Just returned from Pismo Beach, where we booked a room at the Sea Venture. Good place. Hot tubs on balconies overlooking the beach while still providing enough privacy for that punchline to that lightbulb joke. They had an anniversary special. In addition to a nice rate, they dumped rose petals on our entry way, gave us chocolate-covered strawberries, and delivered a bottle of champaign.
Unemployment: 9.1%
The unemployment rate dropped to 9.1% according to the July Employment Situation Report. The headline jobs number was +117,000 vs a Bloomberg consensus range of 25,000 to 125,000. Without the seasonal adjustment, things look substantially worse. 1.32 million people lost their jobs in the month of July. These job numbers are highly focused into a single industry that undergoes a rather pronounced phase transition between June and July: public schools.
The largest seasonal factor was government, which tends to shed only slightly fewer than the 1.22 million jobs it shed in July. This translated to only -37k after the seasonal adjustment. But by far the greatest share of these jobs are in the local government sector, in education.
The biggest gains on a seasonally adjusted basis were made in Education and health services (+38k). This is followed by Professional and business services (+34k). The biggest loser was Government (-37k), which was followed by Financial activities (-4k).
Table A15 provides alternative measures of labor underutilization. U-6, the broadest measure (frequently called the “real” unemployment rate), dropped from 16.2% to 16.1% (unadjusted it increased from 16.3% to 16.5%, though this also included a revision from 16.4%).
For those interested in the Birth/Death model, it subtracted 18k jobs to the unadjusted number. Once again, the seasonal adjustment factor is on total jobs.
This was somewhere between a good and mediocre report, depending on who’s estimates for sustainable employment rate growth you use. As a reminder, depending on who you listen to, we need between 100k and 175k jobs just to maintain the unemployment rate with our current demographics at a constant participation rate.
Unemployment: Celebration Ends
Crossing below the 400k new claims barrier is something worth celebrating. We celebrated. The celebration ends. Today’s Unemployment Insurance Weekly Claims Report gave us a headline number of 400k. Last week’s number was revised up 3k to 401k. From the report:
In the week ending July 30, the advance figure for seasonally adjusted initial claims was 400,000, a decrease of 1,000 from the previous week’s revised figure of 401,000. The 4-week moving average was 407,750, a decrease of 6,750 from the previous week’s revised average of 414,500.
The advance seasonally adjusted insured unemployment rate was 3.0 percent for the week ending July 23, unchanged from the prior week’s revised rate of 3.0 percent.
The advance number for seasonally adjusted insured unemployment during the week ending July 23 was 3,730,000, an increase of 10,000 from the preceding week’s revised level of 3,720,000. The 4-week moving average was 3,729,750, an increase of 4,500 from the preceding week’s revised average of 3,725,250.
Remember that the current seasonal adjustments are quite sensitive to the exact weeks of manufacturing industry retooling. For that reason it is worth looking at the smoothed data (the 4-week adjusted moving average above), and the unadjusted data. The unadjusted numbers show substantial improvement:
The advance number of actual initial claims under state programs, unadjusted, totaled 339,348 in the week ending July 30, a decrease of 29,939 from the previous week. There were 402,140 initial claims in the comparable week in 2010.
The advance unadjusted insured unemployment rate was 2.9 percent during the week ending July 23, a decrease of 0.1 percentage point from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 3,663,134, a decrease of 89,947 from the preceding week. A year earlier, the rate was 3.5 percent and the volume was 4,438,886.
The total number of people claiming benefits in all programs for the week ending July 16 was 7,570,439, a decrease of 75,192 from the previous week.
In other news, other economic indicators have shown slowdown starting in April/May (starting with softer petroleum consumption). The ISM numbers for July crossed below the points associated with stronger employment growth (I generally suggest pretending the non-manufacturing numbers have huge error bars, though). Expectations for tomorrow’s Employment Situation Report are soft (but positive).
This was a bad report. Also significant is the fact that we just saw one of our two good reports revised back into bad territory. Aside from the return to school (which won’t help headline numbers due to the strong seasonal factor), there’s not much to look forward to on the unemployment front. The European liquidity crisis seems to be starting to impact foreign demand. I have some short-term hope, but I can’t provide a good justification other than looking at the chart of the new claims 4-week moving average (the trend change away from good has not been confirmed).
