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This was a solid jobs report, not as measured by the typical recovery, but one of the better reports we have seen for years. Moreover, 30,000 government jobs bit the dust. The higher that number, the better off we will all be. +212,000 private jobs is a good number. However, I suspect this may be as good as it gets for a while.
At the current pace, the unemployment number would ordinarily drop, but not fast. However, many of those millions who dropped out of the workforce could start looking if they think jobs may be out there. Should that happen, the unemployment rate could rise, even if the economy adds jobs at this pace. It is very questionable if this pace of jobs keeps up. I rather doubt it in fact.
Bear in mind that the unemployment rate varies in accordance with the "household survey" not the reported headline jobs number.
In the last year, the civilian population rose by 1,853,000. Yet the labor force dropped by 312,000. Those not in the labor force rose by 2,165,000.
In January alone, a whopping 319,000 people dropped out of the workforce. In February (this months' report) another 87,000 people dropped out of the labor force.
Were it not for people dropping out of the labor force, the unemployment rate would be over 11%.
Please consider the Bureau of Labor Statistics (BLS) February 2011 Employment Report.
Nonfarm payroll employment increased by 192,000 in February, and the unemployment rate was little changed at 8.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in manufacturing, construction, professional and business services, health care, and transportation and
warehousing.
Unemployment Rate - Seasonally Adjusted 
Bear in mind, were it not for millions of people allegedly dropping out of the labor force over the last year, the unemployment rate would be over 11% right now.
Nonfarm Payroll Employment - Seasonally Adjusted Changes
Nonfarm Payroll Employment - Seasonally Adjusted Total
Establishment Data
Employment in the private sector rose by 222,000 in February. In the past 12 months, the private sector has added 1.5 million jobs – an average of 127,000 per month.
Statistically, 127,000 jobs a month is enough to keep the unemployment rate flat.
Index of Aggregate Weekly Hours 
During February, the average workweek for all employees on private nonfarm payrolls was unchanged at 34.2 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls increased by 0.1 hour to 33.5 hours. The index of aggregate weekly hours for all employees rose by 0.2 percent over the month. Since reaching a low point in October 2009, the index has increased by 2.4 percent.
Average Hourly Earnings vs. CPI
Average hourly earnings of all employees in the private sector were changed little in February, following a 9-cent gain in January. Hourly earnings are up 1.7 percent over the year. Between January 2010 and January 2011, the consumer price index for all urban consumers (CPI-U) increased by 1.7 percent.
The big question here is how those wages are being distributed. I think we know the answer to that.
BLS Birth-Death Model Black Box
The big news in the BLS Birth/Death Model is the BLS has moved to quarterly rather than annual adjustments.
Effective with the release of January 2011 data on February 4, 2011, the establishment survey will begin estimating net business birth/death adjustment factors on a quarterly basis, replacing the current practice of estimating the factors annually. This will allow the establishment survey to incorporate information from the Quarterly Census of Employment and Wages into the birth/death adjustment factors as soon as it becomes available and thereby improve the factors.
For more details please see Introduction of Quarterly Birth/Death Model Updates in the Establishment Survey
In recent years Birth/Death methodology has been so screwed up and there have been so many revisions that it has been painful to watch.
It is possible that the BLS model is now back in sync with the real world. Moreover, quarterly rather than annual adjustments can only help the process.
The Birth-Death numbers are not seasonally adjusted while the reported headline number is. In the black box the BLS combines the two coming out with a total.
The Birth Death number influences the overall totals, but the math is not as simple as it appears. Moreover, the effect is nowhere near as big as it might logically appear at first glance.
Do not add or subtract the Birth-Death numbers from the reported headline totals. It does not work that way.
Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another as noted by numerous recent revisions.
Birth-Death Number Revisions
Inquiring minds note enormous backward revisions in Birth-Death reporting.
Birth Death Model (as reported in January)
Birth Death Model Revisions 2010 (as reported February)
Is this new model going to reflect reality going forward?
That's hard to say, but things were so screwed up before that it is unlikely to be any worse. One encouraging sign is several negative numbers in the recent chart. January would have been negative too, had they shown it. Historically there were only 2 negative number every year, January and July. That anomaly broke November of 2010.
Birth Death Model Revisions 2011 (March)
Do NOT subtract that 112,000 from the headline number. That is statistically invalid.
Household Data
In January alone, a whopping 319,000 people dropped out of the workforce. In February (this months' report) another 87,000 people dropped out of the labor force.
Were it not for people dropping out of the labor force, the unemployment rate would be over 11%.
- The number of unemployed persons (13.7 million) and the unemployment rate (8.9 percent) changed little in February. The labor force was about unchanged over the month. The jobless rate was down by 0.9 percentage point since November 2010.
- The number of long-term unemployed (those jobless for 27 weeks or more) was 6.0 million and accounted for 43.9 percent of the unemployed.
- Both the civilian labor force participation rate, at 64.2 percent, and the employment-population ratio, at 58.4 percent, were unchanged in February.
- The number of persons employed part time for economic reasons was essentially unchanged at 8.3 million in February. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
- In February, 2.7 million persons were marginally attached to the labor force, up from 2.5 million a year earlier. These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the
survey.
click on chart for sharper image
There are now 8,340,000 workers whose hours may rise before those companies start hiring more workers.
Table A-15
Table A-15 is where one can find a better approximation of what the unemployment rate really is.
click on chart for sharper image
Grim Statistics
Given the total distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is hard to discuss the numbers.
The official unemployment rate is 8.9%. However, if you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.
While the "official" unemployment rate is an unacceptable 8.9%, U-6 is much higher at 15.9%. Moreover, both the official rate and U-6 would be much higher were it not for huge numbers of people dropping out of the workforce.
Things are much worse than the reported numbers would have you believe.
That said, this was a solid jobs report, not as measured by the typical recovery, but one of the better reports we have seen for years. +212,000 private jobs is a good number.
At the current pace, the unemployment number would ordinarily drop, but not fast. However, many of those millions who dropped out of the workforce could start looking if they think jobs may be out there. Should that happen, the unemployment rate could rise, even if the economy adds jobs at this pace. It is very questionable if this pace of jobs keeps up. I rather doubt it in fact.
Looking ahead I strongly doubt the reports will be this good over the course of a year.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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