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business newsBehind the Scenes Analysis of Economic Headlines
What the real data and numbers are, and what they actually mean for the economy's future.
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Some Really Dismal Numbers
The unemployment numbers last week were just bad, even though the spin doctors were out in force. Of course, we knew that because of Census workers being laid off the number would be negative, and it was, down 125,000. But the "bright spot" we were told about was that private payrolls came in at 83,000 new jobs. Let's look at what you didn't see or hear.
First, last month's dismal (there's that word again) private job-creation number was revised down to 33,000 from 41,000. So in two months, total private job creation is 116,000 jobs. We need 125,000 jobs per month just to keep up with population growth.
But it's worse than that. The headline number we look at is from the Establishment Survey. That means they call up existing businesses they know about and ask them how many people are working for them, etc. One of the first things I do when the employment numbers come out is look at the birth/death assessment on the Bureau of Labor Statistics (BLS) website.
For new readers, the birth/death assessment has nothing to do with people dying, but rather is the BLS's attempt to estimate the number of new businesses that have been created or have "died" within the last month, and they use these numbers to adjust the employment total. They use historical, seasonal numbers to create a model from which they make these estimates. There's nothing conspiratorial about the numbers -- they have to make an attempt at such an estimate, otherwise the employment number would be badly off. But the birth/death number can skew the totals a lot more than is typically realized.
Take the last two months. Using the birth/death model, the BLS assumes that 362,000 jobs were created somewhere. That's three times the number of jobs in the headlines we read. Those extra jobs were added into the total because that's what the model told them to do. And over a complete business and employment cycle, those numbers will average out to be pretty close to right. But as I said, they can also be misleading in the short term. Let's look closer at some of the details.
The B/D adjustments say that we added 65,000 construction jobs in the last two months, more than half the total number of jobs created. Really? US single-family homes set an all-time low sales number last week. Mortgage applications are way down. Home construction is off. Commercial real estate construction is down. Where are those construction jobs?
158,000 new jobs have supposedly been created in the hospitality and leisure industry in the last two months. And that's consistent with what normally happens in summer time. Typically, these are lower-paying jobs. (I worked a few myself while in college.) In the actual numbers, as surveyed, they estimated only 33,000 new jobs in L&H, so the B/D adjustment accounted for nearly all the positive number.
But what happens is that most of those L&H jobs go away in the fall, so then the B/D adjustment goes negative. Further, I'm not sure we can assume a typical cycle here, to base the B/D number on.
(One more thing to complicate all this. The headline number we see is seasonally adjusted, but the B/D assessment isn't. And we just won't go there. That's way too much "inside baseball" sort of trivia.)
But look at this chart from my favorite data maven, Greg Weldon. It shows that the number of people planning vacations is way down, dropping by more than 35% in the last three years, for the second lowest number ever. Ever.
That's not consistent with a typical hospitality and leisure job-growth pattern. I have three kids working in that field, and the talk isn't of robust job creation or lots of overtime.
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