Bloomberg News produced an excellent jobs story today on the July payroll report that should be required reading for every economic journalist.
Kudos to Bob Willis and Alexander Tanzi, my former colleagues on Bloomberg’s economic reporting team, for telling the truth instead of just regurgitating the federal press release. They hit the public service trifecta by including the crucial benchmark information about how many new jobs must be created each month to keep pace with population growth; looking at the negative reason the unemployment rate fell; and exploring other key government measures of joblessness.
None of the other economic news teams on this story even came close, which is one of the reasons I’m writing about the topic. As journalists, we simply must do a better job.
The U.S. economy created 117,000 jobs in July, but needs 125,000 just to keep pace with population growth. That means the July gain actually represents a net loss. Likewise, the U.S. economy created 46,000 jobs in June, which means that our labor market actually produced a net loss of 87,000 jobs the prior two months.
The unemployment rate, which measures short-term job churn, dropped to 9.1 percent in July from a prior 9.2 percent, but it wasn’t for a good reason – it wasn’t because of job creation. The decline occurred because 193,000 idle American workers left the labor force for one reason or another, including 156,000 who abandoned their jobhunts. The others probably retired or returned to school. The unemployment rate doesn’t count any of them.
That’s just one of several reasons that so many people in the know don’t care for the government’s preferred measure of unemployment, which also fails to distinguish between full-time and part-time employment. That means that if you lost a full-time job paying $110,000 and replaced it with a part-time job paying $16,000 the unemployment rate lists your situation as unchanged.
Diane Swonk (right), chief economist of Mesirow Financial, described the July job gains as “nothing to pop champagne corks over,” but said they are enough to help us back a “little further away from the brink of a double-dip recession.”
The employment-to-population ratio is a better measure of joblessness in my opinion, because it’s less vulnerable to political gamesmanship. And it tells us that the ratio of the U.S. population with a job declined to a 28-year-low of 58.1 percent in July.
It’s worth noting that the percentage of women in the workplace has increased since 1983, which could obscure the true degree of job loss in the employment-to-population ratio. There were fewer women in the workplace back in the day, which makes the ratio look worse than it really was.
What’s that mean?
It means that times are so hard that the employment-to-population ratio we recorded in July would be a lot worse than a 28-year low if we could adjust it for changing gender roles.
If you look at the chart for the employment-to-population ratio above, which dates back to the start of record
-keeping in 1948, you can see that we’ve never had such a sustained period of decline before. We’ve had our ups and downs, but nothing like the decade-long drop that’s still underway.
The federal government has a bad habit of keeping really bad news from the general public through one misrepresentation or another, as they have with the spread of antibiotic resistant staph bacteria. It’s a paternalistic attitude that harkens back to another age, before the Internet and before widespread public expectations of government transparency.
In economics, this paternalistic attitude is illustrated by the different measures of joblessness that are used to avoid simply coming out and just telling people how dire the national employment situation really is.
The problem is that we’ve hamstrung our own economy by allowing multinational corporations based in the U.S. to move so many jobs overseas to low-wage nations.
The fiction is that our economy is no longer creating adequate numbers of new jobs, even though many of these corporations are sitting on huge piles of cash.
The reality is that U.S. consumer spending is still helping to create plenty of jobs, but many are now located in the low-wage nations favored by the Fortune 500 – such as China and India.
If you want to know how bad things really are here in the U.S., all you have to do is look at how many Americans, ages 16 to 64, are without work.
We know from the July payroll report that 129.8 million Americans in this age group are employed. By using a total U.S. population estimate of 312.5 million for the same month, we can calculate that there are 233 million Americans, ages 16 to 64, because we know that 74.5% of our population is normally in this age range.
That means that 103.1 million, or 44 percent, of working-age Americans had no employment of any kind in July. That’s a lot more than the 9.1 percent of the U.S. labor force that’s looking for work right now, according to the government’s preferred statistical measure of joblessness, which is somewhat euphemistically referred to as the national unemployment rate.
The only good thing about the July payroll report is that the 117,000 jobs created exceeded economist expectations of 85,000 new jobs. That said, we’ve seen an alarming number of these job totals being revised downward in subsequent monthly reports. I’m enough of a skeptic to believe it’s not accidental.
And don’t even think about scapegoating the practice on the Dems, because the whole point of reading The Cynical Times is to get to painful economic truths at a time when the two major political machines are trying to obfuscate the economic information we need to evaluate their abysmal performance. The first time I started noticing these convenient data revisions was during the Bush administration, which made an art form out of misrepresentation. If anything, downward revisions were more pronounced from 2000-2008.
That’s why I’m so excited about the painfully truthful payroll article Bloomberg published today. It’s one of the few articles I’ve read that includes all three of the elements typically missing from news accounts of the federal government’s monthly job situation report: proper benchmarking for the number of new jobs that must be created each month to keep pace with population growth; looking at the negative reason the unemployment rate fell; and exploring other key government measures of joblessness.
Without that information, the payroll reports make the employment situation look better than it really is.
Sadly, there were literally dozens of ridiculously bad stories about the July payroll report for the single reputable article from Bloomberg. The New York Times and Wall Street Journal articles were abysmal, missing all three legs of the trifecta; the AP article had elements of two of three legs, but failed to complete any of them and erroneously presented the report as a positive; and the Reuters version had two of the three legs but erroneously presented the report as a positive for growth.
Look eco journalism folk, the painful truth is that there simply is no way to view any monthly payroll report as a positive for economic growth when the number of unemployed workers dropped from the national labor force for abandoning their jobhunts exceeds the number of jobs created. In this case we’re talking about 1.3 despondent workers for every job created – and we’re having this discussion 25 months into a tepid recovery from the longest recession since World War II.
Same thing goes for any payroll report in which job creation falls short of the number needed to keep pace with population growth.
The July report fails on both counts.
We’re not Japan. Our population has grown 9.5 percent since 2000. That represents an increase of 20.1 million people – roughly the population of New York State. That kind of growth is the reason we have to create at least 125,000 jobs each month just to tread water on our unemployment rate.
Thank you Bob Willis and Alex Tanzi for getting it right. Our nation desperately needs more crackerjack reporting like this. Hopefully, the improvements you have engineered will be emulated by other eco teams.
In recognition of their efforts, I’m awarding Willis and Tanzi a star each for excellence in public service economic journalism; the first economic reporting stars ever handed out by The Cynical Times.
That makes them working-class heros.
Each star is redeemable for a beer of your choice fellas. Ice cold.