Posts Tagged ‘bls’

The ones that never knock

9 October 2011

Stay in school, kids. At least till you’re 25, or maybe for as long as you can. That’s the message of the wildly different unemployment rates for college graduates age 20-24 versus age 25 and over.

The September 2011 unemployment rate for college graduates was 4.2%, which sounds pretty good, even though it’s more than double what it was before the recession. However, that’s for college graduates age 25 and over. I reported this a couple days ago but didn’t have a separate rate for younger college graduates, since that wasn’t in last Friday’s BLS employment report. But the data do exist. The New York Times mentioned today that the jobless rate for college grads under age 25 averaged an eye-popping 9.6% over the past year. Before the recession it was just 3.7%. Which sent me scurrying to The Google.

The latest BLS Current Population Survey shows that the rate was 8.1% as of last month — trending down, but still historically high and only a percentage point less than the overall unemployment rate. And this is just by the official definition of unemployment, which doesn’t include discouraged job-seekers who’ve stopped looking, involuntary part-timers, or college grads working in “high school” (or less) jobs that don’t require a college degree. Evidently it’s a lot easier to keep a “college job” than to land one.

Staying in school past college seems almost necessary, too, considering that median pay for moderately young (age 25 to 34) college grads with bachelor’s degree is almost 10% lower than it was a decade ago.

As bad as it is for young college grads, it’s vastly worse for those with less education. Unemployment rates for 20-24 year-olds by educational attainment:

  • some college, no degree: 12.9%
  • high school diploma or GED: 22.4%
  • no high school diploma: 28.5%

With hordes of unemployed young people, thousands of them engaged in mass protests in Wall Street and other locales, this country is reminding me a lot of Europe in the early 1980s. Which makes a bunch of classic English punk and post-punk songs timely again. I’ll go with this one:

As good as it gets, and still lousy

7 October 2011

The best that can be said about today’s BLS employment report is that it revealed 202,000 new jobs, which is in the right ballpark for how many jobs the economy needs to generate each month for the next eight years in order to get back to a normal unemployment rate. The bad news is that only 103,000 of those jobs are from last month. The other 99,000 are from revisions to July and August, which push those months’ net-new-jobs totals up to 127,000 and 57,000. So the average employment gain for the last three months is less than half of what we need to be on that eight-year recovery track.

It gets worse. Quoth the BLS: “Since April, payroll employment has increased by an average of 72,000 per month, compared with an average of 161,000 for the prior 7 months.” So now we’re down to about one-third of the needed monthly job creation to be on that eight-year recovery track.

NPR’s Planet Money reports that the job market is bad across all demographic groups, even the college educated. While college-educated people age 25 and over are the only group with an unemployment rate below 5%, the BLS historical tables show that the current rate (4.2%) is more than double what it was four years ago (2.0%). And the employment-to-population ratio of this group has fallen almost 3 percentage points (to 73.0%) over the same span.

The employment-to-population ratio is really where the worst news is. Even the expanded unemployment rates, which include discouraged job-seekers and/or involuntary part-timers, have shown some improvement over the past two years. But the improved unemployment rates seem to be entirely an artifact of people dropping out of the labor force. The labor force is actually slightly smaller today (154 million) than it was in mid-2009, at the trough of the recession. The economy has added about 1.6 million jobs since the employment trough of October 2009, but that hasn’t been been enough to keep pace with population. The current employment-to-population ratio (58.3%) is actually slightly lower than that of October 2009 (58.5%), even as the main unemployment rate has fallen from 10.1% to 9.1%.

Along those lines, the BLS’s “Alternate Measures of Labor Underutilization” are instructive. The official (U-3) unemployment rate counts only the jobless who say they are actually looking for a job. The U-4 unemployment rate includes “discouraged workers,” i.e., jobless people who are not looking but would take a job if one came along. The U-5 unemployment rate adds in “marginally attached workers,” who are a similar state of joblessness. Yet the U-5 unemployment rate (10.5%) is only 1.4 percentage points higher than the official rate, which suggests that most of the unemployed are either (1) still looking for work or (2) really not even thinking about it, i.e., have found life, or despair, or something,  outside the labor force.

The oft-cited U-6 unemployment rate, which is by far the highest, includes part-time workers who cannot get full-time work. This one is 16.5%, so most of the addition comes from the involuntary part-timers. So 6.0% of the labor force is involuntarily working part time. How does 6% compare with other times? The BLS data here go back only to 1994, so it’s hard to be definitive, but about 3% seems to be the norm. That’s what it was for most of 1994-2007, including even the recession and slow recovery of 2001-2003. That’s right — the involuntary-part-time employment rate is double what it was in the last recession and “jobless recovery.” It edged up to 4% in 2008, above 5% in 2009, reached 6% in September 2010 and has hovered around there ever since. That’s a lot of involuntary part-time jobs, and it adds another dimension of lousiness to the current depression. Also, if those are the kind of jobs this economy is creating, it’s no wonder that many people would rather hold onto their unemployment benefits, which, depending on their previous jobs, might pay more. But that’s a subject for another post.

Is inflation on target? (corrected)

5 August 2011

The new BLS unemployment numbers (9.1% unemployment rate, 16.1% comprehensive unemployment rate, 117,000 new jobs created) are the talk of the morning. I don’t have much to add to it, but I’ll echo the oft-made point that job growth needs to be twice as fast for the next several years for unemployment to fall to normal levels. I’ll also note that the numbers are a bit better than those of a year ago, but a bit worse than those of March, when unemployment was 8.8%. So although the numbers are better than expected, they’re still underwhelming and we still might be in a double-dip recession.

Instead I want to focus on the other big economic variable. Inflation has been so low over the past few years — in the range of 1-2% — that Ben Bernanke and others have seemed more worried about deflation than inflation. At the same time, some Fed critics have charged that the Fed’s actions to backstop dodgy financial asset markets and flood the banks with new reserves will lead to a massive inflation after the slump is over or a stagflation (stagnant economy with high inflation) even sooner. Some numbers to remember: Inflation has averaged 3% a year over the past century, and close to that over the past few decades. The Fed’s unofficial target for inflation is 2%. What do the markets expect for the years to come?

A good way to answer that question is to compare the well-reported interest rates on regular Treasury bonds with the interest rates on “TIPS” — Treasury Inflation-Protected Securities. The payments on a TIPS bond are adjusted for whatever inflation occurs over the bond’s lifespan.  The inflation adjustment is trickier than I’d originally thought — instead of simply adding the inflation rate to the interest rate that arose from the bond’s auction, the interest rate stays the same but the bond’s principal rises, and the interest payments are based on the original interest rate times the new principal. (Ex.: Imagine a 1-year, $1000-face-value TIPS bond that sells at par, i.e., for $1000 and therefore has an interest rate of 0%. If inflation is 3% over the next year, then the principal rises 3% to $1030. The interest is still $0, but the overall yield on the bond is 3% ($30/$1000). That’s a simplified example. It’s more complicated if the interest rate isn’t 0%.) Because the arithmetic can get complicated, it’s easier to look up the “breakeven” rate, which is the inflation rate implied by the different on TIPS and ordinary T-bonds.

(Add to that a conceptual complication: Because the TIPS bond is less risky, since it’s indexed for inflation, it should be in somewhat greater demand than the regular T-bond. So, other things equal, it should command a higher price and pay a lower interest rate. With that in mind, the difference between the interest rates on regular T-bonds and TIPS bonds is roughly the expected inflation rate plus an inflation-risk premium, which reflects people’s uncertainty about future inflation.)

Comparing the interest rates for 5-year bonds last week (when this was originally posted), the  T-bonds paid 1.12% and the TIPS paid -0.67%. The implied inflation rate (1.80%, if my spreadsheet math is correct) is actually very close to the difference in the interest rates on the two bonds (1.79%). Apparently the market is expecting the Fed to be just shy of its 2% target over the next 5 years.

Looking at the 10-year bonds, the T-bonds paid 2.47% and the TIPS paid 0.24%. The 2.03-percentage-point difference is again a close approximation of the breakeven rate; my spreadsheet math yields an expected inflation rate of 2.22%, or slightly over the Fed’s target. Together the two breakeven rates imply that the market is expecting inflation to average about 2.6% in years 6 through 10. These numbers provide no guide to where they think that inflation is going to come from (recovery? shortages of gas or food? QE5?), but the weakness in the stock market suggests they’re not expecting a recovery anytime soon. It may just be that their flight to safety has gone into overdrive, and TIPS are in exceptionally heavy demand because they are even less risky than regular T-bonds. So possibly they’re expecting inflation rates of about 1% through 2016 and 2% in 2016-2021, with the remainder being a risk premium.

In sum, the Fed does seem to be hitting its inflation target, more or less, but that’s about all. Bondholders appear willing to lock in near-zero or negative real returns over the next five or ten years, just so they can hold a safe asset. Which suggests they’re scared shitless.

Bummer in the summer (updated)

22 June 2011

In today’s press conference Bernanke acknowledges the obvious: the economy is worse than we thought and likely to stay that way into 2012.  The Fed lowered its official economic growth forecasts and raised its unemployment rate forecasts for 2011-2012. After almost two years of slow but steady recovery and myriad positive straws that one could grasp, the last couple of months have brought mostly lousy news, notably the latest jobs report, which showed a gain of just 54,000 jobs last month, only about a quarter or a sixth as many as we’d need to get unemployment down to normal levels in five years or so.

It’s notable that the imminent end of the Fed’s quantitative easing, all $600 billion of which will be over by the end of the month, brings few calls for another round — everyone seems to agree that we’re in a liquidity trap, in which further monetary stimulus fails to stimulate, because interest rates are already practically 0%, banks are not eager to lend, and companies are not eager to invest in new capital.*

Our best hope, it seems to me, is an almost nihilistic one: the economy somehow recovers on its own, through black-box mechanisms that we still don’t really understand. Business confidence returns, hiring finally picks up, and the economy roars forth. This may be a vain hope, but the “animal spirits” of investors (and consumers) that Keynes wrote about in The General Theory are not really visible, despite the several monthly surveys of business sentiment that are out there.

Our next best hope is another fiscal stimulus. It won’t be like the first one, which is about to run out and was too small anyway, not with a Republican majority in the House that believes spending = death and doesn’t even want to avert a financial crisis by raising the debt ceiling unless the Democrats agree to massive long-term spending cuts. But I could see the two parties agreeing on a big set of tax cuts, which is the usual form that a fiscal stimulus takes anyway (e.g., 1964, 1981, 2001).  That has a couple of disadvantages: (1) the “multiplier” effect of a tax cut on GDP is typically empirically estimated to be smaller than that of a spending increase of equal size, because not all of a tax cut gets spent; (2) tax cuts are hard to reverse, as everyone hates seeing their taxes go up, so they could make the long-term debt problem much worse. Still, it’s probably the only politically viable option for a fiscal stimulus.

* The last part of that statement (companies are not eager to invest in new capital) is less true than I had thought. As the Wall Street Journal article linked to below notes, a survey of banks indicated that small businesses were demanding more loans, at least in the first quarter of the year.

UPDATE: This Associated Press article from the next day’s newspapers adds some helpful detail. The headline from the Syracuse Post-Standard’s version of that article says it all: “Slow Economy a Puzzle: Fed chief flummoxed, says troubles could last a while.” My quick take:

(1) The economy has long been in a liquidity trap (Krugman’s definition, i.e., a slump in which monetary policy is no longer effective).

(2) Bernanke has long suspected this himself, but as Fed Chairman he feels obligated to try to stimulate the economy through monetary policy, via unusual, unprecedented channels “that just might work” like QE2.

(3) QE2 has failed to measurably stimulate the economy, because the economy was in a liquidity trap.

(4) Liquidity trap or not, it’s not easy for the Fed to just throw in the towel, so a QE3 might well happen. But I doubt the Street will get all that excited about it, considering what a dud QE2 seems to have been.

If we make it through December

3 December 2010

The BLS unemployment report for November is out, and it ain’t pretty.  Less than a third as much job creation (+39,000) as expected, not nearly enough to absorb new entrants into the labor force, so the official unemployment rate edged up to 9.8%.  (The comprehensive U-6 unemployment rate was unchanged at 17.0%.)

The private sector added 50,000 more jobs, and the government shed 11,000 jobs.  It is a bit hard to disentangle private sector jobs from the government, in view of the fact that the $787 billion stimulus went mostly to the private sector as opposed to new government jobs, but it is rather remarkable how little the government is doing in terms of direct job creation.  At the federal level this comes down to politics — in this conservative age, creating 3.5 million temporary government jobs, as the New Deal did each year, is considered a bad thing.  Indirectly creating or saving 3.5 million jobs, as the Obama Administration credits the stimulus with having done, is politically viable (or was in early 2009) but hard to prove, which is probably why the stimulus is unpopular with most of the public.  At the state and local level, of course, it comes down to balanced-budget requirements — with tax revenues down for the count, everyone’s cutting government payrolls to try to close the budget gap.  (Without emergency federal aid to make up the difference, the recession gets magnified at the state and local government level.)   If I eyeballed the numbers correctly, employment is down for the year at all three levels of government.

The only good news I noticed in the report was that the number of temp workers, a leading economic indicator of employment, increased for the fourth straight month.  (And even then, the increase is smaller than in several months earlier this year.)  Another leading indicator, weekly hours worked, did not improve, instead holding steady at 34.3 hours.

Now, the unemployment rate is a lagging indicator, and there are positive signs of recovery elsewhere, but that’s cold comfort to the nation’s 15 million unemployed. Seems like we’re back to where Merle Haggard  was in 1973, especially with Republicans in Congress so far refusing to extend unemployment benefits for the long-term jobless:

Keep on working

8 November 2010

Some thoughts on last Friday’s BLS employment report, otherwise known as “the good one”:

The employment report is pretty good news indeed, especially as regards job creation in the private sector.  151,000 jobs were created overall (in the private and government sectors combined), about twice as many as market analysts had projected.  The increases in the length of the workweek and in overtime hours are also welcome news, as these are considered leading economic indicators.  (This is because companies often cut the hours of their workers during a recession and extend the hours of their workers in the early stages of a recovery rather than take on the overhead costs of hiring new workers.  As the recovery gains steam, they’ll actually hire new workers.)

Alas, the increase in employment, though much larger than expected, is still not large enough to reduce the unemployment rate, still at 9.6%.  The increase in employment was offset by new entrants into the labor force, not all of whom found work. All of this happened without any big changes in the labor force participation rate or the more comprehensive U-6 unemployment rate, which is still around 17%.

The increase in weekly paychecks is particularly good news, as Chris Isidore of CNN/Money notes.  Isidore points out that the increase comes not so much from higher hourly wages as from longer workweeks.  He mentions that 318,000 fewer workers are involuntarily working part-time instead of full-time jobs, compared with last month, and that is a big positive deal for a lot of people.

However, the increase in average weekly hours is not all that big; 318,000 is not that big a number compared with total employment (131 million).  The 1.8% month-to-month increase in average weekly hours was the largest in 26 years, as Isidore notes, but that too is less of a big deal than it might seem.  It’s an increase from 33.7 hours to 34.3 hours.  If you’re rounding to whole numbers, as I like to do to keep things less “statsy,” you’d miss the increase entirely.

A number worth trumpeting, as Isidore does, is the 3.5% year-to-year increase in average weekly wages, from September 2009 to September 2010. That’s especially good considering that inflation over the same span was about 1%, which means a 2.5% increase in real weekly wages.  A real wage increase of that magnitude was normal once upon a time (1947-72 and the second half of the 1990s), but for most of the past 40 years real wages have grown very slowly or hardly at all.  We’ll take it.


8 January 2010

And 2009 ends with a third straight month of double-digit unemployment, the Bureau of Labor Statistics announced today.  The official unemployment rate is 10.0%, same as November; the more comprehensive “U-6” rate of unemployment, underemployment, and discouraged job-seeking is 17.3%.

Will add more later.  Meanwhile, The Replacements pretty much said it all about the job market back in 1981:

Back to work?

5 December 2009

Hard to believe that news of double-digit unemployment could be considered good news, but in this case it really is.  The standard unemployment rate edged down from 10.2% in October to 10.0% in November; the number of jobs fell once again, but by 11,000, by far the smallest decline in about two years.  Consensus forecasts had been for a slight uptick in the unemployment rate and about 150,000 jobs lost.

By one measure, this news from the BLS (Bureau of Labor Statistics) is even better than that.  The 11,000 figure is from the BLS’s survey of employers (i.e., “establishments,” “nonfarm payroll employment”), whereas the BLS does a separate survey of households, which shows an increase in employment of 227,000 and a reduction in unemployment of 325,000.  (See Table A in the BLS report.)  I’m guessing the reason that the administration and the media did not trumpet the household data is because those data are considered less reliable than the establishment data.  Still, they’re not worthless, and they are the basis of the unemployment rate figures.

President Obama correctly notes that we’re still not out of the woods yet.  The unemployment rate is still about double its normal “full employment” level.  The BLS’s alternative measures of the unemployment rate are always worth a look, and they show that the labor market is not only still deep in the woods but in some respects not improved at all:

  • The long-term unemployment rate was slightly higher in November than in October (5.9% using the standard seasonally adjusted (SA) figure, 5.6% using the non-seasonally adjusted (NSA) figure).
  • The most comprehensive measure of unemployment and underemployment, the U-6 unemployment rate (which counts all unemployed plus discouraged job-seekers plus involuntary part-timers), is still extremely high:  17.2% (SA) or 16.4% (NSA).  The SA figure fell from 17.5% to 17.2%, but that seems to be the seasonal adjustment factor at work.  The NSA figure, which corresponds to actual people without any such adjustment factor, was actually slightly worse in November, rising from 16.3% to 16.4%.

With roughly one-sixth of the potential labor force either jobless or underemployed, this is no time to declare victory and withdraw on the job-creation front.  Nate Silver argues persuasively that the case for a strong federal jobs bill is a strong as ever.

Turn on the news

6 November 2009

This morning brings the news that unemployment has reached double digits for the first time since 1983, rising from 9.8% to 10.2%.  And the U.S. economy has had a net loss of jobs for 22 straight months, the longest on record, dating back 70 years (to, yes, the end of the Great Depression).  There are 15.7 million unemployed, including a record 5.6 million who have been unemployed for six months or more. Since the recession officially began in December 2007, the number of unemployed has more than doubled, by 8.2 million.

The U-6 unemployment rate – which also counts discouraged and marginally attached job-seekers and involuntary part-timers – is now at an alarming 17.5%.  That’s the highest in the fifteen years that the government has been keeping track of that alternative measure.


Down for U is up

9 August 2009

For the first time since the recession officially began in December 2007, the unemployment rate fell last month, from 9.5% to 9.4%. Professional optimists had already been declaring the recession over, and this welcome news added fuel to their fire. How good is this news, anyway?

As always, the first place is to look is the original report from the Bureau of Labor Statistics (BLS).   First, a few important component numbers:

  • -155,000 = change in total employment from June to July
  • -267,000 = change in total unemployment “
  • +637,000 = change in total number of people not in the labor force “

The first two numbers look good: the decline in employment is much smaller than in previous months, and the ranks of the unemployed fell by more than a quarter million. But the last number is the largest and strongly suggests that hundreds of thousands of people have simply given up looking for work. Small wonder, when there are 5.0 million Americans who have been unemployed for six months or more.  (That’s more than the total number of unemployed just a few years ago, I believe.)