The Labor Department released jobs numbers for June today and the
results were disappointing. Estimates were that non-farm payroll
would add around 100k jobs last month. Instead they added just 80K,
which is just over half the number needed to keep up with population
growth. James Pethokoukis at AEI has put up an updated version of this familiar chart.
Notice the red dot showing where we are now. It's a full two points
higher than where the Obama team thought we'd be at this point without the stimulus plan. And as Pethokoukis notes,
the unemployment rate only looks this good because so many people have
abandoned the work force. If you include all the people who were part of
the workforce when Obama took office, unemployment would literally be
off the chart at 10.9 percent.
There's one additional wrinkle to today's numbers that was noticed by Bryan Preston over at the PJ Tatler. According to CNBC, "The birth-death model,
which approximates the amount of jobs gained through new businesses
created too recently to be counted in the formal survey, added 124,000
positions, meaning that without the estimation the total count would
have been a loss of 44,000."
The birth-death model
appears to be a fairly good approximation of actual jobs being added,
but according to BLS the data varies dramatically on a month to month
basis. Some months the b-d model adds a lot of jobs and some months it
adds few or is negative. So which months tend to add jobs? From the BLS FAQ
on the birth-death model:
Months with generally strong seasonal increases such
as April, May and June generally have a relatively large positive
The b-d model is adjusted slightly each year, but if we look at last year's chart
we find that birth-death added and estimated 141,000 jobs in June and
just 5,000 in July, for a drop of 136,000 month-to-month. I contacted James Pethokoukis at AEI to get his take on the significance of the birth-death estimates. He was kind enough to provide this response:
As you can tell, there is plenty of art in these estimates as well
as science. And when job growth is this slight, these external
adjustments can overwhelm the base numbers. Given the weakening in
manufacturing, we could get a worse base number in July than June, which
means that when you add in a less robust b-d model, the job gains could
be slight to negative. Of course, if jobs are ramping back up to
150,000 or so -- as the ADP forecast could be interpreted as suggesting,
then we would still be positive.
Unless there is a sizable bump in the base numbers, we'll be looking at lower or negative job growth next month.