As a follow up to our NFP extravaganza yesterday, here are a few additional items you may find informative:
Yesterday, we noted the big jump in Unemployment (a historic outlier) and wondered aloud whether it might be attributed to, in large part, a seasonal aberration of the younger set, the teens and 20-25 year olds.
As it turns out, not so much: Philippa Dunne and Doug Henwood of the Liscio Report have crunched the numbers, and they suggest the impact of Teens is de minimis. In an email I received late last night from Philippa, she writes:
"Teen unemployment rose 3.3 points, which was probably exaggerated by some calendar issues. But teens are less than 5% of the workforce, so they contributed just 0.2 point of the total rise. Adult unemployment rose from 4.5% to 4.8% – and it was a clean move, with no rounding funniness. The adult participation rate rose 0.1 point, and the EPR [Employment Population Ratio] fell by 0.2 point. Also, the composition of the unemployment rise shows that it wasn’t just the kids: permanent job losers and re-entrants accounted for 0.2 points of the rise, and new entrants just 0.1 point.
If you want to spin a story out of this, it could be that people are re-entering the labor force because they’re having a hard time making ends meet."
Thank you, Philippa — I stand corrected on the teen portion of NFP.
Downward Revisions were also noteworthy. March was revised down by 7,000, and April by 8,000. This was the the fourth consecutive month of downward first revisions, as well as the fourth consecutive month of second downward revisions. It is further evidence of the negative overall employment trend we discussed in our NFP Preview — weak private
sector job creation; poor real wage gains; flat to negative hours worked.
Last, the Birth Death Adjustments: As we noted yesterday, 42,000 new jobs in construction and 9,000 new financial jobs both seem rather improbable.
We continue to see evidence that in the latter half of a cycle that the B/D overstates job creation significantly. The chart below shows the distortion the Birth Death portion of NFP has created: The B/D jobs have remained
steady, while the actual measured portion of NFP net job creation has been faltering since early
chart via Jake
If the BLS is going to continue to use the Birth Death adjustment to capture new job creation the establishment survey misses in the beginning of cycles (due to new firm creation), then they need to figure out how to make adjustments for the declining portion in the latter portion of the cycle.
Until the business cycle is repealed, the Birth/Death adjustments (similar to how seasonal adjustments are neutral over a year), should be more balanced over the full course of an economic cycle.