I may as well admit that I’m not that pessimistic about the economy and regard this as genuinely good news:
The American economy lost 247,000 jobs in July, and in a reversal, the unemployment rate fell slightly, to 9.4 percent, the government reported Friday.
Although businesses are expected to keep cutting jobs through the rest of the year, the Labor Department’s latest figures offered some faint signs that the sinking job market was approaching bottom.
I’m referring to the job loss numbers which were much better than expected, not the unemployment rate, which seems like nonsense to me.
I’m sure that econobloggers have discussed this ad nauseam, but I’m too lazy to dig it up, so let me ask: isn’t there a better measure of unemployment we could use? This one seems like garbage to me.
Update. The answer seems to be that we should look at U-6 instead of U-3. Why don’t papers report U-6?
PeakVT
The U-6 number is what you want (U-3 is what is normally reported).
eric
@PeakVT: this is correct. the other thing to look at for strength of the economy is commercial vacancy rates in large urban centers.
eric
Napoleon
But the government was to euthanize old people. Also.
Sentient Puddle
@PeakVT: Thanks for the U-6 numbers. I was genuinely surprised this morning to hear the official number go down, but then the cynic in me thought “Wait, I wonder if those are just discouraged workers, or some other shenanigans…”
Looks like there may be reason to be (cautiously) optimistic after all.
West of the Cascades
@PeakVT: The Bureau of Labor Statistics reports these numbers at the same time but rarely puts the U6 in its press release. Today U6 dropped from 16.5% in June 2009 to 16.3% in July 2009 (http://www.bls.gov/news.release/empsit.t12.htm). So that actually is encouraging news. For comparison, U6 stood at 10.8% in July 2008.
lutton
There are multiple figures that include/exclude various factors like underemployment, part-time who want full-time, people who have given up looking, etc.
And I believe one other thing to remember is that at least some (maybe all?) of the figures don’t include people who have exhausted their unemployment benefits; i.e. they only count people receiving unemployment benefits–those who no longer do are not counted as unemployed even if they are. (I think that’s right; someone please correct if I’ve misstated this factor!)
West of the Cascades
@West of the Cascades: no coffee yet this morning – sorry for redundancy.
lutton
Also, one data point is not a trend…it’s gonna take a few months of this to be sure.
Ritholtz says look closely at the details:
As we have long advocated, investors should be more concerned with the details than the headline, and watch for signs of a change in trend.A plus or minus 100k from the consensus is all but statistically irrelevant.
Be aware of the revisions, and Birth/death adjustment: Watch to see how much this impacts the overall number.
Look at these three leading indicators within the release:
1) Hours worked: Are employers still cutting back hours? That is a sign they lack confidence going forward.
2) Wages and income: Are salaries still falling? It reveals how much demand there is for labor.
3) Temp help: Are employers starting to hire temporary workers?
kay
@lutton:
The rate dip isn’t why it’s good news. This is:
“The economy lost significantly fewer jobs in July than expected. Forecasters were predicting a loss of about 325,000 jobs in June. The actual loss was 247,000 — the smallest since August 2008.
The average hourly pay of rank-and-file workers, which had been flat in June, rose 3 cents in July, to $18.56 an hour. That wage is up 2.5 percent over the past year, while inflation has been roughly zero.
The average private-sector workweek increased by one-tenth of an hour, to 33.1. It was the first increase since last summer.”
And the government said that the economy had shed somewhat fewer jobs in May and June than previously estimated.
lutton
and one more post of recommended reading-the always valuable Calculated Risk (two posts on the report already this AM):
http://www.calculatedriskblog.com/2009/08/employment-report-247k-jobs-lost-94.html
http://www.calculatedriskblog.com/2009/08/unemployment-stress-tests-unemployed.html
NonyNony
Because U-3 are the “official” number used by the government in its press releases. And doing more than just copying down what they’re given in a press release would require them to actually understand what the unemployment numbers mean. Which would require more education in economics – or at least in statistics – than more J-school graduates seem to get.
mistermix
@lutton: Nate Silver’s read (God forbid I actually read a primary source myself) is that hourly earnings are up hours worked are up.
You make a good point on revisions. They seem to be constantly revising upward, not down.
cgp
lutton: Unemployment doesn’t look at unemployment insurance all according to Paul Krugman: Jobs paradox?
Shinobi
As someone who is currently cohabitating with an unemployed individual these numbers continue to be incredibly depressing as is related to my future financial situation.
But at least I can still pay the mortgage on my shitty house.
Davis X. Machina
U6 is closer — not identical, but closer — to the way that EU member nations calculate their unemployment data, so it’s better for comparative purposes.
Why isn’t it used more widely here? Time-series data on unemployment couldn’t use U6 before 1994, among other reasons.
booferama
There’s a good Harper’s article from about a year ago (I’m sorry I’m too lazy to look for it online) about how they developed all the U-1 through U-6 numbers over the second half of the 20th century. It’s basically a propaganda move to make it seem that our unemployment rate isn’t as bad as it really is.
Also, and people have already made this point but it’s worth repeating, the unemployment numbers don’t count people who are still employed but having their hours cut. For example, the local libraries here in Southwest Ohio have been cutting full time from 40 to 35 hours to save money. I wonder if there’s some metric that measures the number of workers who are still classified as full time but are losing their hours (and, thus, wages).
Dustin
Wait, the average hourly pay is nearly $19/hour? I don’t know anyone that makes that much, and I consider my $16.5/hr a good wage. Who’s fucking up the bell curve?
Brick Oven Bill
There are 131 million people theoretically employed in the US.
Of these, 19 million are theoretically employed in the Education and Health Services industry, so figure 5 million productive jobs. We continue to add theoretical EHS industry jobs most every month. This month another 17 thousand.
There are 22 million people theoretically employed in Government, so figure 3 million productive jobs. We continue to add theoretical government jobs most every month. This month another 9 thousand.
Yielding an aggregate job number of 98 million jobs in a country of ~305 million, or…
a true unemployment rate of 68%.
These 98 million jobs can be increased in number by:
1. Instituting Tariffs; and
2. Reducing permitting times and costs; and
3. Easing crazy environmental restrictions; and
4. Eliminating the minimum wage.
These 98 million jobs will be sent elsewhere by:
1. Pursing this idiotic green energy, which will drive up energy costs; and
2. Mandatory employeer-paid/taxed medical; and
3. Continued growth of government; and
4. Continued growth of debt.
srv
The same reason they were breathlessly talking about green shoots.
See Chomsky & Herman, the Propaganda Model.
booferama
Laziness averted belatedly: the Harper’s article on the evolution of the unemployment rate, from May 2008:
http://www.harpers.org/archive/2008/05/0082023
lutton
@kay yes, those are encouraging. All signs Ritholtz thought were crucial to ‘reading the tea-leaves.’
On the otherhand, if you look at CR graph on unemployment longer than 26 weeks, it always (since 1969) peaks after–between three and six quarters after–the offical end of the recession.
http://4.bp.blogspot.com/_pMscxxELHEg/Snwp9Kih0yI/AAAAAAAAGCY/fbKe8Zhf7GE/s1600-h/UnemployedOver26WeeksJuly.jpg
And job losses continue at a significant rate.
http://3.bp.blogspot.com/_pMscxxELHEg/SnwgkR2nLTI/AAAAAAAAGB0/UjS-QqXJwi8/s1600-h/EmploymentRecessionsJuly.jpg
Even if we have reached the nadir of this economic turmoil, it’s still a long climb back up.
DecidedFenceSitter
Well the guy who pulls down $1,000,000 in salary is pulling down $480/hour.
lutton
@cgp
Thanks, that helps. I knew there was some difference in the way the different reports were calculated, but I had lost track of which was which.
DougJ
The same reason they were breathlessly talking about green shoots.
I believe the green shoots stuff, albeit in a “green shoots compared to what” kind of way.
Sentient Puddle
Other big of random breaking news: Mel Martinez is resigning today. Ought to be interesting to see what Crist does about this.
some guy
“a true unemployment rate of 68%.”
Wow. Someone must’ve went to the same half dozen colleges as Sarah Palin.
ThatPirateGuy
As a programmer I am pulling down a net 22.5 per hour. Note that this is what I actually take home not the pre-tax 30.5 per hour that is my salary.
note that 19 per hour is only 39.5k per year. That won’t take you very far.
This is in Tennessee.
Mar
Wow, I totally don’t understand U-6 vs. U-3, and I thought I was a relatively smart guy. Anyone want to translate the different U-#s in layman’s terms? I don’t mind a lot of words, but I do mind technical jargon.
@Brick Oven Bill. Your drivel is nonsensical. An argument is formed by a list of premises that link together and cascade to form a conclusion. You seem to have a list of premises without showing any logical connection between them, and then throw out even more conclusory statements than premises.
PeakVT
@Davis X. Machina: Harmonized rates can be found here. The difference from the reported data found elsewhere in that database suggests that US and EU counting methods are fairly close these days.
Kirk Spencer
@Brick Oven Bill: Bob, you just demonstrated you’re an idiot – a label I’ve come close to using before, but this time you deserve it. Let’s run through some of the screwed up assumptions you used to get 68% unemployment.
First, you took the entire US population for your base – 305 million people. You seem to have forgotten that some of those are children, and some are retired.
Second, you excluded a random selection of government and teachers, principals, and the rest of the education system. Nevermind that 2/3 of the latter are government so you double-counted, you say they aren’t really working. Oddly enough, I think if I’m getting a paycheck for spending hours doing things for other people, I’m working. (Librarian here – or am when I’m not unemployed.)
It reminds me of the people who didn’t want their kids to go to school because “you don’t need an education to farm.” It’s a display of willful ignorance that meets my definition of idiocy.
ThatPirateGuy
BOB It is especially crazy to argue that tariffs will help the economy. Are you trying to destroy the US and world economy?
Brick Oven Bill
Premises:
1. There are 305 million people here, more or less.
2. There are 98 million productive jobs here, more or less.
3. Math.
(305-98) / 305 = 0.68
Conculsion:
Unemployment is 68%.
Brick Oven Bill
Children are not employed Kirk. Neither are retired people. This is why they are unemployed.
ThatPirateGuy
BOB
I think you will have to demonstrate premise number 2. For extra credit determine how many private sector jobs are not productive and give us a ratio.
some guy
“Children are not employed Kirk. Neither are retired people. This is why they are unemployed.”
This also why your 68 million figure utterly useless.
Kirk Spencer
DougJ, the problem with figuring unemployment is that it falls into the Mencken rule. “For every human problem, there is a solution that is simple, neat, and wrong.” [ He also said “complex problem”. All human problems are complex. ]
Is a person who is living solely on interest and dividends unemployed? Is a person who is getting ten hours at minimum wage unemployed? That’s just two examples of the problem.
Add to it the fact these numbers are from a survey – a sample, with all the attendant margin of error joys those entail – and you begin to grasp why there is no “easy” answer.
For myself, I use several reports. I use the official (U3) and unofficial (U6). I also consider Total Workforce Participation (table 12), and average hours worked. There is some additional benefit in considering average time collecting unemployment insurance (which is fast approaching the artificial limit of “till it expires”) and a four-week moving average of new claims.
The good news this week is that pretty much everything says we may have bottomed. The bad news is that a lot of indicators are also saying we have not yet started back up. The gut-clenching news is that we’ve fallen far enough for long enough that some of us are going to HURT.
PGE
BOB
If we’re including infants in the calculations, why not include Spermatazoan-Americans as well (I’m sure the General would approve.) So the enemployment rate is well over 99.99% !!! OMG!
Scruffy McSnufflepuss
Is it wrong of me that I enjoy the B.O.B. spoof more when he goes off into 19th century-sounding racial theories than I do when he tries to get wingnut-wonkish?
Anoniminous
Why U-3?
70% of the US economy is consumer driven. One part of that is consumer confidence — how the consumer ‘feels’ about the future. The published unemployment number is an input into how a consumer decides how to ‘feel’ about the economy. If the consumer ‘feels’ the economy is ‘bad’ spending drops … ensuring economic slowdown.
U-3 has been “revised” numerous times over the past 50 years to minimize the published unemployment percentages so the consumer can ‘feel’ good about the economy. U-3 is widely spread for that reason as well as the, not terribly hidden, observation: financial journalists puff the status quo so the status remains quo.
The U-6 numbers are made available so people who have to make reality-based decisions can make those decisions based on reality — or closer to reality, at least.
Mar:
Quick & Dirty definition:
U-6 is what most people think of when the word “unemployed” is used.
Sentient Puddle
@Brick Oven Bill: You forgot a few things. Let me help you out here…
Of those 90 million you figure that are employed in the private sector, let’s figure about 10 million of those are middle management. By the Dilbert principle, we can conclude that these are not productive jobs, and eliminate them.
Of the remaining, at least 25 million are people who sit in front of their computer screen all day picking their noses or reading blogs for most of the day. Let’s assume that collectively, their bosses keep tabs on them for a fifth of the day, meaning that in terms of productivity, these people are really worth about five million jobs.
There’s about 15 million janitors employed. But come on, why clean what’s going to get dirty again? Clearly unproductive jobs.
Then finally, because we are in a global economy, I don’t see why it makes any sense to limit our population base to just the US. As per the latest figures shown in the Heroes episode “.07%”, let’s revise that 305 million figure up to 6.5 billion.
Then with a little math, we conclude that the actual unemployment rate is a staggering 99.31%!
Clearly the Obama administration has failed.
ThatLeftTurnInABQ
BOB,
In your calculations, did you remember to count unemployed black folks at a 3/5ths rate? You wouldn’t want to make the Founding Fathers cry.
HRA
I once worked for the NYS Labor Dept. in the UI/TRA division main office. I also handled WIN and CETA for a short period.
The exhausted UI claims are no longer counted.
July was always a peak layoff time for the auto industry due to tool changing for the new models for the next year. Within a month or so, the autoworkers were back to work.
Cutbacks and terminations of seasonal workers occur here in the north yearly. A prime example this year is the pool business. We have not had any extended hot summer days and we have had plenty of rain. Sales are in the tank for this business. Also they hire college students for the summer and make sure they lack the weeks to collect UI.
Note: It has changed for construction workers through the years. They now work in the colder weather.
Employers want people to retire sooner rather than later. It’s money in their pockets when they can hire someone at a lower salary.
Temporary workers have a very difficult time trying to collect UI. If they come from an agency, the agency will state a job is waiting for them on the form sent to them before the claim is validated by UI. If they are hired by an employer, it’s usually the case where their job will only last until they are unable to collect UI -not enough weeks of work.
Tattoosydney
@Napoleon:
It might bring unemployment down a bit.
Punchy
Micheal Moore is singlehandedly keeping Hy-Vee in buisness, cuz, ya know, he’s FAT.
Norris Hall
* The unemployment rate going down ?
* The stock market is moving up ?
* Economist predicting that the recession is coming to an end?
* Banks starting to lend to each other again ?
* Home sales are rising in some parts of the US ?
Does that prove that Obama’s economic policies are working!!
Don’t bet on it!!
Remember these events just a short year ago…..
* The collapse of Countrywide,Ameriquest, Indymac Bank
* Federal takeover of Fannie Mae and Freddie Mac,
* The propose a $700 billion emergency bailout TARP program
* Washington Mutual seized by the Federal Deposit Insurance Corporation,
* The Dow Jones Industrial Average caps its worst week ever with its highest volatility day ever recorded in its 112 year history
* Lehman Brothers collapses
* The US Federal Reserve lends $85 billion to American International Group (AIG) to avoid bankruptcy.
* The US government agrees to rescue Citigroup
* Economists start talking about a second great depression
* The collapse of….excuse me? hmmm….you sure…oh…
Ah, Excuse me….
That all took place under the Bush administration?!
…..Never mind.
sparky
Seasonality, plus auto layoffs, plus a still-screwed up birth/death model make this report subject to large after the fact revisions. But let’s not let that get in the way of massaging the green shoots, folks! And who pays attention after the fact, anyway? Go USA!!!!
I would be surprised if GS is not shorting all kinds of crap at the moment, because there’s just no way the UST can keep half-inflating an economy that has blown its ass out. I am not going to suggest when, exactly, because up till now, at least, the ability for people to continue to build castles in the air has been much greater than I ever thought possible.
Brick Oven Bill
Re: “Three-Fifths”
Office of Minority Health: ”…black per capita income is just over half that of whites in cities and two-thirds of white per capita income in the suburbs, on average.”
You do the weighted averages and fractions, ThatLeftTurnInABQ, as I do not want to get into trouble, but there may be an unemployment modifier in this data somewhere.
cliff
if you add back in the people who dropped off cause they gave up looking, its 9.7% right on the previous estimates. also, in the NSA numbers the other day, adding extended benfit people and reg benefit thats something like:
total (NSA) is 5.99M + 2.75M or ~8.75M
http://www.dol.gov/opa/media/press/eta/ui/current.htm
a useful look at economic activity is rail shipping, which is basically unchanged at bloody awful.
http://railfax.transmatch.com/
and of course there is the ADP numbers, they post a nice chart, note the change in rate of decline that is supposed to represent ‘green shoots’ aka less bad
http://www.adpemploymentreport.com/ner/charting.aspx
stay safe guys, rumor is that a hedge fund is/has been blowing up causing this huge short covering rally. when thats over expect this to pull back quite a bit..
cliff
if you add back in the people who dropped off cause they gave up looking, its 9.7% right on the previous estimates. also, in the NSA numbers the other day, adding extended benefit people and reg benefit thats something like:
total (NSA) is 5.99M + 2.75M or ~8.75M
http://www.dol.gov/opa/media/press/eta/ui/current.htm
a useful look at economic activity is rail shipping, which is basically unchanged at bloody awful.
http://railfax.transmatch.com/
and of course there is the ADP numbers, they post a nice chart, note the change in rate of decline that is supposed to represent ‘green shoots’ aka less bad
http://www.adpemploymentreport.com/ner/charting.aspx
stay safe guys, rumor is that a hedge fund is/has been blowing up causing this huge short covering rally. when thats over expect this to pull back quite a bit..
cliff
if you add back in the people who dropped off cause they gave up looking, its 9.7% right on the previous estimates. also, in the NSA numbers the other day, adding extended benefit people and reg benefit thats something like:
total (NSA) is 5.99M + 2.75M or ~8.75M
http:// http://www.dol.gov/opa/media/press/eta/ui/current.htm
a useful look at economic activity is rail shipping, which is basically unchanged at bloody awful.
http:// railfax.transmatch.com/
and of course there is the ADP numbers, they post a nice chart, note the change in rate of decline that is supposed to represent ‘green shoots’ aka less bad
http:// http://www.adpemploymentreport.com/ner/charting.aspx
stay safe guys, rumor is that a hedge fund is/has been blowing up causing this huge short covering rally. when thats over expect this to pull back quite a bit..
cliff
if you add back in the people who dropped off cause they gave up looking, its 9.7% right on the previous estimates. also, in the NSA numbers the other day, adding extended benefit people and reg benefit thats something like:
total (NSA) is 5.99M + 2.75M or ~8.75M
http://www. dol. gov/opa/media/press/eta/ui/current. htm
a useful look at economic activity is rail shipping, which is basically unchanged at awful.
http:// railfax.transmatch. com/
and of course there is the ADP numbers, they post a nice chart, note the change in rate of decline that is supposed to represent ‘green shoots’ aka less bad
http:// http://www.adpemploymentreport. com/ner/charting.aspx
stay safe guys, rumor is that a hedge fund is/has been blowing up causing this huge short covering rally. when thats over expect this to pull back quite a bit..
Tattoosydney
@Brick Oven Bill:
Dada, BoB. You are a master.
HRA
I need to add that not all construction workers work longer than the warm weather in the northern states. Fence and pool consruction are two of those who do collect earlier due to bad weather.
I wanted the exhausted claims for the unemployed to be counted. Especially since we had enrolled some of them in the WIN program which was a retraining and trade schooling program. I was told it was not possible. Mainly, it was do not rock the boat mentality. Yet, when I showed them a new enrollee into a locksmith program had been arrested for breaking into a safe during a burglary, they acted swiftly.
BOB I can’t exactly grasp where you are going with “unemployment modifier”. Please explain.
Shinobi
@Brick Oven Bill:
Oh yeah, and don’t forget the laydeez. They only make $.77 on the dollar. So it’s EVEN LOWER.
Doesn’t anyone do any WORK around this country?
mclaren
How hopelessly naive. The unemployment rate is dropping because so many millions of people have become discouraged workers and given up looking for work. They’re now huddled in their parents’ basements, subsisting on free ketchup packets from McDonalds.
cliff
hra, the exhaustion rate is the rate that people drop off Regular benefits – onto the extended benefits I listed above.
there are not a ton dropping off extended yet, but its coming soon, thats why they are talking of extending benefits again.
and I wish they would stop saying 6.5 million jobs lost, its a straight up lie – its right there in the report that ~8.75million are collecting benefits.
also, 34million are on foodstamps.