Way Worse Than Zero

Last Friday, September 2, 2011, the latest jobs report was released by the US Labor Department. It showed no jobs created for the month of August. Zero. Zip. The report confirmed the growing evidence that the US economy was on a track toward a serious economic relapse, at minimum, or a possible even worse double-dip recession. The stock market went into another tailspin. Bond markets globally reeled.

Those trying to downplay the August jobs report noted the August numbers included 45,000 Verizon telephone workers who were on strike and who subsequently have returned to work. That would mean, apologists argued, there were actually 45,000 jobs created last month. Big deal. It takes 150,000 new jobs a month just to absorb new entrants into the labor force.

It is important also to note that the “zero” number was the very best of the various job numbers that might have been reported, not the worst. Other data show the August jobs situation was not stagnant, with no jobs created, but actually much worse. Here's why.

The zero jobs number for August is taken from just one of the two Labor Department jobs surveys – what is called the Current Establishment Survey (CES), which focuses mostly on large companies and doesn't pick up smaller companies very well, where more than half of all jobs are either created or lost. The other Labor Department jobs survey, the Current Population Survey (CPS), is typically not mentioned in the press commentary on the jobs situation. That was true last August, once again. The CPS, however, is a more accurate reflection of the condition of jobs today in the US

The CPS shows, for example, how many workers are leaving the labor force because they can't find jobs. The CPS also shows a truer more accurate unemployment rate, called the “U-6” rate, which includes jobless workers who are discouraged or missing from the labor force and workers being converted from full-time jobs to involuntary part-time jobs. It also shows the duration of the long-term unemployed. In short, it provides a deeper and more comprehensive picture of the condition of jobs in the US last month

So, let's look at just a few of the interesting facts about August jobs from the CPS survey for last month.

To begin with, in August, an alarming additional 430,000 workers were hired as involuntary part timers, bringing their total to more than 8.8 million. That sharp rise in involuntary part-time work means several things. First, it means employers are reducing workers on full-time status to half-time status in growing numbers. That conversion of full-time to part-time work typically represents the first step many companies take before reverting to direct layoffs in greater numbers. A huge increase in part-time jobs occurred in 2008, as a prelude to eventual massive layoffs that followed. Last month's major rise in part-time employment, in other words, may just be the “canary in the mineshaft” indicating mass layoffs to come in a few more months.

Second, the rise of 430,000 part-time jobs represents an actual reduction of up to 215,000 jobs, as hundreds of thousands of workers are converted from full-time to part-time work involuntarily. The August job numbers were, therefore, “less than zero” – i.e. up to a loss of potentially 215,000 jobs. It's not that no jobs were created in August. More accurately, up to 215,000 jobs were lost in August.

Third, last month's jobs data also showed a growing dangerous trend. Over the last three months, there has been a significant rise in the number of discouraged and marginally attached workers in the labor force. In fact, 266,000 have “left the labor force” the past three months alone – in addition to the 430,000 converted to part-time work last month.

Rising numbers of discouraged workers leaving the labor force is often the first sign of a deteriorating labor market and more actual layoffs to come down the road. In addition, rising numbers for involuntary part-time work is often the next, further indication of coming layoffs as companies convert full-time to part-time jobs as an interim step to full layoffs about to occur in the near future.

Thus, these two indicators – rising discouraged workers' numbers and rising part-time employment – are both “canaries in the mineshaft,” i.e. giving off warnings of worst to come in direct layoffs. And both are getting worse.

Both the discouraged and involuntary part-time numbers are reflected in the Labor Department's more accurate “U-6” unemployment rate that isn't often reported by the press, which always de-emphasizes the severity of the jobless situation by referring to the more conservative “U-3” jobless numbers that ignore the discouraged and part-time employment trends.

The more accurate U-6 jobless numbers rose by 212,520 in August. That means, instead of zero jobs created in August, there were actually 212,520 jobs lost in August.

Furthermore, since May 2011, the U-6 jobless numbers have risen by 598,734. In short, nearly 600,000 more workers have become unemployed the past three months alone.

For non-supervisory workers still with jobs this past August, the recent Labor Department shows their average hourly wage and average weekly pay both declined – and that decline was in absolute pay levels – i.e. before even further adjustment downward to account for inflation. If you were fortunate enough to hold onto your job in August, you nonetheless had a significant reduction in pay.

To summarize, the numbers of importance in the August jobs report are not the zero jobs growth reported in August. The numbers that reflect the real condition of jobs today are the 212,500 increase in the unemployed, the 430,000 shifted to involuntary part-time employment, the escalating number of 598,000 discouraged and marginally attached workers in recent months and the sharp decline in real pay levels in just one month.

All these numbers are called “forward looking” – that is, all are a harbinger of much worse employment conditions in the months to come. It is important to focus on future indications of trends, not just one month current data like the “zero” jobs created number reported in the most conservative of the Labor Department's data survey (CES) and U-3 unemployment rate.

In a few days, Obama will address the nation and presumably offer a program for jobs. However, his past track record shows clearly his proposals will likely be “more of the same.” That means more tax cuts for business in the hope they will create jobs, despite the fact business is now sitting on $2 trillion and refusing to create jobs anyway. So, let's give them a couple hundred billion dollars more and maybe they will change their minds. Obama's proposals will also likely include some long-term infrastructure job creation, most of which won't take effect until after the next election in order to satisfy the “deficit cutters” in both political parties. That also won't do much for the jobs crisis now deepening further. Cutting business regulations will purport to represent another way to create jobs, as the president's current stable of ex-corporate advisers have been demanding. Plus, the free trade bills will parade as another false job creation proposal, when it is clear free trade has devastated jobs, not created them.

Missing will be the necessary proposal for a 21st century direct government jobs creation program patterned on the experience of the 1930s Works Progress Administration, or how to pay for that direct job creation program with a fundamental restructuring of the tax system in the US to make wealthy investors, households and their corporations pay for it all.