What’s in a number? – the March employment report came out Friday and it would have to be considered marginal at best.  After three months of private sector job growth in excess of 200,000 jobs reported, the growth in March was reported as +120k against an expectation of +205k.  On the upside, manufacturing jobs outperformed estimates with +37k jobs against expectations of +20k jobs so that’s some good news and with natural gas prices hovering around 5-year lows and the economy still in recovery mode (fingers crossed) that should bode well for manufacturing especially in areas where natural gas is a primary input (chemicals for example). 

The problem with the labor data isn’t in the monthly miss, it’s with the overall trend in the data itself.  Consider the following data from the Bureau of Labor Statistics website going back to the start of 1980 (32 years) and then I’ll make my point on the overall job market.

I.                    Average workforce growth rate from January 1980 through November 2007 was 0.1103%.  So on average over that 28 year time period the workforce in the US (according to the BLS household survey) grew at a rate of 11 basis points a month.

II.                  Average workforce growth rate from December 2007 through March 2012 was 0.0111%.  Thus, since the recession began (officially) in December 2007 (52 months ago) the average rate of growth in the workforce according to the BLS data is 0.0111% (around 1 basis point or essentially no growth).  This marks a significant break in the overall labor market pattern over the last 30 years and is worth illustrating in a chart.

What I’m trying to illustrate here is what the size of the workforce “should” be if the average growth rate from 1980 – November 2007 had remained in place (that’s the red line in the upper right hand corner of the chart) against what the government is telling us the size of the workforce is according to the survey.  The area between the blue chart line (reported data) and the red line (pro forma data) represents either workers that have left the workforce for good or an underestimation of the unemployment rate.  If we compare the reported unemployment rate (calculated vs. the blue line) and the pro forma unemployment rate (calculated off the red line) the difference is a staggering 462 basis points.  The pro forma workforce would suggest a 12.81% unemployment rate vs. the reported rate of 8.19%. 

http://www.bls.gov/news.release/pdf/empsit.pdf