532,00 MORE JOBS LOST IN REAL TERMS

By Leo Hindry

As a sign that the economic recovery continues to lose momentum, over and above last week’s disappointing revision downward of second-quarter GDP growth to just 1.6% (instead of 2.4%), the Bureau of Labor Statistics (BLS), using its Current Population Survey of non-farm jobs, just announced this morning that in August 2010 the U.S. economy again shed more jobs than expected.  Specifically, “U.S. employers decreased (non-farm) payrolls by 54,000 jobs, with only 67,000 private-sector jobs added in the month versus an upwardly revised 107,000 gain in July.  The unemployment rate moved up to 9.6% from 9.5% as weak hiring by private employers wasn’t enough to keep pace with a large increase in the number of people looking for work.”  The BLS noted that there are now 14.9 million unemployed workers and since the Great Recession began (in December 2007) employment has decreased by 6.9 million.

The monthly BLS announcement regarding unemployment, as we note each month:

• uses only a survey of households rather than much more accurate payroll data;
• excludes changes in employment among the nation’s 10.9 million farm and self-employed workers, even though these two categories together represent more than 7% of the civilian labor force; and
• most important, does not take into account the 14.9 million workers who are:

1)    part-time-of-necessity because their hours have been cut back or they are unable to find a full-time job (8.9 mm);

2)    “marginally attached” because while wanting and available for work they have not searched for it in the past four weeks (2.4 mm); or

3)    “discouraged” and out of the labor force because they believe no jobs are available for them (3.7 mm).

Our Summary of U.S. Real Unemployment makes these three adjustments.  It also identifies average weeks unemployed, job openings, and the “Jobs Gap” that needs to be filled in order to be at full employment in real terms.  With the three adjustments made:

• The number of real unemployed workers in all four categories of unemployment – BLS, part-time-of-necessity, marginally attached and discouraged – increased by a massive 532,000 workers to 29.8 million, versus 29.3 million in July.  This very large 532,00 increase in the number of real unemployed workers contrasts sharply with the 54,000 (non-farm) job decrease just reported by the BLS, which again shows how misleading it is to consider only one of the four categories of unemployment and use only ‘survey’ data.  Significant declines this month in employment include: manufacturers shedding 27,000 jobs after adding 34,000 in July; the termination of 114,000 temporary Census workers; state governments cutting a further 14,000 jobs; and hundreds of thousands more workers pulling themselves out of the workforce and thus no longer being counted in any category of unemployment, not even as “discouraged”.

• The real unemployment rate is now 18.6%, compared to July’s real unemployment rate of 18.3% and this morning’s much lower official BLS rate of 9.6%.

• The number of real unemployed workers has increased by 13.0 million since the start of the Recession, and since December 2008 by 5.1 million.  By contrast, the economy needs to add around 150,000 new jobs each month simply to keep up with population growth.

• The Jobs Gap is 21.8 million new jobs in real terms; the administration continues to use a Jobs Gap figure of around 7.0 million jobs.

(I should note that some in the national press, when commenting on real unemployment, still leave out “discouraged workers” despite the fact that this is a huge category and arguably the most effectively unemployed of the four categories.  The all-in real unemployment rate of 18.6% drops to 16.7% if discouraged workers are not included.)

The average number of weeks unemployed is at least 33.6 and the number of workers unemployed a half year or longer is at least 10.0 million (i.e., BLS’s official figure of 6.2 mm plus the 3.7 mm discouraged workers). When considered together, these two numbers, each unprecedented in modern times, are a much better measure of the real employment condition than the more commonly used “initial jobless claims” number, especially when the latter is announced in the trough of a jobless recovery, which is where the nation is now.