Was the August Jobs Report Really So Bad?

At first glance, the August jobs report, released two weeks ago, seems just plain bad:

• Only 96,000 more jobs.
• 119,000 fewer people employed.
• 591,000 more people "not in the labor force".
• Unemployment down but ONLY because 368,000 people left the labor force (Some say "Gave up looking for work".)

Oh, woe are we; woe are we!, the pundits cry:  Bad news for Obama; good news for Romney and the Republicans!

As is often the case, we need to say:  Not so fast!

It often takes a few days to dig through these reports, and there is often a silver lining.. or at least a reason for the seemingly bad news.  

The good news of this month's unemployment report:

• Employment is up solidly among people 25+.
• The size of the labor force has increased among people 25 and older.
• The people leaving the labor force are young people 16-24 who are returning to school.  There were more young people employed over the last few months, so there were more people available to leave employment and to leave the work force this August than in recent summers.
• In comparison to jobs numbers in the month of August in prior years,  this August is not only NOT that bad; but it is actually pretty good.
• Seasonal adjustments seem hinky when compared to previous years.

We'll look at each of these issues, the first three about younger workers here, and the second two, about August numbers HERE.

Fewer people employed?

The Bureau of Labor Statistics numbers do show us that there are 119,000 FEWER people employed in August than in July, and dozens of pundits and right-wingers jumped on that to blather on about the continued misery of the American people; that people were dropping out of the work force because they were terribly depressed and couldn't find work, etc. etc., 

But no...  When one digs a little more deeply into the BLS stats, we see quite a different picture:  

Among people age 25 up, the number of people in the labor force (working or looking for work) actually INCREASED by 180,000 in August and employment among people 25+ INCREASED about 397,000 in August.

Among young people 16 to 24, employment did DECREASE by 453,000 in seasonally adjusted numbers.. and employment decreased by about 1,260,000 in "raw" un-adjusted numbers.  This seems like a huge decrease due to people going back to school, but the reality is that more young people found jobs this summer.  

There were 750,000 MORE young people employed this July than last July, and this was the largest number of people 16 to 24 who were employed since before the recession, back in 2008. The employment population ratio (percentage of people in the population who are employed, either full-time or part-time) of people 16-24 this summer was up to 46.2%, higher than it has been since 2009, when we were still losing jobs at a huge rate. The unemployment rate among young people this summer, while still higher than it was in the early 2000's, is lower than it has been for four years. 


With an increase in Pell Grants over the past two years, it is possible that more young people could afford to go to school this year and perhaps more of them could attend school without working.  In October 2010, about 58% of young people 16-24 were enrolled in school either part-time or full-time.  In March of 2012, that percentage had increased to 61% of young people 16-24.  We'll know more when the school enrollment numbers for September and October are released.
 

People Leaving the Labor Force in Despair?  

The people leaving the labor force don't appear to be leaving in such despair and depression... As we said above, they are largely young people (16-24) returning to school, and there is absolutely NO PROOF that people who are leaving the labor force are doing so in despair.  In fact, the number of people who claim they are not looking for work because they are "discouraged" and believe they will not be able to find work has been going down, both from July to August (852,000 down to 844,000) and from last August to this August (977,000 down to 844,000).

As mentioned above, the number of people 25 and over in the labor force actually increased by 180,000.  So the decrease in the labor force this August is entirely due to younger people, 16 to 24, probably because they are  returning to school.

Why are so many more young people leaving employment and the labor force this year?
Now.. There seems to be a much greater number of young people leaving the labor force to return to school this year than in the past couple of years.  Seasonal adjustments should even out the back-to-school effect, as young people leave the labor force and employment by the droves EVERY August.  So why more young people leaving this August?

Two reasons:

• The first, more young people employed in July 2012 than in recent months of July, was discussed above. 
• The second is a bit more obscure:  August 12th was on a Sunday this year.  

So what?  August 12th was a Sunday?  How does that change anything? 


Here are the changes in the size of the labor force in August for the past 13 years from 2000 to 2012:

• 2000   +236,000
• 2001    -370,000
• 2002   +206,000
• 2003    -  40,000
• 2004    -128,000
• 2005   +347,000
• 2006   +339,000
• 2007    -305,000
• 2008   +166,000
• 2009    -219,000
• 2010   +325,000
• 2011   +316,000
• 2012    -368,000

There doesn't seem to be an obvious pattern when one looks at the change in the size of the labor force in seasonally adjusted numbers.  However, when you look at unadjusted numbers of people who left the labor force in August, the pattern is more apparent, and much more apparent if you only look at unadjusted numbers of people 16-24 who left the labor force in August:
     
                   Change in the labor force, August   
                 Unadj 16+            Unadj only 16-24

• 2000  -   626,000                  -   955,000                                 
• 2001  -1,271,000                     -1,637,000
• 2002  -   624,000                     -1,194,000
• 2003  -   855,000                     -1,245,000
• 2004  -1,051,000                     -1,219,000
• 2005  -   653,000                     -1,103,000
• 2006  -   743,000                     -1,030,000
• 2007  -1,378,000                     -1,538,000
• 2008  -   913,000                     -1,343,000
• 2009  -1,358,000                     -1,417,000
• 2010  -   592,000                     -   974,000
• 2011  -   468,000                      -   855,000 
• 2012  -1,271,000                     -1,630,000

First, it is obvious that, in raw numbers, the size of the labor force decreases quite a bit every August.  It also should be obvious that the drop in the size of the labor force in August is completely caused by a decrease in the size of the labor force by young people 16-24.   

Back to the 12th day of the month:  

The 12th day of the August this year, 2012, was a Sunday. The week containing the 12th day of the month was the week ending Saturday, August 18th. In 2011, the week containing the 12th day of the month was the week ending Saturday, August 13th. This doesn't seem like a big difference, but it makes a big difference in terms of people returning to school. Young people are more likely to stop working and return to school in a week ending August 18th than in a week ending August 13th. 

If you look at the numbers above, you see the biggest monthly drops out of the labor force fell in 2001, 2007, and now in 2012.  Those are the years in which August 12th fell on a Sunday.  Notice that 2007 was still a good year economically, and there were still many hundreds of thousands more young people who dropped out of the labor force in August than in the year before.  The next highest drops occurred in August of the economically distressed years of 2008 and 2009.

To summarize:

• The drop both in employment and the drop in the size of the labor force in August are both attributable to young people, aged 16-24, probably in conjunction with their return to school.
• The number of people 25 and up who are in the labor force and who are employed went up in August.
• The reason that the number of 16-24 year olds in the labor force and the number of 16-24 year olds employed decreased as much as they did had to do with the number of young people employed this summer, which exceeded that of the number of young people employed last summer by 750,000 people.
• Also a statistical fluke, that August 12th occurred on a Sunday, exaggerated the number of young people leaving employment and leaving the labor force in August.  This same fluke has exaggerated the number of people leaving employment and the labor force in every recent year in which August 12th fell on a Sunday.