office, the U3 rate would be 11.1%.

There will be those who will blame this all on the aging population, but the bottom line is that job creation is not keeping up with new population growth.  Also, while there is a long-term trend of baby boomers retiring, the fact that there has been such a precipitous drop in the participation rate the past two years is reflective mainly of the weak economy.  Here are the relevant charts from Zero Hedge.  Don’t tell me that such a precipitous drop is due primarily to the long-term factor of aging.  There is a reason why nobody on the street is feeling this recovery, even though the U3 number has dropped almost a full point over the past 6 months, and it has nothing to do with the aging population.  It has everything to do with the anemic economy.

So this is the new normal in America.  We will continue flat lining at (or near) the bottom of the employment trough indefinitely and more people will leave the workforce, even as the population continues to grow.  Hey, maybe we can get the unemployment rate down to 4% like this.

Cross-posted from The Madison Project

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  • uncmike

    “That is a terrible number for this far into the recovery…”

  • tea4me

    …

    • http://madisonproject.com/ Daniel Horowitz

      I mean the part of the business cycle that we are supposed to be enjoying a recovery!

  • johnt

    I figure by October they will have the unemployment numbers down to 0.1%, or something like that. Banner headlines,”We Never Had It So Good”. It will look good with the “I got OBL” drivel that will still be going on.

  • renl57

    …are depicted in the following chart. As well as comparing them to job losses in previous recessions:

    http://tinyurl.com/7rt5noj

    Two things are apparent from this chart.

    First: This has been the longest and deepest period of job losses since the end of World War II.

    Second: If current trends continue, it would take another 29 months–2 1/2 more years–for all the job losses to be completely erased. That takes us out to October 2014 or so.

    Third: Any President’s programs need time to be passed by Congress and then to take effect, even if they are successful. So even if Romney is elected, we will have recovered from most of the job losses by October of the second year of his term anyway.

    Of course, that assumes that the economy will continue to grow steadily from now till October 2014. Any disruption–a terrorist attack, a war somewhere, a normal business-cycle economic slowdown, etc.–could send the unemployment numbers rising again.

  • http://www.twitter.com/AWG9_yoyo yoyo

    …DCMA and the Justice Department would throw me under the jail.

    How can the BLS seriously keep reporting this … TRASH? It is as meaningless as it is misleading. It is tantamount to fraud – and since they post it on the internet – WIRE fraud.

    Where is the PostMaster General when you need him/her?

  • blakemoney

    but I commend Speaker Boehner for sticking to his message about jobs, and the importance of “No.” He received a great deal of flack from both the left and the right, but by staying the course, his message is finally paying dividends, and job growth in the US is flat and highly encouraging for Republicans as summer begins. Forcing Obama to cut government jobs is paying dividends, too, as he can’t rely on growing government to inflate employment numbers. And it’s too late for him to manipulate anything that will be noticed before November. We can only hope, as some economists have predicted, that the recovery holds off just a little bit until Romney can take advantage of the eventual upturn.

    • renl57

      …that we don’t hope for the country to suffer.

      And remind them how they used to dwell on every American war casualty, every American war mistake, to try to get their hero Obama elected.

  • blakemoney

    and I did not mean to suggest the country should suffer. On the other hand, slow growth is a small price to pay if it’s enough to kick Obama out of office and usher in a new era of tax cuts, less government spending on liberal welfare programs and Scotus appointments in the mold of Thomas, Roberts and Alito. And I do remember how Democrat supporters used to make a big deal out of every American casualty, just so that they could bring a socialist into Washington.

  • Flagstaff

    That is, it’s probably not getting through. It’s confusing. It’s cluttered with arcane terms. Even after being exposed to it several times, I couldn’t explain it to a friend without referring to my notes. Rush has been beating this drum for months, and even he sounds like a blithering idiot when he tries to explain it. And it’s an important message.

    Mention any of the following terms and eyes start to glaze over:

    civilian labor force… Civilian noninstitutional population… population-adjusted… jobs… labor participation number… labor-participation rate

    I realize those are useful, in fact necessary terms to fully analyze the whole picture. But the whole picture isn’t what is being publicized, just the narrow focus on a publicly misunderstood “unemployment rate.” Why don’t we concentrate instead on a few simple numbers?

    How many people have lost jobs and not found new ones since Obama became President? How many more have immigrated or reached working age and not found a job? Add the two together and we have the total number of unemployed people generated during Obama’s reign. Add in those who were already unemployed before Obama who haven’t yet found work and we get a single number: Total Unemployed People. I can’t decipher the first or third numbers from your column, but the second one appears to be about 8 million people.

    For fairness, we could report how many fewer people are working now than were working when Obama took office. I say for fairness because that number is fairly reduced by people who have entered the job market and actually found work. This creates another number: Net Jobs Lost. From your column, that number would be 325,000 people.

    Percentages don’t support families, employed people do. Keeping track of those numbers and reporting them each month humanizes the unemployment crisis beyond an abstract “rate.” We should be doing that.

    Although I’d like to know the numbers, for public consumption I don’t think it helps to break “civilian” employment away from “government” employment; it just adds another layer of complexity and possible confusion. What might be two helpful additional numbers, though, is to see the change in Total Federal Government Payroll under Obama, and maybe even report Total Federal Government Employment to see how it’s changed while we’re at it. That’s still only four easy numbers.

    • checkmate2012

      down since more people left the work force. Period. And putting numbers aside, does anyone “feel” that things are better in our country? Me thinks not.

      • Flagstaff

        But it requires the “uninformed” listener to make a couple of leaps of faith. First, he has to understand fractional arithmetic well enough to understand that reducing both the numerator and the denominator of a fraction by the same number of units causes the fraction to become smaller.

        Then, he has to understand that “unemployment rate” is a fraction of the people who are trying to find work, not of the people who would like to work but who aren’t actively looking for work.

        Had we been reporting the Total Unemployed Workers (better name than Total Unemployed People) the number would simply have been growing every month since Obama took over. That doesn’t require any explanation. Instead, Obama would be made to explain how he can claim that he’s “created millions of jobs” when the unemployed number is bigger every month. It would be clear he’s been falling farther an farther behind the power curve.

        And getting lost in the “labor participation rate” weeds doesn’t help at all.

        • checkmate2012

          Those that are qualified (age, etc.) that want to work vs. those that don’t have jobs that want one. Very simple. It does get lost in translation and we need to simplify the numbers for non-math majors or those allergic to math…ha!