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Subject:  If No New Jobs Were Created How Can Unemployment Date:  12/4/2009  1:41 PM
Author:  JTShideler Number:  209274 of 732

Being an Analysis by profession I got to wondering how Unemployment can go down if there are no new jobs created.  So I started down a path that is probably not worth going to see what the numbers tell me.  All the numbers come from the BLS release

Lets look at the U.S Employment data for October - November

Civilian Labor Force: Oct 153.975 mil ----> Nov 153.877 mil (net loss to labor force .098 mil)

Looks like 98,000 people left the labor force choosing to go back to school, join the military, retired, got incarcerated or decided to stop looking.

- Employed: Oct 138.275 mil ----> Nov 138.502 mil (net gain of .227 mil) 

227,000 people who did not have a job now have one.  Must of been a good month for job growth?

- UnEmployed: Oct 15.700 mil ----> Nov 15.375 mil (net loss of .325 mil)

Unemployment is down 325,000 but only 227,000 people got jobs.  The difference? that equals the 98,000 people who left the civilian labor force and are no longer factored into the official unemployment number.

Not in Labor Force: Oct 82.575 mil ---> 82.866 (net gain of .291 mil)

Interesting only 98,000 people left the labor force but this number increased by 291,000.  This must be explained by 193,000 new people being included this month that just became eligible to be counted.  Some of these people could be newly turned 16 year olds, people leaving active duty military service, people returning to the workforce after being in retirement getting out of prison etc.,

Basic Math check: The sum of the Employed and Unemployed = the Civilian Labor Force

OCT  138.275 + 15.7 = 153.975   ///  NOV 138.502+15.375 = 153.877

Check Sat!

What does not in the Not in Labor Force stat Really Mean? 

According to the BLS website: The Not in Labor Force stat includes everyone 16 years or older of those people who have no job and are not looking for one—" Many who are not in the labor force are going to school or are retired. Family responsibilities keep others out of the labor force.  Active Duty military are also not counted as in the Labor Force.  This is determined by asking the survey households some questions. 

1.  Do you currently want a job, either full or part time?

2.  What is the main reason you were not looking for work during the LAST 4 WEEKS?

3.  Did you look for work at any time during the last 12 months?

4.  LAST WEEK, could you have started a job if one had been offered?

Now lets look at Jobs Data! Found in same Report.

Non Farm Employment: Oct 131.007 mil /// Nov 130.996 (net loss of .011 mil jobs) thats a loss of over 11,000 jobs.  That should have made employment more difficult maybe there are another source of jobs?

Since, Non Farm Employment jobs is the only statistic that the BLS reports we have to do some math on our own.  Should be easy though since we know the total number of people employed we can simply subtract the people working in Non Farm Employment, that should leave the total number of people employed in Farm Related work (or whatever else is not included in non farm equipment category) 

Farm Employment (Total Employed - Nonfarm Job values)  Oct 138.275 - 131.007 = 7.268 mil  ----> Nov 138.502 - 130.996 =  7.506 mil (net gain .238 mil) Must of been a good harvest farm related employment rose 238,000.

Now lets look at the change in Unemployment numbers with the change in Jobs data

Civilian Labor Force: -.098 mil

- Employed: + .227 mil

- UnEmployed: - .325 mil

Not in Labor Force: +.291 mil

Total People in Survey (Civilian Labor + Not in Labor): +.193 mil

Non Farm Employment: -.011 mil

Farm Employment: +.238 mil

So according to the BLS data there were 193,000 more people accounted for this month compared to last month.  Since the difference between the sum of the change in Employed and Unemployed = the change in the Labor force we know that only 98,000 people left the work force to join the Not in Labor Force Statistic.  If you add the change in the civilian labor force 98,000 and add it to the change in total number of people surveyed 193,000 it is equal to the 291,000 people change in the Not in Labor force statistic (.193+.098 = .291). 

This would mean that all of the new 193,000 people accounted for in the survey since last October are being reported in the Not in Labor force Statistic.  This effectively means that not a single person who became eligible to be counted in the Civilian Labor Force decided to seek employment.  So all 193,000 new people are either still in school, joined the military went to jail or Are Not Looking for Employment, or replaced someone in the workforce who gave up.  I think this is a little suspect.

Discounting that fact, we still need to account for the 227,000 previously unemployed people who found jobs that weren't employed before?  We know that the Non Farm Employment Segment shed 11,000 jobs so that means the Farm Sector picked up a staggering 238,000 jobs in one month.

I guess November is Harvest Season so its possible that the farming sector created 238,000 jobs.  Although the numbers I quoted are seasonally adjusted which according to the BLS defenition should have removed a large increase in farm workers normally attributed to climactic events like harvest season.

From BLS:

Seasonal adjustment

Over the course of a year, the size of the nation's labor force and the
levels of employment and unemployment undergo sharp fluctuations due to
such seasonal events as changes in weather, reduced or expanded production,
harvests, major holidays, and the opening and closing of schools.  The ef-
fect of such seasonal  variation can  be  very large; seasonal fluctua-
tions may account for as much as 95 percent of the month-to-month changes
in unemployment.

Because these seasonal events follow a more or less regular pattern
each year, their influence on statistical trends can be eliminated by ad-
justing the statistics from month to month.  These adjustments make non-
seasonal developments, such as declines in economic activity or increases
in the participation of women in the labor force, easier to spot.  For
example, the large number of youth entering the labor force each June is
likely to obscure any other changes that have taken place relative to May,
making it difficult to determine if the level of economic activity has risen
or declined.  However, because the effect of students finishing school in
previous years is known, the statistics for the current year can be adjusted
to allow for a comparable change.  Insofar as the seasonal adjustment is made
correctly, the adjusted figure provides a more useful tool with which to ana-
lyze changes in economic act.

Guess I will still need help from other people to tell me how you can lose 11,000 jobs and still increase employment by 227,000

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