An Analysis of the December 2014 Unemployment Report
The national unemployment rate fell 0.2% to 5.6% as the US created 252,000 Non-Farm Payroll jobs in December. Job growth occurred in construction, manufacturing, health care and food service. Construction added 48,000 jobs. The temporary help category grew by 14,700 jobs and the governments added 12K jobs. The Black unemployment rate dropped 0.6% from 11% to 10.4% as an additional 93,000 people found work.
The national unemployment rate declined from 5.8% to 5.6% as an additional 111,000 people reported employment based on the Current Population Survey. The labor force shrink by -273K people and the labor force participation rate also declined to 62.7%. The drop in the unemployment rate was due to a people leaving the labor force which is measured in the labor force participation rate. When the recession started most labor force drop outs were people who could not find jobs. Now, in 2014, the low participation rate is due to baby boom retirees.
Figure 1. Unemployment Rate and Labor Force Participation Rate, Dec., 2014. Source: BLS CPS
There is some positive news: The employment to population ratio remained at 59.2, the best rate since August 2009. The EM ratio reached a modern high of 64.7% in May 2000 toward the end of the Clinton administration.
The private sector added 252,000 jobs while the government increased the job total by 12,000 jobs. The construction added 48,000 jobs during a winter month. There were also 17,000 new manufacturing jobs and 44,000 new healthcare jobs added in December 2014. Professional and business services has a jump of 52K while leisure and hospitality also added 36.000 workers.
There were 2.8 million people classified as long-term unemployed (out of work for 26 weeks or longer), About 6.8 million people who were underemployed (working part time but wanted full time work). A total of 15.5 million workers were unemployed or underemployed (9.9% of the workforce).
Figure 2. Non Farm Payroll Changes. December 2014. Source: BLS CES
The unemployment rate for women was calculated at 5.0% and men at 5.3%, while the rates for other groups remained largely unchanged: teenagers (16.8%), whites (4.8%), and Blacks (10.4%). The Hispanic rate dropped to 6.5%. A huge drop show the economy is recovering is paces that generate Hispanic employment. Black teenage unemployment was 33.2%.
The Dow Jones Industrial Average rose again on the news to an index value of 17,200.
There were positive revision for October employment numbers(+18,000 to 261K) and for November from 321K to 353K (+32,000 increase).
News of the Political Economy
No real news. President Obama and House Republicans released budgets. Sequestration continues to depress government spending.
The Big Story
According to the Bureau of Economic Analysis, the economy grew by 4.6% annually in 2nd quarter and 5.0 in the 3rd quarter. That is impressive growth for an "older" economy. European growth has been flat or down except for Germany. Wages were stagnant again. Larry Wilmore got a regular show called "The Nightly Show".
Wall street is trying to figure out when the fed will rate interest rates. Many economists are trying to figure out how much slack there is in the economy. People are no longer watching the unemployment rate and have switched to wathcing part-time workers who want full-time jobs and wage growth.
Black Unemployment
The national Black unemployment rate was pegged at 10.4% while the Black labor force participation rate was 61.3%. The number of Black people holding jobs increased by +93,000 while the labor force was reduced by -19K causing a large 0.6% decrease in the unemployment rate. The 12 month average black unemployment rate has been 13.3%, so we are finally dropping below the 12 month trend.
Figure 3. Unemployment and LFP Rates for Blacks, December 2014. Source: BLS CPS
Figure 3. Unemployment and LFP Rates for Blacks, December 2014. Source: BLS CPS
The "real" black unemployment rate dropped to 16% during December due to improvements in the national rate, the U-6 rate and the Black unenployment rate. The rate is calculated by adding the difference in national U-6 / U-3 to the national Black unemployment rate(Black U-3).
Figure 4. The Real Black Unemployment Rate, December 2014
There was about 1.96 million Black workers looking for jobs and 93 thousand self reported they had found employment. Black labor force drop outs increased by 54,000.
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Household Survey Details for December
As previously mention, the economy grew by more than 4.0% in the 2nd and 3rd quarters, yet there has been only a small increase in hiring. Total job gains for the year are 2.95 million jobs of which 2.7 million are private sector jobs.
The long-term unemployed (27 weeks or more) was 4.1 million people which represents 37.3% of the unemployed. The median duration of unemployment was 17.0 weeks while the average duration was 37.2 weeks.
The “work part-time, wants full-time,” fell to 7.7 million. This is a measure of excess labor in the marketplace. About 2.1 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. The report estimated that there were 762K discouraged workers (part of marginally attached) who are not looking because they believe there are no jobs for them.
All three categories dropped in November which is a postive sign of a tightening labor market.
All three categories dropped in November which is a postive sign of a tightening labor market.
Establishment (Business) Survey Results for February
Non Farm Payroll increased by a reported 203,000 which is well above the 12 month average of 150K jobs created since Dec 2009 (+194K Average for past 12 months). Shockingly, even government payrolls expanded(+7,000). Growth was broad based, with gains in manufacutring and services. Transportation added 30,000 and retail trade added 22,000 postions while business services increased by 35,000. Healthcare added 29.6K and leisure services jobs increased by 17,000.
Key sectors of the economy fared well. Construction added 17,000 while Manufacturing jumped 27,000 spots. Temp Help, a negative indictor, grew by 16,400 workers.
Major gains occurred in high wage areas including manufacturing, construction and healthcare. Leisure and Hospitality also expanded.
Non-Farm Payroll Revision
October was revised upwards from +243K to +261K and November was revised upward from +321K to +353K total additional increase of +50K jobs.
ADP
ADP report a non farm payroll increase of 241,000 jobs. Small business (1-49) employees accounted for 106,000 new jobs. Medium sized business(50-499) added 70,000. And large businesses(500 workers or more) added 66,000 employees.
