Friday, June 01, 2012

Today's Employment Report

Today's employment report paints a somewhat bleak and mixed picture of current U.S. labor market conditions, with an increase of only 69,000 payroll jobs in May (less than half of the 150,000 consensus expectation) and an increase in the May jobless rate to 8.2%.  While most reactions to the job data could be best described as "disappointment," here are a few bright spots in today's report:

1. Manufacturing payrolls increased in May by 12,000, which was the eighth consecutive monthly gain in factory jobs, and the 18th monthly increase out of the last 19 months.  For the 11th straight month, the manufacturing jobless rate (7.1%) was below the national rate (7.7% NSA).  Manufacturing employment at just below 12 million in May was at the highest level in slightly more than three years, since April 2009.  Since 2010, manufacturing employment has increased by almost 500,000 jobs.

2. The more comprehensive measure of employed workers from the May household survey (includes self-employed workers) increased by 422,000 jobs last month, and has shown an increase of almost 1.5 million jobs this year, vs. the 823,000 increase in payroll employment from January to May.  Total civilian employment in May of 142.3 million was the highest since December 2008, more than three years ago.  

3. Temporary help employment for professional and business services increased in May to almost 2.5 million jobs, reaching the highest employment level for those workers in more than four years going back to February 2008.   With continued growth in temporary employment this summer, the number of temporary jobs in the U.S. economy should exceed pre-recession levels sometime this summer.      

4. The jobless rate for college graduates fell to 3.9% in May, the lowest unemployment rate for that group since December 2008, almost three and-a-half years ago.

Update: Scott Grannis provides some of his always-insightful commentary (and graphs) on today's jobs report:

"So I think the market's reaction to today's news has been excessively pessimistic. I don't see convincing signs of deterioration in the outlook; I see an economy that continues to grow at a sub-par pace, and that's been the case for the most of the past three years."

48 Comments:

At 6/01/2012 9:08 AM, Blogger Jon Murphy said...

I'm not sure the report is really all that bleak.

Reading into the numbers:


The April-to-May percentage gain was historically normal.

Employment through this expansion has been growing at a faster pace than the previous two (1991-2001, 2002-2008)

The annual employment trend is rising at the fastest pace in over four years (aka, the economy is adding jobs at the fastest pace in 4.5 years), and will likely accelerate in the short run (over the next few months).

Historically, May is a month where fewer jobs are added. There's not much to indicate an imminent reversal in the slow but steady recovery in the jobs market in this report.

 
At 6/01/2012 9:18 AM, Blogger Moe said...

It's pretty bad. I think this is the third year running we've had a Spring Slump.

Construction fell big, by 28,000, a bad sign for those banging the drum about the bounce-back for housing.

Health Care, transportation and warehousing; looks like that's where the jobs were added.

 
At 6/01/2012 9:29 AM, Blogger morganovich said...

i have some real doubts about that household survey.

every unemployed person i know is a "consultant" and "self employed" but most are not actually getting paid, just filling a period for their resume.

i think there has been a real change in the way that gets responded to and it makes me a bit suspicious of the data.

 
At 6/01/2012 9:32 AM, Blogger morganovich said...

jon-

"
Employment through this expansion has been growing at a faster pace than the previous two (1991-2001, 2002-2008)"

where are you getting that number? based on what i can see, that is absolutely untrue.

employment recovery from this recession has been the slowest since the 30's.

prior to 2000, no recession took more than 12 months to return to prior employment levels.

the sharp 1958 recession was more like 9 months.

we are now at 3 3/4 years since the recession was said to have ended and we are not even half recovered.

we are not even in expansion in terms of employment, but only halfway through recovery.

what numbers are you using? that sounds absolutely contrary to all the data i have seen.

 
At 6/01/2012 9:36 AM, Blogger Jon Murphy said...

Construction fell big, by 28,000, a bad sign for those banging the drum about the bounce-back for housing.

Even Construction wasn't that bad. It was towards the low end of normal, but still within the historically normal range.

 
At 6/01/2012 9:37 AM, Blogger morganovich said...

jon-

http://www.calculatedriskblog.com/2012/06/may-employment-report-69000-jobs-82.html

pull up the 3rd chart in this piece and you can see just how dramatically worse this jobs recovery has been that any other since ww2.

2001 was slow, but this one is a real train wreck. 52 months after peak employment and not even 1/2 recovered despite the boost to u-3 from dropping the labor force so dramatically.

trying to characterize this as rapid employment growth seems like a real stretch.

 
At 6/01/2012 9:45 AM, Blogger Jon Murphy said...

where are you getting that number?

That comes from my database. It's something I track.

Looking at where annual employment was at the bottom of the recession compared to where it is now.

So, looking at the numbers, we have this:

Current (8/1/2010-5/1/2010): Gained 1.5% since the bottom 21 months ago

The Aughts Growth (7/1/2002-5/1/2008): Gained 1.3% when 21 months into recovery

The 90's Growth (12/1/1991-7/1/2001): Gained 1.4% when 21 months into recovery

The 80's Growth (5/1/1983-12/1/1990): Gained 6.2% when 21 months into the recovery.

The difference is we have a lot father to come from. Really, this recovery in employment is not historically unusual. Sure, it could be faster, but it's not dead by historical standards (the median growth rate for employment at this point in a recovery is 1.6%).

 
At 6/01/2012 9:54 AM, Blogger Jon Murphy said...

trying to characterize this as rapid employment growth seems like a real stretch.

Woah woah woah...I never used the word "rapid." I said it is growing faster than the last two expansions. But I also said this recovery has been slow and steady.

From a growth rate perspective, this recovery is hardly unusual. We'd like it to be faster and it really should be if it weren't for some dubious economic policies over the past 7-10 years. But to say we are having no growth, or historically unusual isn't correct either.

Employment is rising. It may be frustratingly slow, but it is rising

 
At 6/01/2012 9:59 AM, Blogger Buddy R Pacifico said...

Interesting to note that the high school dropouts have a labor participation rate of 45% percent. That group has a rate that is only exceeded by those over age 65.

I also noticed, Asian unemployment has dropped to 5.2% from 7.0% over the last year. Are there job quotas for this group that are higher than other groups? :>)

 
At 6/01/2012 10:05 AM, Blogger morganovich said...

jon-

i think you are looking at it the wrong way.

let's consider two stocks. each trades at 100.

one drops to 80 one to 50.

they then move to 88 and 56 respectively.

sure, the first gained 10% and the second 12%, but the first is the one enjoying a better recovery both in terms of actual nominal dollars and in terms of % of the loss made up.

using percentage growth to measure these things can be very misleading.

that's why i prefer to look at time to recover to prior employment.

i am also getting a different result than you are by using payrolls data.

using 9/1/2010 as the bottom, the 20 months following to 5/12 give me a 2.405% increase in payrolls.

the 20 months from the 8/1/2003 trough gives me a 2.598% gain and that was the weakest recovery post ww2 until now.

the 2/92 trough shows 3.13% growth in payrolls over the next 20 months.

i think you are using incorrect dates in your comparisons. you seem to be using the employment trough for this one and somehting else for the others.

employment did not trough in 7/2002. payrolls were 130275 then and 1289820 in 8/03.

similarly, they were lower in 2/92 than 12/91

i think your date selection is queering your results.

 
At 6/01/2012 10:11 AM, Blogger Moe said...

The topline unemployment rate, which briefly was at 8.1% in April, ticked back up to 8.2%.

More worrisome than the slow growth in employment is the way corporate profits are screaming higher despite it. I'm not against corporate profits! - it's just that we cannot or need not look to them to hire - it appears they don't need to.

 
At 6/01/2012 10:11 AM, Blogger morganovich said...

"Woah woah woah...I never used the word "rapid." I said it is growing faster than the last two expansions. But I also said this recovery has been slow and steady."

fair enough. apologies. did not mean to put words in your mouth.

 
At 6/01/2012 10:12 AM, Blogger rjs said...

60,000 households are counted monthly in the household survey vs 1/3 of businesses in the establishment survey...

the 90% confidence level on the establishment survey is plus or minus 100K...

 
At 6/01/2012 10:26 AM, Blogger Jon Murphy said...

fair enough. apologies. did not mean to put words in your mouth.

Apology accepted. I can certainly see how what I said could be interpreted as "rapid."

Morganovich-

I think we may be discussing two separate things.

Let me start by agreeing with your example.

Your point, as I understand it, is that this recovery has been slower returning to pre-recession levels than past recessions. I can agree with that. If I have misunderstood your point, please correct me.

My point is that the growth rate is not that unusual for this point in the recovery. We don't want to read too much into the headline number. If May is a typical period of employment decline/slower growth, then the number should not surprise us. Rather, I'd be more worried had it spiked (or gone negative).

I am just worried about folks seeing this number and reading it as weakness in the economy. It is not signalling that. We are not seeing a trend in employment to suggest the US economy isn't improving. That's my main point here.

 
At 6/01/2012 10:45 AM, Blogger Jon Murphy said...

A thought regarding today's number:

The first three months of the year had amazing job creation numbers. All sectors of the economy, and especially construction, benefited from a mild winter. I wonder if what we saw was Spring/early Summer hiring numbers get pulled towards the first quarter and what we are seeing now is not indicative of slower hiring, but rather seasonal hiring have already been done. That could account for the Construction numbers, anyway.

 
At 6/01/2012 10:50 AM, Blogger Moe said...

Another possibility is that some firms may be waiting for the outcome of the health care ruling and election to see whether the coast is clear for more hiring...

 
At 6/01/2012 10:50 AM, Blogger bart said...

ISM employment down again this morning, auguring higher unemployment.

Challenger report yesterday announced U.S. Job Cuts Jump 67% From Year Ago
http://www.businessweek.com/news/2012-05-31/announced-u-dot-s-dot-job-cuts-jump-67-percent-from-year-ago-challenger-says

 
At 6/01/2012 10:52 AM, Blogger bart said...

U6 unemployment up to 14.8% from 14.5%

My reconstructed U7 unemployment rate up to 22.3% from 21.7%.

 
At 6/01/2012 10:57 AM, Blogger Jon Murphy said...

Another possibility is that some firms may be waiting for the outcome of the health care ruling and election to see whether the coast is clear for more hiring...

That certainly is a strong possibility. We should get a ruling on that this month.

 
At 6/01/2012 11:18 AM, Blogger Jon Murphy said...

Private sector numbers look good. The private sector added 82,000 jobs. The government shed 13,000

 
At 6/01/2012 11:28 AM, Blogger morganovich said...

jon-

"My point is that the growth rate is not that unusual for this point in the recovery"

i do not think that is accurate.

first off, "this point in a recovery" does not exist in other recessions.

jobs have recovered and gone into expansion by now in the others. the fact that we are still in recovery at all is unique since ww2.

second, this growth does not look "typical" to me.

2.4% in 20 months now vs 3.1% in the 90's means the 90's were 29% faster.

that's a big differential. =/-30% seems like an awfully broad range for "typical".

the recovery from the 1982 recession was a blistering 7.05% in the following 20 months. again, calling this "typical in comparison to that which was nearly triple this rate seems like a bit of a stretch.

i'm having trouble seeing what metric you are using to see this as typical.

using a yoy number seems to hide more than it reveals. in the other recessions we were much further along first.

1.5% maybe be typical in an expansion, but not in a recovery.

 
At 6/01/2012 11:33 AM, Blogger morganovich said...

"The first three months of the year had amazing job creation numbers"

how do you figure?

payrolls were never up more than .208% sequentially.

in the last recovery we saw high numbers more like .27% and similar numbers in 1992 and the late 80's saw numerous figure over 0.3% and some over 0.4%.

while the numbers were better than we had been seeing, i'm not quite sure the adjective "amazing" is justified.

 
At 6/01/2012 11:39 AM, Blogger morganovich said...

moe-

no question that the rest of this year and june in particular are nightmares from a finincial and business planning standpoint.

in june we have the scotus ruling on obamacare and the greek elections and the spanish bank recap plan and greece running out of money if no new cash is forthcoming.

then we have the us election, huge tax hikes coming through if nothing is done, a nasty budget fight, and an epa gone wild.

it's not difficult to see why markets are so skittish and why businesses have no idea what to do just now.

this is not dissimilar to what happened in the 30's. i would recommend amity schlae's excellent book "the forgotten man" on this. one of the things that blocked recovery in the 30's was massive uncertainty created by intrusive federal programs and interventionist government. when there are elephants stumbling around the room, it's not the time to build things.

 
At 6/01/2012 11:49 AM, Blogger Moe said...

Thanks Morganovich - you're not the first to recommend that book to me, I will get to it somneday!!

 
At 6/01/2012 12:48 PM, Blogger Jon Murphy said...

"The first three months of the year had amazing job creation numbers"

how do you figure?


The change from 4Q2011 to 1Q2012 was the 2nd strongest on record

first off, "this point in a recovery" does not exist in other recessions.

What I meant to say was: when the expansion had been going on for XX months, in this case 21. When it had been 21 months since the jobs trend hit the bottom.

jobs have recovered and gone into expansion by now in the others. the fact that we are still in recovery at all is unique since ww2.

Jobs-wise, this recession was unique since WWII. We shed a ton of jobs.


As for the question of metrics, I am looking at the annual data: a 12 month moving average. From the point where the annual data hit a bottom to the point we are at now. In other words, comparing August 2010's 12 month moving average to May 2012's 12 month moving average.

 
At 6/01/2012 12:49 PM, Blogger Jon Murphy said...

Not seasonally adjusted, too. The 12 month moving average already accounts for seasonality.

 
At 6/01/2012 12:59 PM, Blogger Jon Murphy said...

But one thing we definately are seeing is job growth is coming from the private sector, not the government.

Since the bottom of the NBER defined recession, the private sector has added some 3 million jobs (NSA). The government has shed about half a million (NSA).

So, who has the better job creating record?

 
At 6/01/2012 1:13 PM, Blogger bart said...

Yep, the unemployment mean numbers are coming down super fast. /sarchasm


http://www.nowandfutures.com/images/unemploy_duration_mean.png

 
At 6/01/2012 1:14 PM, Blogger bart said...

And the bogus participation rate, with corrections, don't look much like the BLS BS:


http://www.nowandfutures.com/images/u3_unemploy_corrected.png


http://www.nowandfutures.com/images/u6_unemploy_corrected.png

 
At 6/01/2012 1:16 PM, Blogger bart said...

And the seasonal adjustment factors are wildly varying every year, as if the seasons are very different from year to year since 2000:


http://www.nowandfutures.com/images/unemploy_sa_nsa_u3.png


http://www.nowandfutures.com/images/unemploy_sa_nsa_u6.png

 
At 6/01/2012 1:16 PM, Blogger bart said...

And initial claims are jammed up about 375k per week, for months:


http://www.nowandfutures.com/images/unemployment_claims_short.png

 
At 6/01/2012 1:17 PM, Blogger bart said...

The "recovery":


http://www.nowandfutures.com/images/unemploymentU3U6U7.png

 
At 6/01/2012 1:29 PM, Blogger morganovich said...

also:

hidden in all the furor about the may number, the April number was revised down sharply to 77k.

 
At 6/01/2012 1:37 PM, Blogger morganovich said...

jon-

2nd strongest on record how? in percentage terms, q1 1984 was up twice as much vs q4 than this q1 was from last q4.

1985 trounced 2012 too. so did 1987-90 and lot's of other years.

i found 6 better years in just a few seconds of looking.

a 12mo MA is too broad a screen here.

most recessions recover to full employment faster than that. using a MA longer in period than the event you are measuring hides more than it reveals.

 
At 6/01/2012 2:01 PM, Blogger morganovich said...

bart-

that constant participation rate chart is very interesting.

really dives home why u3 has become such a bogus measure.

i think there is some cargo cult thinking going on with our politicians.

they heard that you never get reelected with u3 over 8% so they decided to reduce the number by gaming it in hopes of reelection, but, as the public knows if they are employed or not, i suspect their personal experiences will trump published numbers at the ballot box.

the politicization of the BLS, BEA etc is really worrying.

 
At 6/01/2012 2:11 PM, Blogger bart said...

... the politicization of the BLS, BEA etc is really worrying.

I can drink to that!, and probably will after the markets close.

The wild variability from year to year in the seasonal adjustments is more than mildly disturbing to me too.

 
At 6/01/2012 2:18 PM, Blogger morganovich said...

jon-

i just ran % change in payrolls from 1/1 to 4/1 for every year since 1960.

(this seems closest to measuring q1 vs q4)

this last gain does not even look close to the second highest.

2011 was higher. so was 2004-6.

the average in that period inclding recessions was 0.485%.

2012 was 0.362%, below the average and not even half of the good years and not even 20% of a great year like 1978. (1.85%)

i am having real trouble figuering out on what you are basing your claim it was the second best q4-q1 jump on record.

based on my run through the PAYEMS series, it looks to be below average and far, far from the best results.

can you walk me through what you are doing?

everyhting i am looking at looks completely opposite to what you are saying.

 
At 6/01/2012 2:25 PM, Blogger VangelV said...


1. Manufacturing payrolls increased in May by 12,000, which was the eighth consecutive monthly gain in factory jobs, and the 18th monthly increase out of the last 19 months. For the 11th straight month, the manufacturing jobless rate (7.1%) was below the national rate (7.7% NSA). Manufacturing employment at just below 12 million in May was at the highest level in slightly more than three years, since April 2009. Since 2010, manufacturing employment has increased by almost 500,000 jobs.


Talk about missing the boat. There are three things to consider when harping on manufacturing jobs.

First is the depth of the contraction. It is natural to have a bounce after a severe contraction that postponed needed purchases.

Second is the automobile sector. Factories have kept assembling vehicles even though inventories have been building. The problem is that real incomes are down and that much of the activity can no longer be sustained. Expect to hear announcements about consolidation and factory shutdowns next year.

Third is the shale energy scam. There are huge expenditures as companies hope to cash in on shale gas and oil. These require massive amounts of pipe, new rigs, compressors, pumps, etc. But we have already seen the shale gas bubble implode and from what I see the shale liquids bubble does not have nearly as much time to run.

 
At 6/01/2012 2:25 PM, Blogger morganovich said...

bart-

"I can drink to that!, and probably will after the markets close.

The wild variability from year to year in the seasonal adjustments is more than mildly disturbing to me too."

amen brother.

the seasonal stuff has been all over the place lately. i keep expecting them to settle down as the tail of volatility from 2008-9 trails off, but so far, not so much.

this is going to be a rotten, volatile month with too many damn political binaries. i too think that plowing the suds off a few might be just what the doctor ordered today.

financial district bar futures are going to be rallying big-time.

 
At 6/01/2012 2:27 PM, Blogger VangelV said...

The difference is we have a lot father to come from. Really, this recovery in employment is not historically unusual. Sure, it could be faster, but it's not dead by historical standards (the median growth rate for employment at this point in a recovery is 1.6%).

But that is the point. Given the amount of liquidity thrown into the system it is very unusual to have this little growth. It should be easy to create jobs when trillions in new money and credit are created. The fact that it did not work should make you rethink what you believe that you know.

 
At 6/01/2012 2:47 PM, Blogger Tom said...

All BLS jobs reports are junk. They are based on surveys and must be repeatedly revised. They use a stone age methodology.

Instead, we should be using Treasury figures, from the immediate, daily, online payroll reports of all employers - the count of employees, payroll amounts, and withholding amounts. This is not a sample, it is the jobs universe.

TrimTabs Economic Research tracks Treasury figures and reports them each month. Here's a video on the May figures - 124,000 jobs created.

http://trimtabs.com/blog/2012/05/30/trimtabs-says-u-s-economy-added-a-disappointing-124000-jobs-in-may/

 
At 6/01/2012 3:01 PM, Blogger morganovich said...

friday funny:

http://i.imgur.com/hyoFj.jpg

a layoffs headline that likely got the editor fired.

 
At 6/01/2012 3:15 PM, Blogger VangelV said...

Instead, we should be using Treasury figures, from the immediate, daily, online payroll reports of all employers - the count of employees, payroll amounts, and withholding amounts. This is not a sample, it is the jobs universe.

The problem is that the government does not like the Trimtabs data because in most cases the numbers come out far worse than the reported numbers. And the Trimtabs people have argued that the BLS bogus inflation numbers look the real wage numbers much better than they are.

 
At 6/01/2012 3:37 PM, Blogger Moe said...

Morganovich:

I'll see your one and raise you one..


http://10.1.0.24:15871/cgi-bin/blockpage.cgi?ws-session=855689772

http://3.bp.blogspot.com/_GNgKrLlDrJE/SunGEtMFJHI/AAAAAAAAAjU/k5OigIgxftg/s400/colon_pounding.jpg

 
At 6/01/2012 7:14 PM, Blogger Larry G said...

" Jobs Report Makes Federal Reserve More Likely to Act"

" There are limited options for additional action. The Fed generally guides the economy by adjusting short-term interest rates, but it has held rates near zero since December 2008, and already has said that it plans to keep rates near zero until late 2014, at the earliest. Even an extension of that promise would have little impact on interest rates.

That leaves bond purchases, the Fed’s major tool during the current crisis. In 2009 and 2010, the Fed bought more than $2 trillion of Treasury and mortgage-backed securities, forcing private money into investments that carried higher risks and driving down borrowing costs for businesses and consumers."

http://www.nytimes.com/2012/06/02/business/jobs-report-makes-federal-reserve-more-likely-to-act.html?pagewanted=2&_r=1&seid=auto&smid=tw-nytimes

 
At 6/01/2012 7:30 PM, Blogger VangelV said...

" There are limited options for additional action. The Fed generally guides the economy by adjusting short-term interest rates, but it has held rates near zero since December 2008, and already has said that it plans to keep rates near zero until late 2014, at the earliest. Even an extension of that promise would have little impact on interest rates.

That leaves bond purchases, the Fed’s major tool during the current crisis. In 2009 and 2010, the Fed bought more than $2 trillion of Treasury and mortgage-backed securities, forcing private money into investments that carried higher risks and driving down borrowing costs for businesses and consumers."


Actually, the Fed is not bound by any rules and, as Greenspan has stated, could buy whatever it wished. Perhaps it can start by buying some shares of Facebook, Chesapeake, and GM. It could buy the bonds of shale producers or solar companies looking for cash to keep going. It could buy copper, zinc, or office buildings. Anything to get people like Mark to tell us how great things are, at least until after the election is over.

You should ignore what the Fed is buying and bet on reality instead. Buy gold and do a bit of reading. If you like fiction get yourself a copy of Wolf Among Wolves and pay attention. If you want to understand more get Man, Economy, and State or Human Action.

Of course, you have shown yourself incapable of learning so I doubt that you will do what you must to navigate the coming turmoil.

 
At 6/01/2012 11:30 PM, Blogger juandos said...

The May jobs report was a complete and utter disaster for the economy and, perhaps, President Obama’s chances for reelection.

Employers created just 69,000 jobs last month, the Labor Department said on Friday. That’s the fewest since May of last year. Economists had been expecting nonfarm payrolls to increase by 150,000. (In fact, the result was lower than what any economist polled by Reuters had predicted.)

Moreover, companies added 49,000 fewer jobs than previously estimated in March and April. Talk about a slowdown. The average monthly gain was 226,000 in first quarter vs. an average of just 73,000 in April and May.
...

 
At 6/03/2012 10:12 AM, Blogger bart said...

financial district bar futures are going to be rallying big-time.

If you have the symbol, I'll short them on Monday. -g-

 

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