Look Again – July Jobs Declined by 198,000

On Friday, August 5, the employment numbers were released by the US Department of Labor for July jobs. The Current Establishment Survey (CES), referred to as the “payroll report,” indicated 117,000 jobs were created in July. That was more than the general forecast of 85,000 by economists, although still well below the 150,000 a month needed to absorb new entrants into the labor force. However, it was, nonetheless, heralded by the business press and politicians as “not so bad,” considering that earlier in the week reports for manufacturing activity and consumer spending were disastrous – indicating the worst performances in two years for those indicators since the economy's 2009 lows.

But hold on. The 117,000 represent just one part of the Labor Department's monthly reporting of employment, what are called the “B” tables. Those tables reflect a reporting by establishments (businesses) to the Labor Department each month. The problem with the “payroll report” (CES) is that it is acknowledged to be biased toward larger establishments: bigger corporations, with more than 500 employees. Many smaller to medium-sized businesses are not included in the CES report and “B” tables, nor are most of the millions of non-incorporated proprietorships or the nearly ten million self-employed. The latter three groups are reflected in the Labor Department's “A” tables, in a second survey on jobs each month called the Current Population Survey, or CPS.

The CPS reflects best the job hiring and layoffs by small- and medium-sized businesses. Small businesses are generally acknowledged as responsible for more than half of all jobs created over the past decade, and for job losses as well. And small businesses have been steadily reducing jobs this year and, furthermore, continue planning to do so in the second half of 2011, according to various business surveys.

For example, the National Association of Independent Business (NFIB), a trade group that surveys its membership of small businesses on a monthly basis, reported three months ago in May that small businesses were planning layoffs this summer at the highest rate since last September 2010. Those layoffs are now working their way through the economy this summer.

So, why didn't they show up in the July Labor Department jobs report? Well, they did: in the CPS report – i.e. where most small businesses and self-employed are recorded – in contrast to the “payroll” CES report where they aren't. But not one business press story in a major business daily or weekly referred to the CPS report's results, except to note that the unemployment rate – a statistic from the CPS report – fell slightly to 9.1 percent.

So, what did the jobs numbers for July show? Total net gains in employment, which is really what is important, declined by -198,000 in the July CPS report. In other words, there were 198,000 fewer non-agricultural workers employed in July than in the previous month of June!

More interesting still, the number of workers employed, according to the CPS, has fallen for four consecutive months by a cumulative total of 901,000.

The July drop of 198,000 was not as larger as the June decline of 526,000. But together, with April and May job declines, the total decline was 901,000. See Table A-5 of the Labor Department's “Current Employment Situation Report” released on August 5 for July. There, you will find jobs data showing that in February 2011 a total of 137,738,000 non-agricultural employees were employed. In July, that number had declined to 136,837,000.

What the “A” tables in CPS also show is that full-time employed workers total employment fell over the past four months by 926,000, including 48,000 last month. So, why did the unemployment rate fall to 9.1 percent last month, given that many lost jobs? Because there were 481,000 part-time workers hired over the last four months, while 579,000 workers were so discouraged in finding work they left the labor force altogether. The latter two statistics reduce and offset the -926,000 jobs lost, to make it appear a small net number of jobs were created. That adjustment then lowers the unemployment rate.

So, what we have is a picture in July of continuing net job loss for the month, not job gain. Over the past four months, it's a scenario of a “major churning of jobs.” Better paying full-time jobs are being destroyed, while lower-paid part timers are being hired and larger numbers of workers are giving up and leaving the labor force. All that translates into lower weekly take home pay and a steady drift lower of consumption and buying power.

It's the steady stagnating and declining real spendable income for 90 percent of the households in the US that underlies the faltering “business confidence” that conservatives and Teapublicans like to refer to so much. Business confidence has not recovered because few can afford to buy their products. Business won't invest and expand production and hire if it can't even sell the products it now has. And that's a problem due to stagnating and declining incomes by the vast majority today, and the largest factor determining that decline is the related stagnation and decline in jobs.

As a consequence, big businesses continue to sit on their $2 trillion hoard of cash today, while small businesses can't get loans to expand and hire. The perpetual media drumbeat of excuses for their hoarding $2 trillion is that we need to give businesses yet more tax cuts to get their confidence up and invest. So, what's the major number? Will $3 trillion do it? $4 trillion? Or the pro-business apologists argue we need to get rid of regulations to improve business confidence. Or we need to cut trillions from spending (but don't raise their taxes) and then their “confidence” will return. The business confidence argument is nothing but a “confidence game.”

As the past week's events since the passage of the debt ceiling bill last August 2 have shown, business confidence is impacted little by deficit cutting and phony debt ceiling crises. It's impacted by manufacturing reports showing record declines in manufacturing activity and consumer spending turning negative – both reported last Tuesday and Wednesday. The Friday, August 5, July jobs report was considered a moderate report by the business press, not too great, but not as bad as the manufacturing and consumer reports earlier in the week.

But that's only because the press carefully avoided reporting the CPS jobs decline estimates for July and chose to focus on the less negative CES payroll report. But job losses cannot be ignored. Nor can they be hidden or avoided. Soon to be added to the continuing decline of jobs by small businesses, moreover, will be the “mass layoffs” by large businesses that also began to appear in late July – i.e. before even the CES was able to pick them up. Those “mass layoffs” by big corporations – in banking, manufacturing and services – will soon appear in the August jobs report that will be released the first Friday in September. Just in time for Labor Day.

Meanwhile, Congress will stumble toward another spending cuts crisis with the upcoming 2012 budget that is due by October 1, cutting more government jobs at an annual rate of 500,000 or more – while the private sector slashes jobs at an even higher rate.

The real crisis is not deficits or debt, but the crisis of job creation that is the No. 1 reason for the chronic and growing deficits of the past two years.