Friday, June 06, 2008

Employment continues to be soft but not recessionary

The monthly employment report for May did show that employment continues to be soft, but the decline was still only modest in comparison to what we would normally see in a recession. The decline in household employment was a modest -0.2%, which is just barely significant. Sure, the headline unemployment rate "jumped" to 5.5%, but the number of people employed in May was still greater than the number who were employed in March. The "gap" is explained by a sharp rise in the size of the overall labor force coupled with a sharp decline in the number of people who were not in the labor force in March. That meant that there was a big jump in the number of people looking for jobs who were neither employed nor looking for a job in April. Payroll employment declined a very slight -0.04%, which is essentially flat or no significant change.

Some of the jump and decline is simply due to the quirky nature of seasonal adjustments. Before applying the seasonal adjustment, houshold employment actually rose, albeit very slightly, by 5 thousand. Unemployment did still rise before the seasonal adjustment, but from 4.8% to 5.2%.

Nonfarm payroll employment actually rose by 648 thousand before applying the seasonal adjustment. Private employment rose by 640 thousand before applying the seasonal adjustment.

Most significantly, year over year, which does not depend on seasonal adjustment, nonfarm payroll employment is up by 104 thousand, which although quite modest, is not the kind of year over year change one would expect to see in a recession. Unadjusted household employment is up by 62 thousand year over year, which is also nothing to write home about and is indicative of a slow, sluggish economy, but is not indicative of a true, full-blown recession. Even with the seasonal adjustment, household employment is up by 133 thousand, again a sign that we are not in the middle of what is traditionally known as a recession.

The total decline in private payroll employment since January has been 318 thousand or a modest -0.3% over four months. That is (barely) noticeable, but such a vert modest decline is not indicative of a true, full-blown recession.

We may still end up in a recession, eventually, but we are certainly not there yet on the employment front.

-- Jack Krupansky

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