Professor Cole's Finance Blog

This morning at 8:30 a.m. EDT, just as it does on each first friday of a new month, the Bureau of Labor Statistics released its monthly employment report entitled "The Employment Situation," for the previous month, in this case, for August 2009.

The report summarizes the findings of two separate monthly employment surveys, one of establishments and one of households. The establishment survey is larger and hence has a smaller forecast error, but it only captures employment at larger, established non-farm establishments. It misses the self-employed, as well as employees of smaller and newer establishments that don't participate in the survey. The second is the household survey, which is smaller and hence has a larger forecast error, but is able to provide information on unemployment, which is not available for obvious reasons, from a survey of employers. It also captures information on self-employed workers and workers at smaller and newer establishments.

The headline jobs number comes from the establishment survey while the headline unemployment rate comes from the household survey. For August, these numbers were -216,00 and 9.7%, respectively. The employment number has been trending upward from peak job loss of more than 700,000 in January. The unemployment rate has been trending upward since April 2008, with the exceptions of June and July 2009; August 2009 re-establishes that upward trend.

If we delve deeper into the numbers we find the following: Employment as measured by the household survey fell by almost double the number in the establishment survey, 392,000 lost jobs verus 216,000 lost jobs. While this may be statistical noise, it also may reflect the disproportionate effects of the recession on small businesses and the self-employed, which are not captured in the establishment survey. Also of note is the decline in labor force participation, which fell by 143,000 in August and by 637,000 in July. Had these workers remained in the labor force without jobs, the unemployment rate would now be 10.1% instead of 9.7%. (In order to be unemployed, one has to report having actively looked for work during the previous four weeks; if not, then one is "not in the labor force.")

There also is wide variation by age, gender, race and ethnicity. Among teenagers, unemployment is up to 25.5%. Among adult men, unemployment is up to 10.1% as compared to only 7.6% for adult women; this recession discriminates against men. Among African-Americans, unemployment is up to 15.1% and, among Hispanics, up to 13.0%.

The BLS also reports broader measures of unemployment in Table A-12 of its report. U-6 is the broadest of these measures, including officially unemployed plus discouraged workers, plus those employed part time for economic reasons, plus marginally attached workers, and this measure rose to 16.8% in August, up from 16.3% in July and 10.9% in August 2008.

Finally, we note that the BLS "revised" its jobs numbers for June and July. Both months were revised downward, June by 20,000 and July by 29,000. This strongly suggests that we will see the August jobs number adjusted downward next month, once the BLS has had the chance to review data from late-filing respondents.

Only Vice President Joe Biden could find green shoots amidst this dire economic news. Yesterday, Biden reported that the administration's $787 billion Stimulus program, of which less than 20% has been spent to date, has already "created or saved between 500,000-750,000 jobs." How he measures a "saved" job is anybody's guess, but I'm sure the 15 million - 26 million unemployed (depending upon the narrow or broad definition of unemployment) workers are glad to  hear that Joe is looking out for them.