Radio commentary, February 5, 2010
January employment: droopy
A few words on the employment report for January. As I always point out when doing these reviews, the monthly employment release from the Bureau of Labor Statistics is based on two very large surveys, one of 300,000 employers, called the establishment survey, and one of 60,000 households. For more, see here.) And as I often point out when doing these reviews, the numbers are not cooked, as many conspiratorial sorts want to believe. You might take issue with some of their definitions, particularly of unemployment, but the work is done by serious, honest people who want to tell the truth. Indeed, one of the more curious features of American life is that we have an excellent statistical apparatus that tells us reams about this society, a lot of it disgraceful, but almost no one seems to care. As Poe demonstrated in “The Purloined Letter,” the best place to hide something is often in the open.
Now to the numbers. There was an unusually large divergence between the two employment surveys this month, with the establishment survey looking rather weak, and the household survey rather strong. The truth is probably somewhere in between. Weather was awful in January, but it explains only part of the weakness in the headline payroll number.
Total employment rose by just 36,000, only about a quarter of the recent average. But, stunningly, manufacturing was up an 49,000. We haven’t seen a rise of that magnitude in percentage terms since 1990 (leaving aside the effects of an auto strike in 1998). Private services were up just 32,000. Several important service sectors shed jobs, and many turned in perfomances well below recent trends. The recently mighty “eat, drink, and get sick” subsectors—health care and bars and resturants, who’ve been going like gangbusters, added just 6,000, a fifth their recent average.
Average hourly earnings were up the most in nearly two years. The combination of weak job gains and strong wage gains has some Wall Street types worried about a return to stagflation—but I think the stag part is far more of a risk than the flation part. With the job market as weak as it is, the likelihood of a burst of wage growth seems very remote. And the growth in earnings, aside from January, has been very weak lately.
The household numbers were considerably stronger. Total employment rose by a very strong 589,000. At the same time, the ranks of the unemployed fell by 590,000. That took the unemployment rate down by 0.4 point to 9.0%, its lowest level since May 2009. That definition of unemployment requires that people be actively looking for work. The broad U-6 rate, as it’s called, which includes people who want full-time work but can only find part-time as well as those who’ve given up the job search as hopeless, fell a sharp 0.6 point to 16.1%, its lowest level since April 2009. It’s still very very high, but it’s down nearly a point and a half since late 2009.
So, the job market continues to improve slowly, but is still quite bad. There are about five unemployed people for every reported job opening, not far from an all-time high. Federal Reserve chair Ben Bernanke gave a speech the other day in which he said that he suspected that the unemployment rate will stay quite high for a long time, and he’s almost certainly right.