Thoughts on the June 2010 Employment Report
This morning, at 8:30 a.m. EDT, the Bureau of Labor Statistics released the jobs report, formally known as “The Employment Situation,” for June 2010. The headline numbers that you will hear from most of the media are a 125,000 decline in payroll jobs and a 0.2 percentage-point decline in the unemployment rate. You also will hear that the 125,000 decline reflects 225,000 temporary Census workers who were let go during June, so that the “real” number we should focus on is an 83,000 increase in private-sector payroll employment.
President Obama emerged from the Oval Office to assert that “we are headed in the right direction” and that the jobs report “shows continued signs of gradual labor market recovery.” Is the President correct, or does the jobs report contain much more ominous signs for the labor market?
If we dig into the report beyond the headline numbers, we won’t like what we find. First, let’s explore why the unemployment rate declined, even though employment declined. How can that happen, you ask? It happens because the denominator declined by more than the numerator (remember that lesson on fractions from grammar school?). In fact, employment as reported by the Household Survey, which queries households rather than employers, declined by not 125,000 but by 301,000. This number is far in excess of the decline in Census employment, indicating that total private sector employment declined by more than 50,000 workers. The Household Survey includes self-employed workers and workers hired by recently established businesses that are missed by the Establishment Survey, so this discrepancy is especially disturbing.
Even more disturbing is what happened to the size of the civilian labor force, which is the denominator of the unemployment rate. That number declined by a stunning 842,000 workers. This reflects the 301,000 workers who reported that they became unemployed during June, 350,000 unemployed workers who gave up looking for jobs during June, and a 191,000 increase in the size of the civilian non-institutional population. The 191,000 number is how many jobs the U.S. needs to create just to “break even” when we lose no jobs and no one leaves the labor force.
An informative exercise is to calculate what the unemployment rate would have been had the 651,000 employed and unemployed who left the labor force remained in the labor force by looking for work during the past four weeks: the unemployment rate would have risen by 0.2 to 9.9% rather than declining by 0.2 to 9.5%.
The ranks of the chronic unemployed—those out of work for at least 26 weeks—was virtually unchanged at 6.75 million, or almost half of the 14,623 unemployed. The median duration of unemployment rose to 25.5 weeks in June from 23.2 weeks in May.
