The Bureau of Labor Statistics (BLS) monthly employment data in June 2011 was really terrible overall, describing little growth. As the USA is still recovering from a recession, and now at a point where the economy should be grabbing – this data is almost like a stomach punch.
Nonfarm payroll employment was essentially unchanged in June (+18,000), and the unemployment rate was little changed at 9.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment in most major private-sector industries changed little over the month. Government employment continued to trend down.
Employment is one case where there are other data sources we can use to validate what we are being told – ADP’s employment data was released yesterday (analysis here). The BLS’s headline number includes government non-farm employment, and excluding the government sector – BLS private non-farm employment grew 57,000 vs 157,000 for ADP.
Although jobs growth of 157,000 is better than 57,000 – neither is good. It is worse if we adjust for government: 118,000 for ADP & 18,000 for BLS. The economy needs to grow at least 150,000 just to keep up with the growth of the people entering the jobs market. The USA real jobs growth has been negative now for the last two months.
Let me repeat my theme on BLS vs ADP:
Econintersect believes the simplistic sampling extrapolation technique of ADP yields a far better picture of the employment situation than the complicated, convoluted Bureau of Labor Statistics (BLS) methodology.
Because of the differences in methodology, many pundits ignore the ADP numbers – while waiting for the BLS numbers. Although there can be a low correlation in a particular month, the different methodologies tend to balance out, and the correlations are excellent outside of the data turning points. We are now 15 months past the post recession turning point in employment.
Looking below the headlines:
- In the latest BLS report employment-population ratio fell from 58.4% t0 58.1% – and the labor force participation rate fell slightly from 64.2% to 64.1%). These ratios tell you that the population or workforce without a job worsened by 700,000.
- Econintersect does not like the BLS methodology of determining unemployment – only participation rates or employment-populations ratios tell you what is really going on with unemployment. But for those who like to read this the headline U-3 unemployment rate rose from 9.1% to 9.2%.
- The U-6 “all in” unemployment rate (including those working part time who want a full time job) rose from 15.8% to 16.2%
- Average hours worked remain unchanged compared to an April upwardly revised 34.4. A rising number indicates an expanding economy.
- Local government employment fell by 39,000. While some of these jobs could have reappeared in private sector employment as outsourcing, loss of state and local government jobs remains a headwind to economic growth.
- The big contributors to employment growth last month were professional and business services (12,000 versus 44,000 last month) and education and health (0 versus 34,000 last month). Education was the headwind losing 17,400 jobs.
- Economic markers used by Econintersect to benchmark economic growth were mediocre. The transport sector employment is up 2.2% YoY this month. The support services industry (including temporary help) was up 3.1% YoY but fell 1.3% MoM annualized. Econintersect believes the transport sector is a forward indicator so this implies future lack of jobs growth. Others look at temporary help as a forward indicator, and this also is weak.
- Manufacturing grew 6,000 versus a loss of 5,000 last month..
- The unemployment rate for people between 20 and 24 fell from 14.7% to 14.5%. Econintersect posted an analysis on university graduate unemployment which is worth a read (analysis here).
- Average hourly earnings up-ticked slightly from $19.42 to $19.41.
- The average weekly hours remained unchanged at 33.6.
Please refer to June 2011 ADP Employment Growth: Not Good, Not Bad for statements from the National Federation of Independent Business and from outplacement agency Challenger.
In our June 2011 economic forecast, we estimated non-farm payroll growth at 130,000, which was far above some other pundits estimated between 50,000 and 68,000. The other estimates have proven to be better than Econintersect. How many jobs businesses create in any one month is not directly dependent on these economic factors, but on individual decisions. The impact of all the economic factors is averaged out over many months.
Econintersect will continue to examine this data, and readers can look forward to more analysis in the days to come.
June 2011 ADP Employment Growth: Not Good, Not Bad by Steven Hansen
Is A Budget Deficit Necessary for an Economy? by Steven Hansen
What’s Up With Employment? by Steven Hansen
JOLTS: Likely Indicating Slowing Employment Growth by Steven Hansen
Is the Stimulus Effecting Unemployment Claims? by Steven Hansen
College Training for Unemployment by Mike Konczal
Economic Damage Storm Track of The Great Recession by Ted Kavadas