Finally: Decent news on the unemployment front

Before departing on an expensive, 12-day trip to Asia, El Presidente trumpeted today’s release of the Bureau of Labor Statistics’ Employment Situation Summary.  He noted the 159,000 increase in private sector payrolls, but skipped over the fact that the unemployment rate is stuck at 9.6%, basically where it’s been since spring:

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Nonfarm payroll employment increased by 151,000 in October, and theunemployment rate was unchanged at 9.6 percent, the U.S. Bureau ofLabor Statistics reported today. Since December 2009, nonfarm payrollemployment has risen by 874,000.

Household Survey Data

The number of unemployed persons, at 14.8 million, was little changedin October. The unemployment rate remained at 9.6 percent and hasbeen essentially unchanged since May. (See table A-1.)

Among the major worker groups, the unemployment rate for adult men(9.7 percent), adult women (8.1 percent), teenagers (27.1 percent),whites (8.8 percent), blacks (15.7 percent), and Hispanics (12.6 per-cent) showed little change in October. The jobless rate for Asians was 7.1 percent, not seasonally adjusted.

The number of long-term unemployed (those jobless for 27 weeks andover) was about unchanged over the month at 6.2 million. In October,41.8 percent of unemployed persons had been jobless for 27 weeks ormore. (See table A-12.)

Both the civilian labor force participation rate, at 64.5 percent, andthe employment-population ratio, at 58.3 percent, edged down over themonth.

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Population growth adds about 100,000 working age adults to the labor force each month.  However, continued advancement in technology and worker productivity means that the economy needs to add 125,000 new jobs to maintain pace with population, given the same level of output. In other words, month-to-month, it takes 125,000 new jobs to reduce unemployment, even though only 100,000 new job seekers enter the marketplace due to advancing technology, shifts in productivity and emigration of some jobs.

October is only the second month in 2010 that non-farm payrolls exceeded that number, and the margin of 34,000 is not much.  It would take the better part of a decade to work down the existing “labor inventory” of jobs lost since Obama and the 111th Congress took office. So, while today’s release was good news, the overall performance of Democrats on the economy, as told by the unemployment picture—is dismal.

Weekly jobless claims take another dip, down 21,000

Fresh data from the Bureau of Labor Statistics Website:

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In the week ending Oct. 23, the advance figure for seasonally adjusted initial claims was 434,000, a decrease of 21,000 from the previous week's revised figure of 455,000. The 4-week moving average was 453,250, a decrease of 5,500 from the previous week's revised average of 458,750.

The advance seasonally adjusted insured unemployment rate was 3.5 percent for the week ending Oct. 16, a decrease of 0.1 percentage point from the prior week's revised rate of 3.6 percent.

The advance number for seasonally adjusted insured unemployment during the week ending Oct. 16 was 4,356,000, a decrease of 122,000 from the preceding week's revised level of 4,478,000. The 4-week moving average was 4,447,250, a decrease of 38,500 from the preceding week's revised average of 4,485,750.

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These are the last weekly claims figures to be released prior to next week’s midterm election.  New applications for unemployment compensation have been stuck in a range between 450,000 and 475,000 for months, now.

Half of last week’s decrease of 23,000 new claims was accounted for by an upward revision in the previous week’s data and the moving average remains stubbornly stuck above 450,000.

While there is nothing particularly rosy or damaging in this week’s data, it still highlights a very weak job market and an economy struggling to keep its head above water.  We should get confirmation of the sluggish economy with tomorrow’s estimate of Q3 GDP growth.  Analysts expect something on the order of 1.5% to 2.0% annual growth.

It’s in this setting that voters will go to polls next week and issue a referendum on the efficacy of President Obama’s economic policies.

US Unemployment Rate still at 9.6%, Payrolls plummet 95,000

Fresh from the Bureau of Labor Statistics website at www.bls.gov:

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Nonfarm payroll employment “edged” down (-95,000) in September, and the unemployment rate was unchanged at 9.6 percent, the U.S. Bureau of Labor Statistics reported today. Government employment declined (-159,000), reflecting both a drop in the number of temporary jobs for Census 2010 and job losses in local government. Private-sector payroll employment continued to trend up modestly (+64,000).

Household Survey Data

The number of unemployed persons, at 14.8 million, was essentially unchanged in September, and the unemployment rate held at 9.6 percent.

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These are the last unemployment and payroll figures to be released before the November 2, 2010 mid-term elections.

Gory numbers like this are not good news for Democrats.  The US unemployment rate hasn’t been below 9.5% since January, 2009—the month Obama took office. Incumbents now have to go home and campaign in Districts and States, and explain why nearly $1 billion in “stimulus” spending did virtually nothing to curb persistent joblessness and an economy struggling to stay above water.

I was looking for the unemployment rate to increase to 9.7%.  I’ll go through some of the tables and post an update later today.

Separately yesterday, the Gallup organization released its own independent survey of households and employment.  It’s findings? Equally dismal:

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Unemployment, as measured by Gallup without seasonal adjustment, increased to 10.1% in September — up sharply from 9.3% in August and 8.9% in July. Much of this increase came during the second half of the month — the unemployment rate was 9.4% in mid-September — and therefore is unlikely to be picked up in the government’s unemployment report on Friday. …

The government’s final unemployment report before the midterm elections is based on job market conditions around mid-September. Gallup’s modeling of the unemployment rate is consistent with Tuesday’s ADP report of a decline of 39,000 private-sector jobs, and indicates that the government’s national unemployment rate in September will be in the 9.6% to 9.8% range. This is based on Gallup’s mid-September measurements and the continuing decline Gallup is seeing in the U.S. workforce during 2010.

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Update:  Calculated Risk does its typically excellent job charting the data and showing the real picture of how the economy is struggling.  I’m borrowing the small chart here.  Follow the link to see the big picture of how this wreckovery is unlike any other in post-WWII history.

Unemployment may increase even WITH growth

It’s a creeping malaise caused by stagnant to slightly positive growth in economic output accompanied by sluggish hiring in the labor market.  It’s a long, painful economic illness, it is always and everywhere the product of leftist economic ideology, and it’s probably already here.

In today’s Wall Street Journal Online edition:

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The strong likelihood of tepid economic growth through next year suggests unemployment may rise, rather than fall, as many forecasters currently predict.

In a paper published Monday, economists at the Federal Reserve Bank of San Francisco warn business cycle analysis generated within the central bank system is pointing to growth that will be “at or below potential” growth levels.

This modest rate of advancement won’t be enough to generate the needed level of job growth, which suggests “the unemployment rate could rise by as much a 0.5 percentage point during this period,” moving from the current level of 9.6% to 10.1%. The paper’s authors, economists David Lang and Kevin Lansing, observe “such a scenario would take the unemployment rate back to the peak recorded in October 2009.”

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In a post late last week, I explained some of the reasoning behind such a sluggish labor market.  It’s primarily a climate of uncertainty that kills confidence and makes businesses think twice about expanding production and adding new employees.  On the other side of the labor market is supply.  Depending on which economic forecasts you read, the economy needs to add between 150,000 and 225,000 new jobs every month just to keep up with population growth.  If the economy is growing at a rate too slow to support that level of job creation, the unemployment rate rises as new people enter the job market.

This has two effects that are felt right away:  It suppresses wages because there are more people competing for fewer jobs (thus driving the price of labor down), and it creates even more uncertainty by consumers.  Consumer spending drives nearly 70% of the economic output of the U.S.  If consumers have less money to spend because of falling wages, aggregate demand is reduced, which drives down the prices of goods and services produced.

It’s a classic economic catch 22 in that consumers spending less translates into businesses hiring less, further depressing consumer confidence and spending.

So how do you get out of the spiral?

Improve business confidence.  Make it easier and less expensive to do business in the U.S., and American businesses will do what they do best.  There are many ways to improve business confidence:  Getting rid of Obamacare is one way.  De-clawing the immense federal regulatory environment is another.  But the best way to improve the business climate is to send a certain message to the business community: Cut corporate income taxes, eliminate capital gains taxes altogether and stop this stupid class war distinction between the people who create the jobs and the people who work in them.  There is no better relationship on the planet than there is between productive employee and successful small business owner.  The former is always handsomely rewarded for his efforts to improve the latter’s business success, because the latter knows that productive employee is just as good at a competitor’s place of business.

No bright spots in today's unemployment data

Recovery summer, huh?  Dog days is more like it.  Scanning through the statistics released this morning, there are no bright spots to point to and say, "see?  things really are getting better."

• Dow Jones had polled economists and the consensus expected total nonfarm payrolls to drop by a sobering 60,000.  Instead, the economy shed 130,000, more than twice what was expected.
• The revision of the June data--down drastically. Payrolls fell a whopping 221,000 that month, some 94,000 more than the original estimate of 125,000.
• In seven months, the US economy has averaged about 100,000 new jobs a month, a figure far short of the 125,000 to 175,000 needed just to offset population growth.
• The jobless rate held steady at 9.5%, but only did so because of the Eeyore factor increase--the rise in the number of people who have given up looking for work.
• The report shows 6.6 million people, or 45 million of those left jobless by the recession, have been out of work for more than six months.  Length of time out of work makes job-seekers less attractive to employers, because of concerns over lost skills, potential work ethic issues and other factors.
• Average hours worked per week increased 0.1 hours and average hourly wages increased $0.04, which some might point to as a slight positive. I dismiss these as statistical noise.  Hours are flat, wages are flat, and people are not finding work.

It's still hard to say whether the economy is headed for a double-dip. Last Friday's GDP figures showed a significant increase in Residential Investment, a strong leading indicator for economic growth.  However, most economists believe that RI increased because of the homebuyer tax credit and that the number will fall as the incentive plays out.

I think it's far more likely that growth will simply slow to an abysmally glacial pace, somewhere well south of 2.0% real GDP, and stay there for quite some time. There's enough economic activity to prevent a slip into negative territory, but not enough to ignite a full-scale recovery.  There are still billions upon billions in excess housing stock on the market. There are still hundreds of billions in mortgages that are either in default, in arrears or are scheduled for reset in the next 12 to 24 months. There are still tens of millions of unemployed and underemployed workers, and a small business community that is petrified in uncertainty regarding the future.  The new healthcare regime, the new financial regulation regime, and the potential for cap-and-trade legislation have business owners simply sitting on a mound of cash, waiting to see how things play out.

Simply put, the economy has fallen and can't get up, and there's no other way to spin it.  The stimulus only succeeded in adding trillions to the debt, which will eventually drive up interest rates and further choke off capital investment.  The enormous shakeup of the healthcare and financial markets have created such an environment of uncertainty that only the loosest risk-seekers are expanding.

Gimme some feedback in the comments.