The official unemployment rate has been moving downward almost exclusively as the labor force shrinks so dramatically in proportion to the population. That wasn’t the intent for the design of the statistic, but the state of economic commentary being what it is has left most observers to draw their own conclusions (I think most unbiased people understand what is going on with it). In January 2014, however, for the first time since April the change in rate actually reflects an improvement in the Household Survey.

As is the luck of the mainstream, unfortunately such could not be accompanied by better performance in the Establishment Survey. Despite the one-month convergence, the two surveys are still noticeably apart and each showing a different state of the jobs market.

ABOOK Feb 2014 Jobs Since 11-2011ABOOK Feb 2014 Jobs Since 10-2012

While all the major statistics that I track had a decent month in January, it was bound to happen given the near-relentless decline from the middle of last year. Given that expected volatility in the data, we will see next month if becomes an inflection.

As yet, that has not been the case – the labor market still is showing deterioration. While the M/M change in the official Labor Force was positive, it does not come close to erasing the declines seen in recent months. In fact, the labor force today is not appreciably larger than at the beginning of 2012, or even the beginning of 2011. That is simply astounding, and, again, should be a cause for at least re-evaluating the statistical process of data collection and the analysis that accompanies it.

ABOOK Feb 2014 Jobs NLFABOOK Feb 2014 Jobs LF

Three out of the past four months have shown Y/Y declines in the labor force (and November was barely positive). A labor force that is shrinking is doing so as a response to cyclical conditions and not just the structural deficiencies evident across the broader spectrum of labor data.

ABOOK Feb 2014 Jobs Weekly Earns

Finally, since the middle of 2012, weekly earnings continue to progress near historic lows (outside of the Great Recession itself). That more than suggests both a lack of demand for labor and an overabundance of it. Neither are consistent with sustainable economic growth.


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