New jobs slowdown

[Chiwas]

A hiring shock

July payroll growth far shy of Wall Street forecasts; unemployment rate down to 5.5%.
August 6, 2004: 10:44 AM EDT

NEW YORK (CNN/Money) - Hiring by U.S. employers slowed significantly in July, according to a government report Friday, as the number of new jobs added to payrolls came in far below Wall Street expectations.

The Labor Department report showed only 32,000 new net jobs added to payrolls during the month, down from a revised 78,000 jobs that were added in June. The increase was the smallest since December, when payrolls rose by just 8,000.

The unemployment rate fell to 5.5 percent, an improvement from the 5.6 percent reading in June.

Economists surveyed by Briefing.com forecast a 243,000 gain in jobs, and the unemployment rate staying unchanged at 5.6 percent. Economists surveyed by Reuters had a median jobs growth forecast of 228,000, with a range of estimates between 200,000 and 300,000.

This is the second straight month of jobs growth far below economists' forecasts, following three months that showed strong jobs growth starting in March. The June report had initially showed 112,000 jobs added, rather the 250,000 forecast at that time.

But Friday's report missed the target by even a wider margin.

"The significant number of headwinds such as rising energy prices and the prospects of rising short-term rates are taking their toll on the economy," said Anthony Chan, senior economist with JP Morgan Fleming Asset Management.

U.S. stocks opened sharply lower on new concerns about the state of the economic recovery.

Meanwhile bond prices soared and yields, which move in the opposite direction, fell amid expectations that the Federal Reserve will not raise interest rates as fast as previously expected. The Fed holds its next meeting to consider interest rates Tuesday.

[dude1394]

This IS shocking... Either the analysts don't have a clue about what is really going on (as they keep missing targets by huge margin) or the economy has changed away from large company hiring, as the household survey that is used to calculate the unemployment rate showed a growth of 629K. Now before a lefties head explodes let me say I'm not saying that it's not accurate, but that something IS afoot about the calculation. It's hard to see two indiced supposedly measuring the same thing going in different directions.

How accurate is report?
More importantly, the survey of households, used to compute the unemployment rate, showed 629,000 more people at work than in June. The other payroll number is based on a survey of employers. One economist said he believes this suggests problems with the employer survey.

"I don't have any faith that 32,000 jobs added reflects what's going on," said Vitner, who had forecast a 280,000 gain in the payroll number. "The growing disconnect between the surveys is too much to dismiss."

[Mavdog]

This is why I preached caution when proclamations of a"boom" echoed from Bush supporters.

Clearly we have an improved economic situation from where we were in 01/02. The actions of the Fed to make debt cheap has proven to help both personal and business investment/consumption bring us out of the economic downturn. What we need to face today is that the personal consumption side is pretty tapped out, unless one believes that household debt should be higher (I certainly don't, esp. with the costs of that debt rising). We can't depend on the consumer as we have the last couple of years.

That dictates the need to encourage business expansion/investment, and with the costs of financing already low the only tool is to use tax policy. With our government currently running historically high deficits with no end in sight, this is going to be a very difficult to accomplish, for to grant business the tax breaks to encourage the investment needed to spur hiring the deficit will only go higher in the short term.

I think the word for this is a conundrum.

[dude1394]

So what exactly IS up with all of this. The jobs supposedly did not happen yet the unemployment rate has dropped from 6.2% to 5.5% since Jan '03.

Here is an attempt to explain it, I don't know enough about the issue to be knowledgeable, but at least it fits the known data, (first test of a theory).

billhobbs

[quote]
Bush Economy: Highest Total Employment in American History

The July jobs report is out and it's being spun as bad news for the President by people who don't understand how the data is collected and calculated. The media is reporting that only 32,000 jobs were created in July. But that's not true, for a number of reasons.

First, the 32,000 figure has a statistical quirk in it: July is one of two months, the other being January, that the government statisticians simply assume that a certain percentages of businesses fail, and they reduce the jobs-growth estimate by tens of thousands of jobs to account for it. According to the New York Post's John Crudele, a year ago that lead to the job-growth number being slashed by 83,000 jobs in July.

Second, the 32,000 figure reflects only "nonfarm payroll jobs," which means, roughly, jobs created by employers. This data come from the government's monthly "Payroll Survey," which generally misses small businesses, especially newer small businesses, and always misses self-employed people.

The real number you should focus on is this one: Total employment in America rose by 629,000 to 139.66 million people in July, based on the government's Household Survey, which is also the data on which the official unemployment rate is based. Unemployment dropped a tenth of a percent in July.

A few months ago on this blog I published numerous posts documenting the surge nationwide in the growth of the number of limited-liability corporations, one of the most popular forms of incorporation for the self-employed and for new entrepreneurs just launching their ventures. (My most recent post on the LLC surge is here.) And more recently I linked you to Jeff Cornwall's commentary on a Kauffman Foundation report that shows a resurgence of entrepreneurship among Americans, especially minorities but also among whites. As Cornwall noted, the Kauffman report showed that most entrepreneurs are starting businesses because they see an unfilled need in the marketplace, not because they are discouraged job-seekers.

The American economy is, more than ever, being driven by entrepreneurs, not by big corporations. That's why, more then ever, the jobs number that matters is the total employment number, not just the number of "nonfarm payroll jobs."

Here are some basic facts you need to know about the American economy under President George W. Bush:

# The unemployment rate has fallen from 6.2 percent in July 2003 to 5.5 percent now.

# The number of unemployed people has fallen from 9.1 million in july 2003 to 8.2 million now.

# In Jaunary 2001, the month that George W. Bush took office, 135,999,000 Americans had jobs. By October of that year, the number of Americans with jobs had slumped to 134,562,000 - as the sudden negative economic impact of the 9/11 attacks combined with the economic slowdown that began almost a year before Bush took office (with the stock market collapse in April 2000) to cause unemployment to surge.

Today, 139,660,000 Americans have jobs, more than at any time in our nation's history.

[dude1394]

Here is the link to the NYPost in the above article. Pretty good prognosticating, I think I should figure out what stock this guy's buying. Again I'm not trying to "make" a point as much as understand what is occurring. From everyone in business I talk to business is great. We personally are headed for 25% profit sharing. It makes you go hmmm....

August 5, 2004 -- WALL Street thinks the gov ernment will report strong U.S. job growth tomorrow.
I think Wall Street is wrong.

The consensus is that the Labor Department will saythat anywhere from 215,000 to 300,000 jobs were created in July when its report is released before Friday's opening bell.
Experts had predicted good growth in June but the actual number was a not-so-stellar gain of 112,000 jobs — less than half of what had been expected.
The guessers apparently think some of the jobs that didn't show up in June will suddenly appear tomorrow.
With only two more monthly reports due before the election, tomorrow's number is obviously politically important.

But this report is just as vital for Wall Street because other reports are showing a slowdown in economic growth, an inconvenient development for a stock market that is already expensive. Here's my theory — and I emphasize the word "theory" — on where I think Wall Street will be wrong on the jobs figures.

Last year the government reported that the economy lost 44,000 jobs in July.

Included in that figure was a guess by the Labor Department that so many companies quietly went out of business that they took 83,000 jobs with them. You could look it up: http://www.bls.gov/web/cesbd. htm. Without that guess, the economy would have gained — rather than lost — jobs last July.

In other words, the Labor Department's so-called Net Birth/Death Adjustment tabulates July as one of only two months in which there are more companies dying and taking jobs away than creating new jobs.

The other month is January, when Labor takes out a massive number of jobs because it assumes a large number of companies die off after Christmas.

I assume the White House doesn't understand these assumptions because the small jobs gain in January — helped by these assumptions — set off a massive amount of administration bellyaching.

But the White House was quite happy when these assumptions reversed in the spring and hundreds of thousands of guesstimated jobs were added to the monthly count.

Unless the Labor Department deviates from its previous assumptions this July, the economy will have to have created an awful lot of jobs to get over the statistical hump and meet Wall Street's forecast.

Or, the jobs will have to suddenly appear.

[reeds]

Weak job growth, high oil prices and slumping stocks are all helping Kerry...this could turn out good after all? Defeating Bush that is...

[dude1394]

I'm still trying to figure out the jobs story with the poor job announcement along with the incongruous announcement of the unemployment rate going DOWN. Here is an anlysis from the Heritage Foundataion...Haven't gone completley through it. But there is some sort of disconnect going on that I haven't figured out yet. It would be interesting to find a jobs creation through the 90's for example.

employment

One of the most visible economic issues in this presidential primary election cycle is the apparent failure of the economy to create jobs. Even though the U.S. economy has been growing strongly for over two years, many analysts have focused on an illusion of 2.2 million "lost jobs" since President George W. Bush took office. The illusion stems from a survey of employment conducted each month by the U.S. Bureau of Labor Statistics (BLS), officially referred to as the Current Employment Statistics (CES) survey and commonly known as the payroll survey.

Like all surveys, the CES suffers from a number of problems that are well known to data analysts. However, the payroll survey contains a unique methodological problem: It systematically overcounts the jobs held by one person when that person changes employers. The existence of a potential turnover effect is not new. But worker turnover is far below its pre-war norm, with potentially large consequences for estimates of total employment.

This paper takes a critical view of the payroll survey and finds that:

* The payroll survey double-counts many workers who change jobs and is now artificially deflated because job turnover is down. Decelerating turnover in 2002-2003 explains up to 1 million jobs artificially "lost" in the payroll survey since 2001.
* The BLS household survey indicates record high employment. The disparity of 3 million jobs (in employment growth) between the household and payroll surveys since the recovery began is unprecedented.
* The disparity between the two BLS surveys of total employment is cyclical. The disparity widens during recessions and narrows during periods of rapid growth in gross domestic product (GDP). Such variation strongly suggests a statistical bias in one of the surveys.
* Payroll survey data are always preliminary. Past revisions have regularly shown the initial estimates to be off by millions of jobs. For example, initial estimates of job losses in 1992 were revised in 1993, 1994, and 1995 and now show net job creation.
* The payroll survey does not count the surge in self-employment. The household survey has recorded a surge of 650,000 self-employed workers. This number may be even higher if modern workers in limited liability companies and in consulting positions with traditional firms are not identifying themselves as self-employed.

Most economic indicators suggest an improving economy since November 2001, except for the loss of payroll jobs according to the CES. Aside from the payroll survey, most labor indicators suggest an improving labor market: Real wages are rising, unemployment is low and declining, and jobless claims are down. The sharpest contrast is the record high level of total employment: 138.6 million according to the Labor Department's household survey, formally known as the Current Population Survey (CPS).
-------

Conclusion

The payroll survey may be systematically undercounting job growth, creating an unprecedented job growth gap between its total employment measure and the household survey's. In the past six months, the BLS has approved new techniques to smooth the household survey's measure of total employment in order to make month-to-month comparisons. Analysts can now point with confidence to the employment of a record number of Americans as of January 2004 and the employment of an additional 2.2 million workers since the recession ended.

Why has the payroll survey missed so much recent job creation? The BLS is skeptical of the start-up explanation, and recent benchmarks confirm the BLS's position. Self-employment is a different matter, and the latest statement by the BLS commissioner confirms the appearance of a new class of contractors. The evolution of the workforce--specifically, the demographic emergence of consultants and contractors who do not consider themselves self-employed--is a likely wedge between the surveys. Self-employment has grown by over 600,000 in two years, and misidentification by the LLC and consulting workforce implies a much higher number.

Finally, a new hypothesis quantified in this report is that decelerating turnover is artificially deflating company payrolls, creating an illusion of 1 million jobs lost since 2001. The heightened insecurity since September 11, the Iraq war, and the specter of outsourcing are logical explanations for reduced turnover. Here again, innovative new data series on employment dynamics from the BLS allow economists to confirm this hypothesis.

Policymakers and analysts should treat payroll data with caution when making comparisons to employment levels in 2001 and earlier years. Contrary to the conventional wisdom, the best measure of job growth now comes from smoothed total employment reported in the household survey. Consequently, policies aimed at protecting illusory lost jobs are ill-advised. Employment in America is rebounding strongly, and the increasing dynamism of U.S. job markets should not be clogged by misguided and misinformed cures.

A chart from the site.




















the rest

[Chiwas]

I want, and I mean it, I REALLY DO WANT, that the economy recovers ASAP and for long term, it does not matter if Bush is the one doing it and gets relected, but this is funny:




Bennett is very sharp and resorceful.


One about Kerry to compensate:

[FishForLunch]

Now the democracts have something to cheer about, a job slow down, their prayers have been answered.