It was real ugly.
U.S. payrolls fell by 125,000 in June as the private sector added few jobs.
The unemployment report fell to 9.5% from 9.7%. But, the decline in the unemployment rate was the result of 652,000 people dropping out of the workforce--and therefore not counted as unemployed.
Years ago there was a writer at Barron's who queried state tax offices for receipt totals on a monthly basis. His assessments of employment numbers were generally confirmed by BLS's second revisions (in other words he was two months ahead of the accurate releases). Unfortunately he died about twelve years ago and no one else has picked up his work.
ReplyDeleteWhere do the "drop out" numbers come from? Does the BLS just make that up when they want the unemployment rate to stay low?
ReplyDeleteBirth Death model
ReplyDeleteDrop out estimate comes from the Current Population Survey question asking if "You're looking for work?"
ReplyDeleteBirth death model estimates employment at new companies to adjust establishment data.
Robert - In a sense, the falling figure represents a clearing labor market. As wages fall--whatever new jobs that are being created are coming in with significantly lower wages than what existed during the boom--many workers are deciding not to sell their labor at all and drop out of the market. Granted, this process has been slowed by the ever-extending unemployment benefit, but just the same, we expect some workers to drop out of the labor force during a market correction.
ReplyDeleteIn that sense, the latest figures represent a "good thing." This is exactly what happened in 1921, and what initially happened in 1929, until Hoover intervened to disrupt the correction. It suggests there are limits to the myriad of labor market interventions, and that market forces still have some strength in hat sector. No doubt, Labor Department economists are currently working overtime to correct this oversight.
@HRG
ReplyDeleteDon't confuse what is going on as a "clearing of the market". The number went up last month because of huge census hires. Huundreds of thousands were laid off by the census last month.
This is much more complex than a simpler clearing of the market.