Three Takeaways from the October Unemployment Report
Today the Bureau of Labor Statistics released the October Unemployment Report, the last report before the general election on November 6th. The report showed an uptick in the overall rate from 7.8% to 7.9%. As with every month, we delve into the numbers not commonly reported in the media, to get a better understanding of the employment situation.
1) Workforce Participation Rate edges up .2 to 63.8%
There are two ways to read this data point, the first of which is that the rate has fluctuated between 63.5 and 63.9 for all of 2012. So while edging up slightly is a good thing in terms of the economy at large, it doesn’t show any really improvement. Essentially the labor market is in neutral.
The other way to read it, is that it is a sign of improvement as this is the second month in a row that the Participation Rate has increased. While it is certainly possible that this is an indicator that a recovery is starting, there are two points that are cause for concern. Early 2010 saw the same magnitude of growth, albeit over 3 months with a plateau in the middle. This slight improvement however was followed a slide that continued until this year. In addition, as mentioned above, 63.8% is still within the range seen for all of 2012.
There is too little data to make the argument that the job market is recovering, based on this data point alone. Were it to move 64.0 and experience sustained growth getting there, then the argument could be made, but with the available data it cannot.
2) Household Data shows number of Unemployed Increased by 200,000,
Despite the number of jobs added to the economy, the number of people considered to be unemployed actually jumped by 200,000, although this number seems to be related to some discouraged workers re-entering the labor force. Coincidentally the number of people not in the labor force, but would like a job also dropped by 200,000. While it is improbable that these groups of 200,000 are completely one in the same, it stands to reason that there is at least some amount of overlap.
3) Household Data shows number employed increased by 400,000 but Establishment Data shows 171,000 jobs created. What is the disconnect?
Last month the Bureau of Labor Statistics came under fire for reporting that the number of employed had jumped by nearly 800,000, an unrealistic number given the state of the economy. While some have charged that it was politically motivated, the more likely answer was a statistical fluke in the data. Fluke or not, it is indirectly used to calculate the unemployment rate, which resulted in the surprise drop in September.
Likewise for October, it seems unlikely that 400,000 were added, given the state of the economy. Putting that figure into question even more so is the disconnect with the Establishment Data, which showed an increase of 171,000 jobs. The cause of the gap is two-fold, one is that the Household data is a smaller sample, resulting in a higher margin of error and that the number employed also counts part-time, non-benefit providing jobs. For these reasons it is the Establishment Data number cited in media reports for total jobs numbers.
The Revised Rate: (Methodology)
Taking into account workers no longer in the work force, but would like a job, the unemployment rate would be: 9%, down from 9.1% in September.