Another Misunderstood Jobs Report

Record December Level of Full-time Jobs

Last week we received the first wave of the final economic reports for 2019. We received the December ADP Private Sector Payroll Report, Weekly Unemployment Claims Data, and the December Employment Situation Report. The December ADP report surprised on the high side. The December Employment Situation Report was moderately good, with a record level of December Workers (Current Employment Statistics - CES) and a record level of full-time jobs (Current Population Survey - CPS.) This was covered in the article "Dec. Jobs Report: Santa's Surprise." How did various sectors do? What happened with workers, hours worked, and total earnings?

All sectors grew December to December except Mining and Logging. All sectors received wage increases, including Mining and Logging. This was all covered in "Dec. Wages and Workers - Annual Gains Across the Board."

The former President was trying to promote his economy during his final two years in office compared to the first two years under President Trump.  The problem was that the former President was comparing 24 months of growth compared to 20 months of growth. The best way to compare accomplishments is by looking at the same point in the Presidencies. How is President Trump doing compared to former Presidents Reagan, Clinton, George W Bush, and Obama after 35 months in office?

President Trump has overseen the addition of 8.127 million full-time jobs during his first 35 months in office. This is more full-time jobs than former President Reagan, and Clinton combined. It is also more than former Presidents Reagan, Clinton, George W Bush and Obama combined. The four former Presidents oversaw the creation of just 5.429 million full-time jobs during their 140 months in office. Former Presidents Reagan and Clinton oversaw 7.798 million full-time jobs being added to the economy during a combined 70 months in office.  President Obama was negative 765,000 full-time jobs after 35 months in office.

President Trump is trailing former President Clinton in total jobs creation because former President Clinton added 2.8 million part-time jobs. President Trump, by comparison, has trimmed 150,000 part-time jobs. This means that President Trump has added 78 million jobs and former President Clinton has added 8.1 million total jobs. Is a part-time job the same as a full-time job? No. Is this job creation, with 164 million participants, comparable to the Clinton era 132 million participants? we have 1.3 million fewer unemployed workers than former President Clinton. More participants and fewer unemployed workers is a difficult trick to manage. President Trump must have a magic wand.

President Trump and former President Clinton are the only two Presidents who trimmed unemployment and grew jobs. Former President Reagan added 2.5 million full-time jobs, 2.2 million part-time jobs and 222,000 unemployed workers. Former President Bush added  1.5 million full-time jobs, 803,000 part-time jobs, and 1.3 million more unemployed workers. Former President Obama lost 765,000 full-time jobs, added over 1 million part-time jobs, and trimmed 317,000 unemployed workers. The participation level was pretty much unchanged for Mr. Obama because the gains in part-time jobs offset the drop in unemployed workers.

The participation rate has climbed under Presidents Trump and former Presidents Regan and Clinton. We hit "peak participation" during the late 1990s. The participation rate dropped slightly under former President George W Bush and slid significantly lower under former President Obama.. Unemployed workers are participants. If jobs are not created at the same rate that unemployed workers fall of the "CPS Unemployment List" then the participation rate falls. The reduction of unemployed workers under President Trump is reducing his participation rate.

Under Participation is skewing the data. This column has discussed during the past few years that 3.3% unemployment with 63% participation is not the same as 3.5% unemployment with 67% participation. Participation matters. If you examine the December unemployment rates and participation rates you will find that the optimal combination happened December 2000:

• December 2000: Unemployment 3.68% Participation 66.96%
  
• December 2009: unemployment 9.65% Participation 64.45%
  
• December 2019: Unemployment 3.36% Participation 63.03%
  

The effective unemployment rate (U-7) for December 2000 is, by definition, 3.68%. The U-7 for December 2009 was 13.04%-7 this December the U-7 is 9.02%. This is one of the reasons why we are not seeing wage inflation. There are still people on the sidelines looking for work. Another reason may be the automation of some activities. There are self-service order kiosks in some restaurants. There are pay station kiosks in other restaurants. There are speed passes and self-service toll booths.  We cannot be at full employment without full participation.

The jobs report had some good data that was overlooked: Record December full-time jobs, the highest December participation rate since December 2012, a minor reduction is part-time jobs since President Trump took office. Jobs are up. Unemployment is down. Only former President Clinton and President Trump have reduced unemployed workers and increased full-time jobs.

It's The Economy.