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Unemployment vs. Employment: What does it mean?

From The Daily Capitalist

Several things are happening with unemployment which are interesting and indicative of where we are in the business cycle.

There is no question that private sector jobs (nonfarm payrolls) are increasing. They were up by 231,000 jobs in the BLS's April report.

Courtesy Wall St. Journal

While government jobs upped the numbers to 290,000 you can't count those jobs in determining whether we are in a recovery. And many government jobs (66,000) were Census jobs that are only temporary anyway. Non-federal government employment actually dropped as states and municipalities cut back.

Strength was seen in: professional and business services, up 80,000; manufacturing, up 44,000; leisure and hospitality, up 45,000; education and health services, up 35,000; construction, up 14,000. Manufacturing has added 101,000 jobs since December.

To put this in perspective, in the past two year we have lost 8.5 million jobs according to the BLS, more than half of today's total unemployed. In the first four months of 2010 we've averaged 143,000 new jobs a month.

Employment recovery is good. Unemployment is a different thing. New jobs don't account for the total labor workforce. People come and go from the labor pool for a variety of reasons. If more people are looking for jobs after, say having given up looking, the unemployment totals can go up. This is what happened in April.

 The unemployment rate, those looking for jobs in the last four months increased from 9.7% to 9.9%. According to the BLS, the increase was due to an increase in the labor force. There is a rough netting process to determine job increases vs. labor increases: April employment increased 550,000 yet the labor market added 805,000 workers.

What is discouraging is that the broader unemployment indices are growing. People unemployed for 27 weeks or more rose by 169,000 to 6.7 million—almost half of all unemployed people (45.9%).

The broadest unemployment measure, known as U-6, grew from 16.9% to 17.1%. The U-6 figure includes “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that’s all they could find.

According to the BLS:

About 2.4 million persons were marginally attached to the labor force in April, compared with 2.1 million a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 1.2 million discouraged workers in April, up by 457,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.2 million persons marginally attached to the labor force had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

This shows that we need to create a lot more jobs to consider it a "recovery."

The third part of the BLS report dealt with the workweek:

In April, the average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.1 hours. The manufacturing workweek for all employees increased by 0.2 hour for the second straight month to 40.1 hours, and factory overtime was up by 0.1 hour over the month. The average workweek for production and nonsupervisory employees on private nonfarm payrolls increased by 0.1 hour to 33.4 hours in April.

Average hourly earnings of all employees in the private nonfarm sector increased by 1 cent to $22.47 in April. Over the past 12 months, average hourly earnings have increased by 1.6 percent. In April, average hourly earnings of private-sector production and nonsupervisory employees increased by 5 cents to $18.96.

Nothing very significant here. It shows that while some hiring is taking place, many of the workers are temps, and employers are striving to get more productivity from their employees before hiring new ones. That is, employers are still unsure about the economy. It is clear that with the large overhang of unemployed workers, wage growth will be kept down.

Courtesy Wall Street Journal

In an interesting article in the Wall Street Journal this week, "Moment of Truth for U.S. Productivity Boom," it appears that productivty gains (3.6% in Q1; down from 6.3% Q4 2009) have been coming as much from worker-management initiative as it is from capital investment.

The U.S. productivity per worker is among the highest in the world, of course thanks to workers, but the real reason is capital investment into machinery that make them productive. While there has been healthy spending in technology as businesses strive to become more efficient during the downturn, it appears that now there is a trend to have workers work smarter and harder.

But a tough job climate is also prompting workers to do more. "I feel like I work harder," says Jamie Barber, 34 year old, who has spent 12 years as a creeler [at polyester yarn manufacturer Unifi].

Unit labor costs slipped an annualized 1.9 percent in the first quarter, following a fourth quarter drop of 5.6 percent. Wages will remain subdued for the foreseeable future.

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