How To Parse A Jobs Report PDF Print E-mail
Written by King Banaian   
Friday, 06 June 2008 13:25

Let's begin at the beginning. What did we expect?

  1. The Bloomberg economic calendar page tells us we expected a loss of 60,000 jobs; we got a loss of 49,000. (WSJ carried the same number this morning.) Not good at all, but not a blow-out bad month.
  2. We expected hourly wages to rise 0.2%, they went up 0.3%. Average workweek came in right where we expected.
  3. We expected the unemployment rate to be 5.1%, but we got 5.5%. Whoa! How did that happen? The answer, quite simply, is that the level of people entering the job market went up.

Have a look at Table A-8 from the report. We can decompose the 5.5% unemployment rate into the reasons by which they are unemployed. Here are the numbers for May, with April numbers in parentheses.

  • Job losers and those who have completed temporary jobs 2.8% (2.6)
  • Job leavers (quitters) 0.6% (0.6)
  • Reentrants 1.6% (1.4)
  • New entrants 0.6% (0.5)
  • Total unemployment rate 5.5% (5.0)

So had we had the same behavior of people entering the labor force as we had for April (which was the same as for the entire first quarter), the unemployment rate would have come in at 5.2% rather than 5.5%. So the employment-population ratio, which many have used in the past to account for what's happened in the labor market when the unemployment rate didn't provide them the gloom and doom they wanted, only dropped by 0.1 to 62.6%, virtually unchanged since February.

200,000 new teens are in the labor force in May 2008 vs May 2007 (table A-2, with a nod to Paul who spotted it while I was writing this.) That's one source of the new workers into the workplace, but not all of them, as the number of people not in the labor force fell by 369,000.

That last number is the surprise, the reason we will end up talking about the unemployment rate all weekend long. The rest of the data should have come as no surprise. The job market is weak but not in free fall; an oil shock and a housing contraction should do what we're seeing here, but so far the loss of jobs in the first five months 2008 has been 324,000, not much different than the first five months of 2001. That's about what we grow in two good months.

Cross-posted at SCSU Scholars. Comments welcome.