posted March 5, 2012
Two Articles on Jobs: ‘The US Jobs Crisis-The Bigger Picture’ and ‘Those Peculiar January Jobs Numbers’

Article 1: THOSE PECULIAR JANUARY JOBS NUMBERS: OR, WHEN 243,000 JOBS AREN’T

The January 2012 jobs report released by the US Labor Department on Friday, February 3 indicated that 243,000 new jobs were created in the nonfarm sector of the US economy last month. Additionally, the U-3 unemployment rate fell from 8.5 to 8.3%. How real are those numbers? Are they actual jobs created? What’s the true unemployment rate?

First, it is important to note that the 243,000 January jobs numbers are not the actual jobs created. They represent ‘seasonal adjustments’ made to the raw data for jobs, referred to as the ‘not seasonally adjusted’ jobs tally for the month. The January jobs report reflects an anomalous massive upward revision of the raw jobs data, due to assumptions about seasonality and new business formations.

Let’s look at trends from November 2011 through January 2012 for both the ‘seasonally adjusted’ and ‘not seasonally adjusted’ for purposes of comparison.

The actual (not seasonally adjusted) jobs numbers for November 2011 show there were 133.179 million nonfarm jobs in the US economy that month. The following month, December 2011, total nonfarm jobs had declined to 132.952 million, for a decline of –227,000 jobs. That makes sense, given that –203,000 jobs were lost in construction, which is typical for Decembers, while –74,000 jobs were reduced by states and another-72,000 by cities and schools that month. Offsetting the construction-public sector job losses were 142,000 jobs added in Retail, mostly department stores, which also makes sense given the holiday season. Manufacturing and other service sector jobs changed little, some up and some down slightly over the month. Again, these are the ‘not seasonally adjusted’ jobs for November.

What about the ‘seasonally adjusted jobs numbers’ for November? One would expect some differences in numbers here, of course. Let’s look. Total nonfarm jobs increased in November, by 203,000 instead of declined (per the not adjusted numbers) by –227,000. That represents a net difference and ‘swing’ of 430,000 jobs.

Now let’s make a similar comparison of ‘seasonally adjusted’ and ‘not seasonally adjusted’ for jobs between December 2011 and January 2012 that were reported on February 3, 2012 for last month. What appears is an incredible 7 to 10-fold increase in the difference between ‘seasonally adjusted’ and ‘not seasonally adjusted’.

The not seasonally adjusted, raw jobs numbers show a loss of jobs for January 2012, after the holiday season, of –2.7 million jobs. That includes about –300,000 construction jobs, which is not strange given the mid-winter slowdown typical of this sector. Plus another –600,000 jobs in retail, which makes sense after the typical holiday sales hiring surge typical in November-December. And another –400,000 in business professional services as most businesses trim their labor force at the start of the year to keep costs down and to watch when and where to add jobs back in the subsequent months. However, the adjusted, upward revised numbers for January showed a gain of 243,000 jobs instead of the unadjusted –2.7 million fewer jobs. That 243,000 gain in jobs includes adding construction jobs in mid-winter, and adding even more jobs—176,000—in Retail and Services after the holiday season hiring surge. This retail-services job gains for January occur, moreover, despite the dismal retail sales holiday season when, except for autos, retail sales actually declined by 0.1% compared to the previous year. Why would retail employers add jobs after that poor sales season? Why would they not reduce the huge numbers of part time and temp hires of November-December in January, as they typically do after the holidays—especially given the poor retail sales performance? And why would the construction sector add jobs in mid-winter? And why would business professional sector companies add 1.1 million jobs, according to the seasonal adjustment assumptions, instead of trimming jobs, as reflected in the unadjusted numbers? In other words, why would professional-business services not make their typical beginning-of-the-year labor force temporary reductions?

It is interesting to note that instead of a ‘net swing’ between the seasonally adjusted-not seasonally adjusted numbers of 430,000, as occurred during November-December, we get a ‘net swing’, or difference, between seasonally adjusted vs. not adjusted of nearly 3 million jobs for December-January? Does this make sense? One would expect major differences between seasonally adjusted-not seasonally adjusted numbers. But a seven-fold increase in the difference from month to month—from 430,000 to 3 million—is not credible.

Let’s look at this massive difference and ‘net swing’ anomaly from another perspective: the unemployment numbers. To start, forget about the ‘U-3’ unemployment number preferred by the press, with its reported reduction in unemployment rate from 8.5% in December to 8.3% in January that the administration and press have been hyping. The more accurate U-6 unemployment rate is a better indicator since it accommodates part time, discourage workers, and underemployed workers. It too underestimates true unemployment by about another 2%, per this writer’s calculations, but not nearly as dramatically as the U-3 number.

In December the U-6 unemployment rate for 15.2%, both for not seasonally adjusted and seasonally adjusted total employment. That means, for the unadjusted employment levels there were 20.208 million jobless in December 2011 and 20.096 million unemployment in December per the seasonally adjusted numbers. That’s a difference of only 112,000 unemployed.

But look at the December-January difference in unemployed between the two sets of numbers: The U-6 unemployment rate for seasonally adjusted fell to 15.1% in January (from 15.2%) in December, while the not seasonally adjusted number of unemployed rose from 15.2% in December to 16.2% in January. The U-6 indicates the number of unemployed rose, which makes sense for construction, retail, and other sectors per the preceding argument. But for the seasonally adjusted numbers, unemployment declined for the U-6 by 0.1% (and 0.2% for the U-3). The ‘net swing’ between the two sets of data for December-January was 1.108 million, compared to the ‘net swing’ for November-December of only 112,000. The difference represents a ten-fold jump for December-January.

How can the seasonally adjusted vs. not seasonally adjusted jobs numbers be so large for December-January compared to previous months? How can what appears to be a decline in jobs clearly in January end up reported, after seasonality and other statistical ‘adjustments’, as an upward revised 243,000 jobs?

Other economists have been focusing on the possible problem with the seasonality assumptions in the January jobs numbers this past week, but their commentary is not reaching the public press. The essential point is that the January jobs report is peculiar, and requires an explanation by Labor Department statisticians why there was a ‘swing’ of about 3 million jobs last month between the raw jobs numbers data and the ‘upward revisions’ in the seasonally adjusted numbers for the month.

ARTICLE 2: THE U.S. JOBS CRISIS–THE BIGGER PICTURE

Despite last Friday’s January 2012 Labor Department jobs report, more than three years after President Obama assumed office the crisis in jobs in the U.S. continues as the number one problem of the US economy. The ‘seasonally adjusted’ official numbers may have indicated 243,000 jobs created last month, but the actual, raw data on jobs was dramatically different, as will be explained in a follow up analysis to this item on jobs in the U.S. economy. In the interim, for those readers inclined to get excited about January’s very short term jobs picture, to start here’s some more sobering facts on the ‘bigger picture’.

Based on the U.S. Department of Labor’s ‘U-6’ unemployment rate, at the official end of the recession in June 2009 there were 25.4 million jobless; By January 2012 more than 30 months later, there still remained 23.4 million without work. That’s a total of only approximately 67,200 jobs created a month over two and a half years—a monthly number barely half of what is needed to even absorb new entrants into the labor force each month.

Most of the two million jobs created in the private sector since Obama assumed office three years ago have been lower paid service jobs, part time jobs, and temporary forms of employment—all providing lower wages and few benefits. Higher paying and benefit jobs in manufacturing and construction have, in contrast, continued to decline since the June 2009 recession low-point. Today there are still 79,000 fewer jobs in manufacturing and 680,000 fewer jobs in construction than there were at the recession low-point of June 2009. There were 21.1 million manufacturing and construction jobs when the recession began in 2008. There are only 17.3 million manufacturing-construction jobs today.

Unlike all previous 11 recessions in the U.S. since 1945, the government sector has not created jobs to offset private sector job loss during the recession. Government instead has become a major contributor to job destruction. Local governments have laid off 643,000 workers since June 2009, nearly a quarter million—247,000—of whom have been teachers. Public workers and teachers continue to be laid off at a rate of 20,000 a month or more. At that pace, by the end of his first term, President Obama may have presided over a loss of nearly a million public workers’jobs.

Other indicators of the continuing sad state of the jobs markets in the U.S. after three years further corroborate the continuing crisis of jobs in the U.S. For example, the duration of long-term unemployed—i.e. those out of work 27 or more weeks—has continued to rise steadily since June 2009 from 24% of all those unemployed to more than 40% today. Another indicator of the continuing severity of today’s jobs crisis, the ‘Employment to Population Ratio’ that measures how well the economy is creating jobs in relation to the growth of population, shows the U.S. economy is growing fewer and fewer jobs as the U.S. population rises. In other words, we are not even keeping up with the population growth. At the start of the current recession 63% of the US population was employed; today only 58.5% of the U.S. population has jobs. Not least, the ‘Job Opening to Labor Turnover’ (JOLT) ratio shows there are still today 4.2 workers looking for every job offered—i.e. well more than double the 1.8 to 1 ratio that existed before the recession began.

The Jobs Creation programs offered by the Obama administration and Congress over the past three years have proved dismally inadequate. In January 2009 the Obama administration promised to create 6 million jobs if its 1st stimulus program costing $787 billion were passed by Congress, 40% of which were tax cuts. In June 2009 there were approximately 25 million unemployed. By mid-summer 2010 there were still 25 million unemployed and job losses began to rise again that summer.

The Obama administration’s answer was to propose even more tax cuts for corporations and investors, another $802 billion in tax cuts including a two year extension of the Bush-era tax cuts costing $450 billion. The administration then added another new twist to its jobs strategy in late 2010: it brought in corporate CEOs like Jeff Immelt of the General Electric Corp., and Bill Daley, a big banker, to run the President’s new ‘jobs council’. Their corporate answer to a jobs program was more free trade agreements, an end to more business regulations, lowering corporate tax rates for offshore multinational companies hoarding their profits in foreign subsidiaries to avoid paying US taxes, patent law reform, and taking hundreds of billions in funds from social security to cut payroll taxes. That corporate-designed jobs program failed in turn as well.

Obama administration business tax cuts, its corporate friendly and job-destroying free trade deals, and its raiding social security to give workers with jobs a paltry tax cut at the expense of retired workers’ deferred wages have all failed to even dent the 23-24 million still unemployed. The stimulus and tax cut programs of the past three years have bailed out big business and big banks, but have not created jobs beyond a mere trickle. What was once a ‘trickle down’ approach to job creation has become today a ‘drip-drip’ policy.

While the Democrats have thus far failed to provide any effective programs to restore the millions of jobs lost since the recession began, Republicans continue to propose old ‘retread’ solutions that destroyed millions of jobs over the past decade. Republicans continue to propose more tax cuts for corporations and wealthy investors, still more job-destroying free trade agreements, more cuts in social security-medicare-medicaid and other social programs, and a further expansion of defense spending. These programs not only have failed to produce jobs, but actually have eliminated them by the millions over the past decade.

The historical record shows that $3.4 trillion in Bush tax cuts, given mostly to business and investors, were associated with no job creation at all during his term. The number of private sector jobs when Bush came into office in January 2001 was 111,634,000. The number of private sector jobs when he left office in January 2009 was 110,981,000. The U.S. economy and taxpayer paid $3.4 trillion to lose 653,000 jobs. By December 2011, three years later and after another year extension of the Bush tax cuts, there were 109,928,000 private sector jobs. The more the Bush tax cuts, the fewer the jobs. Yet Republicans continue to beat their broken drum that ‘tax cuts create jobs’, when in fact there are still 1.7 million fewer private jobs in the U.S. than there were a decade ago.
Republicans further continue to chant for more cuts in social programs, when countless studies show it will result in the loss of millions more jobs. And they continually call for more defense spending and wars as a way to create jobs. But the facts here again are the contrary. Increasingly, defense spending results in more high tech-high cost weapons systems that only boost still further the bloated profit margins of defense giants like Lockheed, Raytheon, Boeing and others, and actually result in more jobs outsourcing to these same companies’ foreign defense contractor partners in Japan, Germany, Israel, the United Kingdom and elsewhere.

The S&P-Fortune 500 largest corporations today sit on more than $2 trillion in cash and refuse to spend it to invest in America and create jobs here at home. The big tech-big bank-pharmaceutical companies sit on another cash hoard of more than another $1 trillion sheltered offshore and refuse to bring it home to create jobs. And the big 19 banks sit on still another $1 trillion and refuse to lend to small businesses to create jobs.

If big banks and big business refuse to use their bailed out $4 trillion cumulative cash hoard of the past three years to create jobs, then the government must tax it, must take it back from them and directly create jobs itself. The U.S. needs a 21st century version of the 1930s Depression-era ‘New Deal’ jobs programs, adapted from the past to present conditions. What the U.S. economy needs is the immediate creation of a Civilian Conservation Corp (CCC) program similar to that created in 1933. In just 90 days the CCC created the equivalent of 1.2 million jobs in today’s economy. Intermediate and longer term, what the economy now needs is a new 21st century ‘Works Progress Administration’ (WPA), that created between 1935-40 the equivalent today of 25 million jobs.

More specifically, the U.S. needs a new ‘Alternative Energy Public Investment Corporation’ (AEPIC), in which the government would invest directly in alternative energy infrastructure. It needs a modern version of the 1930s CCC, a ‘Civilian Reconstruction Corporation’ (CRC), to directly build, repair and maintain urban areas and urban renewal. It needs a ‘Community Health Services Administration’ (CHSA), to build medical clinics in communities and provide direct health services to the working poor, those on Medicaid, and the 50 million uninsured. And it needs a ‘21st Century Works Progress Administration’(21WPA), that targets job creation in non-infrastructure and non-health services employment across all other industries and occupations.

The $4 trillion to fund these direct job creation programs are there. There’s no need to raise the deficit or debt. If the super-wealthy and their big corporations and banks won’t spend the trillion dollar bailouts they were provided by the US taxpayer, to invest in America and create jobs, then the only alternative is for the government to reclaim those trillions and spend it on direct job creation programs itself.

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