By now we’ve all read about the September reports on job creation and unemployment – and the massive disconnect between them: the employment numbers showed less than 120,000 jobs created last month, but the household survey on unemployment had over 870,000 more people employed (thus dropping the unemployment rate to 7.8%). Explanations quickly sprang up, from statistical bumps to conspiracy theories and everything in between.
As it turns out, John Taylor (Economics One) did some digging into the numbers and found a more likely reason: two-thirds of the increase in the household survey were due to part-time employment, not full time employment. In fact, “the broader U-6 measure of labor underutilization—which adds in this part-time employment—did not decline at all” (emphasis added).
So what happened to cause a part-time surge? Taylor presents two ideas. The first, proposed by Joe LaVorgna, chief US economist at Deutsche Bank, is the campaign itself:
First, there was an unusually large gain in non-private employment, defined as total employment less “private industries” employment, which thus includes campaign workers who organize grass roots efforts, make phone calls, knock on doors, or help at political conventions. Second, there was an unusually large increase in employment in the 20 to 24 year age group—a typical age for campaign workers. The explanation is appealing because both Democrats and Republicans are increasing such grass roots campaigns. State data—especially from the swing states—is needed to confirm LaVorgna’s hypothesis. But if true the increase in part time employment is not a sign of an improving economy: it implies that the jobs gain in September is largely temporary.
Of course, it won’t be until next month, when September’s state data comes out, that we can examine the validity of this theory. In the meantime, Taylor has an alternate possibility:
Another view is that the increase in part-time employment is directly due to the weak recovery, and a sign that it is getting weaker. Surges in part time employment frequently occur in times of economic stress. Consider, for example, all the months in which part time employment rose by 500,000 or more. There are 13 such monthly increases in the BLS data base—Jan 1958, Mar 1958, Jan 1975, May 1980, Oct 1981, Feb 1982, Feb 1991, Sep 2001, Nov 2008, Dec 2008, Feb 2009, Sep 2010, Sep 2012. With two exceptions, every one of these occurred during recessions when the economy was sharply contracting. The two exceptions are in the current recovery, which is another measure of its weakness.
In other words, this “recovery” is acting a lot like a recession. Quelle surprise!
One final note from Taylor on how things are going…
Even more troublesome is that in the past 6 months of the recovery, the entire employment increase was more than accounted for by part time jobs: Total employment rose by 940,000 from March to September and part time employment rose by 941,000.
So, during this supposed election year “turnaround,” the number of full-time employed Americans fell by 1,000 between March and September.
They call this “forward”?
Cross-posted to Bearing Drift