Saturday, February 4, 2012

January's Published Employment Gains Are Real ... Maybe Even Better Than Reported

January's employment report makes clear that conditions continue to improve on the jobs front. Maybe even more than we think. But we'll get to that later.

Similarly, the U. S. economy is regaining health as well, albeit at a much slower than desirable pace for this time in the recovery. That's why we need to contain any tendency toward irrational exuberance and continue to be "cautiously optimistic" instead of "genuinely optimistic" about monthly job growth approximating 250,000 or more in future months.

With that caveat in mind, here's the good news. Reported job gains for January were 243,000 versus an estimated 125,000. The unemployment rate decreased to 8.3% from its prior month reading of 8.5% while the broader U-6 rate ticked down from 15.2% to 15.1%. Please see Jobs Data Show Sustained Growth.

What's it all mean? In simple terms, it means that we're moving farther away from a double dip recession possibility, and that's a good thing. That said, we're moving forward rather slowly, albeit in the right direction.

Another thought provoking article suggests that up to 500,000 jobs may have been created last month, roughly double the actual reported number of 243,000 and some four times the January estimate of 125,000.

Did Economy Really Create 500,000 Jobs? says this:

"According to one little-followed measure, the economy created nearly 500,000 jobs last month — about twice as many as the government’s official figure of 243,000.

To gauge employment, the Labor Department uses two separate surveys. The jobs figures come from establishment payrolls, while the unemployment rate comes from a survey of U.S. households.

But the Labor Department also releases jobs figures from the household survey that it has adjusted (by subtracting farm workers and so on) to reflect the same sort of jobs the establishment survey covers. By this count, the economy added 491,000 jobs last month.

In fact, the household gauge shows that the economy didn’t erase quite as many jobs in the recession as the establishment survey did, and that there’s been a significantly stronger rebound in employment. But why?

Both of the Labor Department surveys have downsides. The sample size for the household data is much smaller than the establishment figures, for example. But the establishment figures can’t always keep up with shifts in the makeup of U.S. businesses. So economists generally think the establishment figures are better, but sometimes argue that the household ones are better at picking up turning points in the labor market. . . .

Analyzing a data set that allowed (two economists) to match people in the household survey with people on employee payrolls from 1996 to 2003, the economists found “substantial discrepancies” between the two.

Some 6.4% of people who showed up as holding jobs on employee records were recorded as unemployed in the household survey. Many of them were 65 and older — which suggests they were people who considered themselves retirees even as they continued to draw some sort of paycheck. An even larger 17.6% of people who counted as employed in the household survey didn’t show up on employee records. Many of them had demographic characteristics, such as low education levels, that suggested they were working off the books.

The economists also found that from 2001 to 2003 — the period that covers the brief recession and the jobless recovery that followed it — the number of people on employer records who counted in the household survey as unemployed declined. But the number of people who didn’t show up on employer rolls but who were counted in the household survey as employed rose. That’s a pattern that might be repeating itself, with fewer senior citizens taking jobs here and there to round out their retirement income, and more people getting paid under the table."

Here's what we do know. Unemployment remains high, and economic growth is still quite slow.

We have at least several more years of a higher than 5% unemployment rate ahead of us. It's at least an even bet that we won't break below the 8% rate before sometime in 2013.

And if government spending keeps growing, economic growth won't be satisfactory. Not even close.

If we stagnate economically, we'll be disappointed with employment conditions and general economic prosperity for a very long time. Unless we choose to get used to it, of course. But let's never settle for that.

Let's do all we can to make sure that an unemployment rate of 8%, 7% or even 6% never becomes something that we expect, let alone accept, as Americans.

Complacency is something we can never afford. The longer term economic well being of many of our fellow citizens is at stake.

Thanks. Bob.

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