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What is Employment?

There’s been a lot of good economic news lately, the second year in a row that July uncharacteristically surged ahead.   The “ISM Index” poll of manufacturers looked more positive than it has since 2008, even with a strong US Dollar.  Initial claims for unemployment fell to 326k last week, another low since 2008.  US GDP grew at 1.7% in 2Q13, not exactly great news but far better than expected (and accompanied upward revisions to previous quarters).  The ADP employment report showed a net gain of 200k jobs, the rosiest figure of them all.  Only 82k of those came from small businesses, with large companies gaining a new high of 60k jobs added – meaning that for the first time since 2008 big companies are in a hiring mood.

By the time you read this, the official Bureau of Labor Statistics (BLS) employment report for July should have come out, and it should be roughly in line with the more smooth ADP figure.  Now that we are really turning a corner, as Barataria expected in 2013, it’s time to take an in-depth look at what “employment” means and why there’s still so very far to go.

A “job” back when the BLS started their current methods

The best figures on the bulk population are kept by the BLS in conjunction with the Census Bureau.   While the monthly ups and downs are subject to a lot of noise, given their methods, their picture is detailed and reliable over the long haul.  We can use them to take a moment to see where we stand in terms of jobs, who needs ‘em, and who has ‘em.  We can use the June 2013 numbers for this and not have a lot of error, even if their July survey shows a good change.

Population:  The overall population of the US is 314M people.  But not all of them could reasonably be working.  The BLS uses the “Civilian Noninstitutional Population” (CNP) as their baseline, which is everyone over 16 years old that is not in prison, a mental home, or otherwise not capable of working.  That figure is 246M.

Civilian Labor Force:  This is the number that includes everyone with a job or actively looking for a job.  It’s called “Civilian” because it also excludes all military personnel.  The total is 156M, or 63.5% of the population (the “participation rate”).  It is essentially the CNP less everyone in school, retired, staying home to raise the kids, or in some other way not part of the working population.  This is the definition that causes the most debate and it is the baseline for most of the calculations done by the BLS.

Employed / Unemployed:  There are two components to the Civilian Labor Force –  144M people are employed and 11.8M are not.  The ratio of the two is the headline “unemployment rate” that is reported most frequently.  That is known as U3 officially, as it is only one of many measures of unemployment used by the BLS even though it is the only one usually reported.

Hospitality workers often don't have the hours they want

Hospitality workers often don’t have the hours they want

Employed Part Time for Economic Reasons:  Here comes the fudge!  Of those employed in the Civilian Labor Force, the BLS surveys those with fewer than 40 hours who would like to work full-time.  That stands at 8.2M, or 5.3% of the labor force.  This number is worth keeping a close eye on for several reasons.  The first is that it’s usually the first part of the employed to go up.  Some have predicted this will increase when Obamacare becomes law because companies will have to give benefits to everyone working 30 hours or more.  For a number buried in the reports, it’s got heft.

Marginal Workers:  There are 2.6M people who are not counted in the Civilian Labor Force because they have not been actively looking for work for one reason or another, but may in the near future.  This includes 1.0M “discouraged workers” who are not actively looking for work but would like to have it (and may simply be part of the underground economy) plus 1.6M people who have chosen to go to school or stay at home but could be available for work if needed.  Marginal workers are not included in the Civilian Labor Force.

U6:  Below is a chart of U6, the broadest measure of unemployment, since it was first tabulated in 1994. It includes Part-Time and Marginal Workers, meaning it uses a broader baseline of “worker”.  It stands at 14.3% currently, or about one available worker in 7:

Chart from the St Louis Federal Reserve

Chart from the St Louis Federal Reserve

If you take the 11.8M unemployed and add half of the 8.2M part-timers and all the 2.6M “marginal workers”, you get a total of 18.5M jobs that need to be created.  At a gain of 200k per month it will take 7.7 years to reach full employment, or about 2021.  The rate of job creation is accelerating at a rate of about 25k jobs/month each year, which would get us to full employment sometime around the end of 2017.  But this is complicated by the fact that more young people have been entering the Civilian Labor Force, about 2M in the last year, yet when Baby Boomer retirement picks up we will eventually see a shrinking Civilian Labor Force.

How good has the news been?  Given the Barataria prediction that we will hit something like full employment around 2017-2018, in time for the next upward economic cycle, we’re pretty much right on track.  The news is good, but not really all that good.  We still have a few years to go in this Managed Depression – but we’re on the upswing.  It’s time to watch some of those details!

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23 thoughts on “What is Employment?

  1. Yes I agree it is a long haul back. But this turn to zero hours contracts is very troubling. And the downward track in government spending due to sequestration is also very troubling we are neglecting our infrastructure. What do you think of a job assurance program?

    • I’m not sure about job assurance – a fluid labor market is in everyone’s interests through this transition, but we do need basic standards (such as a decent minimum wage). The progress so far has been good, but it’s so damned slow – it does have to accelerate to make a difference.

  2. The NSA has been in the news and I would like to jokingly point out that they are a growth industry.

    That’s my tie in to my post about Project Venona.

    From the post I would like you to take away 2 conclusions about the cold war:

    –Julius Rosenberg was guilty.
    –If Joseph McCarthy had access to Venona, he would have been largely vindicated.

    Venona
    ________________________________________
    In 1995 the National Security Agency (NSA) released details of the Venona Project, a top secret U.S. military intelligence program to decipher Soviet cablegrams that had begun in 1943 and was formally closed in 1980. For some historians (e.g., Haynes and Klehr), the information contained in these messages about Soviet spies in the United States offers conclusive proof that McCarthy-era fears about Communist infiltration of the U.S. government—often dismissed as bordering on the paranoid—were quite accurate after all. Other historians, however, question the reliability of the decryptions as a “smoking gun” because of the incomplete and tentative nature of the deciphering, and therefore dispute the conclusion that the red scare of the 1940s and 1950s was justified.
    Hearing rumors of a secret German–Soviet peace deal, in February 1943 Colonel Carter Clarke of the U.S. Army’s Special Branch instructed the Signal Intelligence Service (forerunner of the NSA) to attempt to decode Soviet diplomatic cable traffic to and from its embassies and consulates passing through the United States. The two-stage cipher system used by the Soviet Union was in theory unbreakable, but, by a mixture of skill, perseverance, and luck (the accidental duplication by the Soviet manufacturer of the “one-time pads” used in the encipherment produced a recurrent flaw), the army code-breakers managed to render the first of 2,900 intercepted messages sent between 1940 and 1948 partially readable by 1946—by which time the war was over. However, the messages turned out to reveal not secret peace-deal negotiations but evidence that the Soviet Union had been organizing an espionage campaign against the United States since 1942. The deciphered cables indicated that the Soviet Union had recruited informants in most U.S. government and military agencies at all levels, and they mentioned several hundred U.S. citizens or resident aliens (almost always by code name) who were involved with the Soviet Union in some capacity (Haynes and Klehr put the figure at 349).
    The task of deciphering the original messages continued slowly, on and off, until 1980. During the McCarthy years, the FBI and CIA used the Venona decryptions to identify new spies, to corroborate existing information gained from prominent Communist defectors like Elizabeth Bentley and Whittaker Chambers, and to confirm the guilt of atomic spies such as Klaus Fuchs and Julius Rosenberg. It is arguable, however, that the method of deciphering the messages meant that their revelations were potentially circular: the cryptographers sometimes used as a working hypothesis an identification of the real person behind the code name that had been fed to them by other intelligence agencies, which then in turn used the partially decrypted messages as confirmation of their suspicions about a particular individual. In many cases, the association of a code name with a particular individual remains speculative or unknown. Nevertheless, in combination with the partial opening up of the Soviet archives after 1991, the Venona cables offer the possibility of significant new interpretations of the emergence of the cold war, placing it much earlier than commonly thought.
    The project remained secret until 1995, as U.S. intelligence agencies insisted that it was more important not to reveal how successful it had been in cracking Soviet codes. There was also a recognition that the cables would be ruled as hearsay and hence inadmissible as evidence in a court of law, so their release would not have been of immediate use. Some commentators (Moynihan) have argued recently that this continuing secrecy was a mistake, as the Venona Project would have clarified a lot of the muddied water about Communist infiltration during the cold war, allowing the American people to have a clearer picture of the extent of Soviet espionage based on fact rather than rumor and paranoia. While the Venona documents would have been taken to confirm, for example, that Julius Rosenberg was indeed guilty of passing on atomic secrets, they would also have demonstrated that Dean Acheson (secretary of state in the Truman administration) was not the Communist conspirator that Senator Joseph McCarthy accused him of being.

    • A bit of a diversion, but I’ll bite since you’re an old-timer ’round here. 🙂
      I remember that when the Soviet archives were opened they showed an acceptance that their spy Julius Rosenberg was caught, but were mystified by the implication of Ethyl. She apparently had nothing to do with it.
      I also agree that openness does serve the government’s interests far more often than the spymasters seem to appreciate. It probably does make their job a bit harder, but they don’t seem to understand their own need for public support over the long haul. Was McCarthy right? Eh. We were infiltrated, but he made the case for that far too political to be useful. Things like that should never be political footballs – or serve the career of one person or party over the other.

    • I think it was just noise. The BLS number was higher in June but lower in July. It’s always noisier overall. Remember, this is a small number derived from subtracting two big numbers – and in the case of the BLS the big numbers come from a survey. A lot of noise month to month.

    • I can’t answer that with confidence. I think the press is lazy, but part of it is that administrations really like the headline (lower!) number. It also does not conform to the way unemployment is reported in other nations, which is closer to the headline U3. U6 is way more informative, however. There’s no reason a press outlet can’t use both, but it always seems that people writing about economic issues don’t even know U6 is there.

  3. Another aspect of spying is that the US along with UK, Canada, Australia, and New Zealand have had the the ability to intercept all electronic signals since the 1960s. It is called Project Echelon.http://en.wikipedia.org/wiki/ECHELON

    Terrorists are by definition nuts. They don’t have to lead a nation. They just want to cause mayhem. Also they are always buying cell phones and then throwing them away.

    At least during the cold war the Soviets had there embassy in DC and that is where they did there spying. We have our embassy in Moscow and that is where we spy on them. The Soviets were much more rational than terrorists.

    With terrorists you could try to personally infiltrate their organization, but eventually you have to prove yourself–you know, kill someone or blow someone up. You would have to kill someone from the West or someone Jewish. Who wants to do that? If you were a double agent with the Soviets they didn’t make you do that, as far as I know.

  4. The other obvious thing about the CIA and NSA is that they don’t have any arrest authority.
    FBI does and I am not aware of any secret prisons in the US. The secret prisons are in other countries. Now the CIA may kill people in foreign countries or do extraordinary rendition, but it is not like the NSA is sending people off to Siberia. The CIA plays dirty because the terrorists play dirty. You need something to try to deter people from signing up.

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