By Guest Contributor: Deltalect
President Obama mentioned the May 2010 BLS Non Farm Payroll figures this afternoon saying “This report is a sign that our economy is getting stronger by the day, a lot of businesses that were hit hard during this downturn, they are starting to hire again.” (Source)
Is our economy really getting stronger? Let’s run the numbers. Of the 431,000 new jobs added in May, 411,000 were government census workers. These jobs will completely disappear in the next few months baring any extraneous events such as an executive order to continue their employment. These jobs have nothing to do with the health of the economy because they arise every decade independent of how the economy is faring. President Obama said that businesses “…are starting to hire again”. Government workers do not work for businesses and therefore must be subtracted from his argument. This leaves us with only 20,000 new jobs. (Source)
Temporary work has grown rapidly during this recession as unemployment has risen or remained steady. Aside from temp workers rarely receiving the full complement of pay (40% less on average) and benefits (usually none), 1 in 5 temp workers work less than 35 hours a week and many who are “hired” by agencies fail to find consistent work every week. Of all the jobs gained, 31,000 were temporary jobs. These aren’t indicative of a strengthening economy and when subtracted we’re down to a LOSS of 11,000 jobs in May. (Source1, Source2)
We’re not done.
The BLS report is based off of a statistical computation of two reports; the Current Population Survey which samples 60,000 households and the Current Employment Statistics Survey which samples 140,000 businesses and government agencies. This method cannot account for new businesses which are formed or old ones which have closed shop during the month. Enter the Birth/Death model. From BLS: “The sample-based estimates are adjusted each month by a statistical model designed to reduce a primary source of non-sampling error which is the inability of the sample to capture, on a timely basis, employment growth generated by new business formations.” The BLS reports 215,000 jobs were added in may due to this. In essence, they are saying that far more businesses opened up in may than closed. This defies logic as vacancy rates continue to increase; up 2.7% last month. 3 out of 5 commercial properties now sit vacant. The 215,000 jobs attributed by the birth/death model number is, at best, a giant question mark. We cannot simply subtract the 215,000 birth/death model jobs because there exists a real number, we just have no idea what it might be. (Source1, Source2, Source3)
A minimum of 98,000 jobs are required just to maintain a steady economy, as this is approximately how many young adults enter the work force every month. We can say with a high degree of confidence that the economy has grown nowhere near that number in May. (Source)
If you think the drop in unemployment is a silver lining, think again. The official unemployment number (U-3) was at 9.7% for the month of May, but U-3 only includes all people who are actively looking for work. If people give up on finding a job, U-3 goes down, and this is what happened: “In May, the civilian labor force participation rate edged down by 0.2 percentage point(sic) to 65.0 percent.” People are just giving up on finding jobs. Probably because they’ve been looking for jobs for a very long time. (Source)
Ominously, the number of persons unemployed by 27 weeks, the longest time span measured by the BLS, has risen steadily. In fact, we are shattering all previous records for long-term unemployment. (Source)
Gallop takes a more granular approach to unemployment. According to them, we’re at 19.1%. (Source)
To obtain a reasonable understanding of where we are in terms of a recovery, we must assess where we are relative to the long term trend. As you can see, we haven’t seen this sort of pain in over 70 years. (Source)
I wish it were otherwise, Mr. President, but I most definitely do not see any strength in this economy.
What do you think, dear reader? Is our economy about to rebound?