Wednesday, April 10, 2013

February unemployment review: NFP jumps to 236,000 new jobs but all other stats are the same

BLS Unemployment Report Review for February

Ok, so here is a really good lesson in statistics.  The February unemployment report, which was released on  8, 2013, shows a jump of 236,000 jobs.  A huge jump over the from February  increase (119K).  So, we always have to remember the number can fluctuate by 100K up or down and that the number is constantly revised.

So what looks like a great number is in fact a random jump with no supporting indicators. Naturally, you  would expect to see the figure revised downward.  Instead, the figure was revised upward in April to 268,000 new jobs. And January was revised up to 148K. What the heck?

Long story short the unemployment rate (7.7%) and the non farm payroll number (236K), are the headline numbers, but they can randomly bounce around a very large amount.  You really have to look at the other numbers to get a complete picture.

Unemployment report summary and reaction

 Non Farm Payroll jumped by 236,000; a figure that is way above average.  There was strong growth in all employment categories except education and state government. The unemployment rate dropped 0.1% to a calculated 7.7%.  

The chart below shows the slow decline in the national unemployment rate.

The  large increase in payrolls came as unexpected news. The stock market surged on the news.   All other unemployment statistics were unchanged.

The national unemployment rate has reached a plateau around 7.8% with little sign of reduction in a slow moving economy.  The Employment to Population ratio was measured at 58.6%, the lowest since October 1983. The participation rate was rate 63.5% the lowest since June 1979. Both have barely moved in the past year.  The low values point to a huge number of people who have dropped out of the labor force.

Household Survey Results for February

The household data survey reported that the total labor force expanded by 165,000 while the number employed expanded by 170,000.  

The black unemployment rate stayed at 13.8%.  The reported black labor force decreased by 2000 people and -14,000 less black people said they were working.  Black employment was 16,059,000 workers.  Black teenage unemployment was 43% versus 22% for whites and 27% for Hispanics. Unemployment rate for Hispanics/Latinos was 9.6% while the rate for whites was 6.8%.

The black unemployment rate has reached a plateau while the national rate continues to decline.

The chart below shows the real black unemployment rate (Black U-6) stuck around 20% even as US national rate slowly declines.

The long-term unemployed (27 weeks or more) was 4.8 million people which represents 40% of the unemployed.  The median duration of unemployment was 17.8  weeks  while the average duration was 36.9 weeks.  People are finding jobs slightly faster.

The “work part-time, wants full-time,” number was 8.0 million.  These people are considered under employed and would like additional work.  About 2.6 million workers were marginally attached to the labor pool.  They have looked for work in the last 12 months but not in the last four weeks.   And there were 885K discouraged workers (part of marginally attached) who are not looking because they believe there are no jobs for them.

Establishment Survey Results for February

Non-Farm Payrolls rose by 236,000 positions in February.  The growth coming in construction, retail trade, business services, and healthcare. Construction was a very strong area of the job growth.  Construction added 48,000 jobs while retail trade added +24,000. Government lost -10,000 jobs. 

The following chart show the huge jump in private jobs which added 246,000 jobs in February

You can see the wide spread growth across all job categories except for education and state government.

Non-Farm Payroll Revision

Non-farm payrolls were revised in December upward to 219K from 196K and for January 2013 from 157K to 119K. The January revision was the first time we have had a negative revision in 6 months which may indicate a slowing economy.  
The average work week was at 34.5 hours and wages added 4 cent in February.


 ADP reported an increase in private payrolls of 198,000 positions for February.  Small business (1-49 headcount) added 77,000 jobs; medium size (50-499) added 65,000 and large companies (500+) increased workers by 57,000. The breakdown is important because large businesses tend to pay employee more. 

Sunday, April 7, 2013

White Networks block Blacks from Jobs

Nancy DiTomaso knows how white "networks" keep blacks from job opportunities.  Her book: "The American Non-Dilemma: Racial Inequality without Racism" delves into how whites retain their privileges while behaving in a self-described non-racist manner.

There is a story from Huffington Post here: "Black Unemployment Driven by White's favors for friends."

Nancy DiTomaso has been researching the topic for years.  Here is a great piece from a PBS program called "Race - The power of illusion" produced by California Newsreel in 2003. DiTomaso discusses racial inequality and hiring discrimination.

Race at Work: The realities of Race and Criminal Record in NYC Job Market

Here some old news but I don't want to lose track of it, so I am saving it in a blog post.

Devah Pager and Bruce Western did some great work in 2003 using job testers in NYC.  They used identical testers who were different only by race: black, white and Hispanic.   They then added the variable of a criminal record with a felony conviction.

The testers were choosen for similar background, appearance, and verbal skills.  The were all college graduates but representing themselves as high school diploma holders with solid work experience in the field. The testers were also coached to use similar self presentation styles.  They went to 1470 interviews.

The results were indicative of significant racial discrimination in hiring.

23% of whites were offered a job or a call back
19% of Hispanics a similar positive response
and 13% of black got a good response

A summary report from the NYC commission on human rights is here.

The detailed study by Devah Pager is here.

And here is Devah Pager dissertation which has the original research here.


Friday, April 5, 2013

Rage against the "Job-Killing" machine

We are feeling the pain of automation

One of the most important and under reported stories of our time has finally hit the big time.  Technology and automation are destroying jobs AND we are feeling it. For the past 100 years, technology has helped developed countries grow and raise their standard of living. It has created a high standard of living where everyone in society has all of life's basic necessities.  Technology has killed jobs but added many more until recently.

Technology did cause people to lose jobs but in a growth else where quickly absorbed the surplus. Most jobs required low-skill levels and hard work, so workers were quickly recycled in to other areas of the economy.

When the industrial revolution first started in Britain, the new machines were feared by the populous who thought they would put people out of work.  Instead, growing wages fueled demand for new material goods, the country grew, and the displaced workers moved on to other, newer industries.  Britain's internal growth and lack of global competition allowed the country to shift workers to more productive jobs.  Britain's financial system was designed to supported industry. Labor captured most of the increase in wealth and funneled it back into the economy as demand. The results was a prosperous cycle of demand and growth.

What has happened during the late 20th century is that the 100 year cycle of growing wages, growing demand and national income growth has been broken.  No one is complete sure why the link between growth and wage is broken.  Many economists suspect globalization / outsourcing (global labor competition, financial engineering, regulatory manipulation by large companies, and technology change).  We are going to look at technological change.

As we mentioned earlier, technology killing jobs has been in the news because of a great, new book called  "Race Against the Machine" by Erik Brynjolfsson and Andrew McAfee. Their basic theory is that smarter machines are reducing the demand for white collar labor, however the change can be absorbed as long as wages are sufficient to generate demand for technology.  In addition, two other factors have conspired to reduce employment: 1) developed countries are net importers of goods and 2) process (versus product) technologies have become incredibly efficient by historical standards.

There is no shortage of new machines and innovation, but the country cannot afford to buy them because wages have stagnated.  In addition, developed countries are net importers further reducing growth and wages.

We want to offer some further background reading on the problem:

Race against the machine
Economist: Has the idea machine broken down ?
60 Minutes

The dilemma  was summarized by Walter Reuther, the leader of the United Auto Workers union, in a famous anecdote he would tell.

'After touring a factory filled with lots of automated car making equipment, a manager asked Reuther how he was going to collect union dues from all the machines making cars."  Reuther replied "How are you going to sell cars to these machines ?" '

Here is some background on the quote.

Finally, just to keep the problem real, here are some video's of Robots in Action

Packaging robots from ABB on Youtube.
ABB dual arm concept robot is here. 


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