Reclaiming Common Sense

This week it was anticipated that the June Employment Situation Report would be underwhelming. This column projected that the number of full-time workers, non-seasonally adjusted (NSA,) would increase, part-time work would decrease, unemployment would increase and that participation could go either direction. That is just the Current Population Survey (CES) data. It also projected that the Current Employment Statistics (CES) data would show weak growth and a possible contraction. It was also projected that the seasonal factors would boost the non-seasonally adjusted (NSA) CES data to a solid gain when the seasonally adjusted (SA) CES data was reported.

You are reading and hearing elsewhere that the July Jobs Report was strong. The seasonally adjusted data was strong - reality was not so kind.

We saw the slowest July Workers Growth recorded since July 2013. The good news is that we added workers. The bad news is that we are seeing a slowing economy. This is slower growth than we saw during July 2010.

How did we see better worker growth reported than 2010? We saw slower NSA CES growth than July 2013 and a higher SA growth than July 2013 at the same time. Also note that the SA worker numbers grew 2004-2006 while it contracted according to the NSA data. Sometimes down is up.

The Growth Rate fell in the range of expectation - the seasonal factors did not. The seasonal factor used to convert the NSA data to the SA data was 0.991968 If we had the anticipated seasonal factor of 0.991597 or the rate we had recently seen last year, 0.991447, the Real SA CES number would have been reported at 155,000 Even if we used the projected value of 0.991597 the SA CES Private Sector Job Growth number should have been reported at 171,000. This is how the data is manipulated so that they do not need to change the narrative.

Private Sector Job Growth has been slower this year than 2011, 2012, 2013, 2014, or 2015. The good news is that we have not seen a contraction. The good news is that we broke away from the 2007 trend line. The question is what will happen next month. Was this a delay of decline or a plateau?

Full-time Job Creation was slower this July than July 2003 through July 2007, and slower than last July. There are two ways to look at the above histogram: We had better full-time job creation than July 2008-July 2014 and fewer part-time job losses than expected; We had slower full-time job growth than 2003-2007. We saw job expansion prior to the Great Recession. We were able to add full-time and part-time jobs during July 2004 and 2005. We have not added non-seasonally adjusted FT and PT jobs since July 2009 and July 2010. How did we add 456,000 jobs and only 85,000 workers? This is the difference between the two data sets.

Somehow we added both Seasonally Adjusted Full-time Jobs and Part-time Jobs - Something we normally do not do. This just "does not happen." This is not the best July data we have seen in a while. It was weak at best.

The Number of Unemployed Rose. Last month we had 8.144 million unemployed workers. This month we have 8.267 million. We saw an increase even tough we have had steady Continuing Claims numbers and record low first-time claims. This could be because we have seen weakness in the part-time job market recently and those part-time jobs that were added did not go to those who recently lost their jobs. We have 700,000 more July unemployed workers than July 2008. The last time, prior to the recession, we had this high a level of July unemployed was July 2004.

The Jobs Gap is Huge. We were adding enough jobs to accommodate population growth from December 31, 2004 though July 31, 2007. We have barely added any full-time jobs since July 2007. We have only added 1.7 million full-time jobs and 3.0 million part-time jobs since July 2007. We have only added 10 million full-time jobs and 1.7 million part-time jobs since 12/31/2004. We need 16 million jobs so that we can get back on track with where we were during 2007, just to accommodate the workforce population growth.

The Non-Seasonally Adjusted Unemployment Rate and Participation Rate inched upwards this past month. Unemployment should have gone down. Participation should have decreased, as well. We have a higher unemployment rate than we had during July 2007. The problem is that the effective unemployment rate, when the participation rate is factored into the equation, is over 10%, Participation has improved over last July and is slightly higher than July 2014. We need to see this participation rate trend continue.

The report was weak.  The Private Sector "Jobs Streak" ended during May. We did not add over 200,000 "jobs" this month. We added 217,00 seasonally adjusted CES workers. We added 85,000 non-seasonally adjusted workers. The number should have been reported between 155,000 and 171,000. Unemployment increased from last month's 8.144 million, even though the weekly unemployment report did not reveal that truth.

Don't believe everything you hear or read.... Unless it is in this column. Only the government lives in the seasonally adjusted world.

Dig into the data..