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Friday, March 06, 2015 10:51 AM

Diving Into the Payroll Report: Establishment +295K Jobs; Household +96K Employment, Labor Force -178K

Initial Reaction

Once again we see the pattern of a strong establishment survey but a poor household survey. The latter varies more widely, and the tendency is for one to catch up to the other, over time. The question, as always, is which way?

Here is one stat that really stands out: The unemployment rate for teenagers 16-19 fell 1.7 percentage points. BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +295,000 - Establishment Survey
  • Employment: +96,000 - Household Survey
  • Unemployment: -274,000 - Household Survey
  • Involuntary Part-Time Work: -175,000 - Household Survey
  • Voluntary Part-Time Work: +15,000 - Household Survey
  • Baseline Unemployment Rate: -0.2 at 5.5% - Household Survey
  • U-6 unemployment: -0.3 to 11.0% - Household Survey
  • Civilian Non-institutional Population: +176,000
  • Civilian Labor Force: -178,000 - Household Survey
  • Not in Labor Force: +354,000 - Household Survey
  • Participation Rate: -0.1 at 62.8 - Household Survey

January 2015 Employment Report

Please consider the Bureau of Labor Statistics (BLS) November 2014 Employment Report.

Total nonfarm payroll employment increased by 295,000 in February, and the unemployment rate edged down to 5.5 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in food services and drinking places, professional and business services, construction, health care, and in transportation and warehousing. Employment in mining was down over the month.

Click on Any Chart in this Report to See a Sharper Image

Unemployment Rate - Seasonally Adjusted

Nonfarm Employment January 2011 - February 2015

Nonfarm Employment Change from Previous Month by Job Type

Hours and Wages

Average weekly hours of all private employees was stationary at 34.6 hours. Average weekly hours of all private service-providing employees was flat at 33.4 hours.

Average hourly earnings of production and non-supervisory private workers was flat at $20.80. Average hourly earnings of production and non-supervisory private service-providing employees was flat at $20.61.

Since November, Average hourly earnings of production and non-supervisory private workers rose $0.03, from $20.77 to $20.80 (about a penny a month).

Since November, average hourly earnings of production and non-supervisory private service-providing employees rose $0.04 from $20.57 to $20.61 (about 2 cents a month).

From this perspective, wages are rising about 1% a year.

For discussion of income distribution, please see What's "Really" Behind Gross Inequalities In Income Distribution?

Birth Death Model

Starting January 2014, I dropped the Birth/Death Model charts from this report. For those who follow the numbers, I retain this caution: Do not subtract the reported Birth-Death number from the reported headline number. That approach is statistically invalid. Should anything interesting arise in the Birth/Death numbers, I will add the charts back.

Table 15 BLS Alternate Measures of Unemployment

click on chart for sharper image

Table A-15 is where one can find a better approximation of what the unemployment rate really is.

Notice I said "better" approximation not to be confused with "good" approximation.

The official unemployment rate is 5.5%. However, if you start counting all the people who 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.

U-6 is much higher at 11.0%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Some of those dropping out of the labor force retired because they wanted to retire. The rest is disability fraud, forced retirement, discouraged workers, and kids moving back home because they cannot find a job.

For further discussion of a more accurate measure of the unemployment rate, please see Gallup CEO Calls 5.6% Unemployment Rate "The Big Lie": What's a Realistic Unemployment Rate?

Mike "Mish" Shedlock

10:05 AM

No, No, No Says Draghi to Greece; Spanish Economy Minister Insists 3rd Bailout Talks Underway

Spanish Economy Minister Insists 3rd Bailout Talks Underway

Spanish economy minister, Luis de Guindos, has reiterated his position that Third Greece Bailout discussions are in play.

Luis de Guindos put back on the table the possibility that the Troika is preparing a new bailout for Greece. "The four month extension of the aid program will show us the real situation and establish the need for a third rescue," he assured an information forum. "Next week, the Eurogroup meeting will hopefully expose the discussions that have occurred," he added.

Jean-Claude Juncker denied this week that it was negotiating a third bailout for Greece, but it's the second time that the economy minister made statements in this regard. In particular he spoke of a package of between 30 and 50 billion euros of which Spain would guarantee between 13% and 14%. Our country has already contributed 26 billion euros in respect of guarantees and loans for the Greek economy.
Whom to Believe?

Once again this is a question of whom to believe.

I don't know for the simple reason that no one involved merits the benefit of the doubt.

I discussed this issue at length in Greecification of Spanish Politics and the Lies of Spain's Ministers.

The actual amount of Spain's loan to Greece is €6.65 billion. Everything beyond that is a loan guarantee, not current paid out of pocket. The guarantee is real, but it's not spent money ... yet.

See the preceding link for discussion.

No, No, No Says Draghi to Greece

Keep Talking Greece has anther interesting post today: Varoufakis says “We have Plan B” after ECB Draghi’s says No,No,No to liquidity.
“We have Plan B” Greek Finance Minister Yanis Varoufakis told private Mega TV on Thursday, just a couple of hours after ECB head Mario Draghi linked ECD funding with Greece’s compliance to the bailout and austerity program, righting the conditions for liquidity.

At a press conference today, Mario Draghi distributed money around, but to the Greek, he said three times “No”.

NO, ECB will not allow Athens to sell additional T-bills total worth 8 billion euro.

NO, ECB will not buy Greek bonds under its new assets-buying program.

NO, ECB will not accept Greek bonds as collateral.

“The ECB is a rule-based institution. It is not a political institution. It cannot provide monetary financing to governments, either directly or indirectly. We cannot give money to banks to fund governments,” Draghi said.

Odd, that he did not add that he had no problem to fund banks and put the burden on taxpayers around Europe, when it comes to fund the oh-so-dear banks.

P.S. No, Varoufakis did not elaborate on the Greek Plan B.
Musical Tribute

I believe I see four distinct no's in the above article, and I have the perfect musical tribute.

Link if video does not play: Ringo Starr - The No-No Song

Mike "Mish" Shedlock

Thursday, March 05, 2015 10:12 PM

Will Higher Minimum Wages Create Jobs? Who Benefits From Higher Minimum Wages? Demographic Perspective

Of all the ridiculous notion floating around in the liberal media is the notion that higher minimum wages will create jobs.

The theory goes like this: Pay people more, they will have more to spend, and by spending more they will create more jobs. On that basis, proponents argue for a $15 minimum wage at McDonald's. There are several obvious flaws in such arguments.

Obvious Flaws

  1. No one in government has any idea where to set a minimum wage to achieve such miraculous results. Should the wage be $9.78, $12.22, or $14.88?
  2. Logically, wages vary by industry, skills needed, and actual skills of the workers. A government mandated minimum wage says none of those matter. No matter what you do, or how badly you perform that task, you get a guaranteed rate.
  3. Many small business owners, the very kind that the liberal media blames the likes of Walmart and McDonald's for destroying, will not be competitive at forced higher rates.
  4. Businesses will do everything possible to not raise salaries until it affects their bottom line.

Crash Course in Free Market Economics

In regards to point number four, Walmart announced a wage hike because turnover was too excessive. It did so, not because of government mandated minimum wage, but rather because of turnover and the quality of employees it could attract at the wages it was offering.

That's a logical way to set minimum wages. I discussed that theory in Crash Course in Free Market Economics and Income Inequality

If that does not convince you, please consider Union Group Mobilizes "Against" Pay Hike.

Restaurants Mobilize Robots

Also in regards to point number four, and something I have noted before, Restaurant Ordering Robots to Replace Human Jobs.
Panera is ready to launch the restaurants of its future. Using online restaurant ordering, you will either place your own order on your smartphone or on a tablet device at the restaurant. And then the kitchen staff will just show up with your order after you pay on your phone or on the kiosk.

This method frees up labor to work on food prep and serving. It enhances order accuracy and gives you better service. But will you miss the human touch of a waiter or waitress?

Having done this kind of ordering outside the U.S., I can honestly say you won't miss it at all.

There's also another reason why you'll see online restaurant ordering take off in the near future. In areas where they plan to boost the minimum wage, there's a good chance that will equate to labor cutbacks. So the person taking your order will be replaced by a machine!

Chili's goes modern too

Tablets are also coming to the table at your local Chili's to take your order, to offer pay games to entertain your kids...and to upsell you on dessert!

Chili's will install table-top tablets in its more than 1,200 stores by next year, according to The Wall Street Journal. Applebee's has also been testing such tablets, but no word yet on a full rollout from them.

Some restaurant chains will look at this technology and see a way to reduce staff headcount. But the really smart ones will use it as a way to get their servers focused on super-serving you at the table -- since some other parts of the job that used to be done by people are now going to be automated.
Demographic Perspective

The idea that higher minimum wages create jobs is absurd. And let's look at this from one more perspective: demographics.

As boomers head into retirement, forced or not, an increasing number of people are dependent on Social Security. The participation rate shows just that.

Precisely what do you think retirees on fixed income think about 0% interest rates and the price of food, especially at places like McDonald's that are already struggling?

It is ridiculous to think that raising the minimum wage to $15 for uneducated, low-skill workers will be enough to counteract the number of people who decide "I cannot afford to eat out anymore, especially since it's unhealthy garbage anyway."

There will be no increase in jobs as a result of a hike in minimum wages. Any historical attributions otherwise were a result of the increasing participation rate or other economic situations creating an increasing demand for workers in the face of wage hikes.

Who Benefits?

A hike in minimum wages only benefits marginal employees who retain their jobs. Everyone else loses by paying more for goods and services. Businesses will be forced to pass on costs. No one can possibly benefit from such a spiral.

Studies that show jobs rose after hikes in minimum wage, really show jobs rose in spite of minimum wage hikes!

Mike "Mish" Shedlock

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