South By North Strategies, Ltd.

Picturing The Newly Insured

Via Ezra Klein’s Wonkblog comes a graphic depiction of the characteristics of the 32 million Americans expected to gain health insurance coverage under the Affordable Care Act.

Analyzing The Tax Plans Of Presidential Candidates

A recent segment on the PBS NewsHour discusses the differing tax plans of President Barack Obama and Gov. Mitt Romney.

Where Do National Employment Numbers Come From?

(October 8, 2012) Last Friday, the U.S. Bureau of Labor Statistics released the national employment report for September 2012. As South by North Strategies, Ltd. (SBN) noted in its monthly analysis, the American economy gained an estimated 114,000 jobs in September, while the share of the labor force that was unemployed fell to 7.8 percent. That 7.8 percent figure was the lowest national monthly unemployment rate recorded since January 2009.

Normally, the release of national employment data for a given month, which occurs at 8:30 am on the first Friday of the following month, is a relatively straightforward event of interest mainly to policymakers, journalists, business executives, and analysts like SBN. At the same time, the report is one of the most important economic indicators to appear in a month, and the data hold the potential to drive markets, politics, and public policies. That explains why the release of information is tightly controlled, with accredited journalists subject to “lock-up conditions.”

Is The Fix In?
Due to the stakes associated with the upcoming presidential election, the September employment report has become enmeshed in political controversies and surrounded by conspiracy theories, some of which have been percolating at the state and local level for months.

As  John Cassidy of The New Yorker noted on Friday in his Rational Irrationality blog, the first allegations of number fixing occurred within five minutes of Friday’s data release, when on-air personalities at CNBC raised the issue. The claims were repeated throughout the day and were amplified through various print, broadcast, and online outlets, as well as through social media. The conspiracy theories seemingly received a further boost when  Jack Welch, the retired CEO of General Electric (and beloved mentor of Jack Donaghy of 30 Rock fame), tweeted that the data were suspect. (He later attempted to clarify his views.) More recently, Donald Trump expressed similar concerns on national television.

The past few days have seen a flurry of claims and counterclaims about the BLS figures, especially in the blogoshpere. Two points deserve mention. First, the numbers were not altered for political reasons and accusations to the contrary demonstrate an unfamiliarity with the processes used to generate these important statistics. Second, the September numbers are, by any objective measure, unimpressive and paint a picture of an economy that is generating too few jobs. The numbers are “good” only in relation to the disastrous conditions experienced since the onset of the “Great Recession” in December 2007.

As University of Oregon economist Tim Duy wrote on his well-regarded blog Fed Watch:

The jobs numbers are out, and they are reasonably solid.  Reasonably solid as long as you weren’t expecting miracles.  Very strong if you thought the economy was heading into recession.  But just about where they should be if you think the economy is just sort of grinding along at a slow but steady pace.

The professional view of SBN is broadly consistent with that of Professor Duy. At the same time, the recent flap is fascinating in how it has pushed an issue on which the firm works into the national spotlight and highlights just how unfamiliar many prominent people and ordinary citizens are with some of the nation’s most important economic statistics. Inspired by the remark long attributed to former U.S. Sen. Daniel Patrick Moynihan that “everyone is entitled to their own opinions, but they are not entitled to their own facts,” SBN would like to offer a quick, admittedly simplified, overview of from where national labor market statistics come.

Who Counts?
Responsibility for  measuring the labor market rests with the U.S. Bureau of Labor Statistics (BLS), an agency within the US Department of Labor. Founded in 1884, the BLS is the oldest permanent major federal statistical agency. Consistent with its founding in the late 19th century, the agency’s mission is to collect “information upon the subject of labor, its relation to capital, the hours of labor and the earnings of laboring men and women, and the means of promoting their material, social, intellectual, and moral prosperity.”

For most of its early history, the BLS had little more than fact-finding authority, but that changed during the 1930s when the magnitude of the Great Depression pushed labor market issues to the center of the national debate and led to the development of social scientific methods of measuring the labor market and associated phenomena like unemployment. Since 1959, the BLS has had sole responsibility for preparing national estimates of labor market conditions.

Today, the BLS, which has its headquarters in the District of Columbia, is responsible for collecting information on employment, unemployment, jobs, wages and benefits, prices, productivity, workplace conditions and injuries, consumer expenditures, time use, and international comparisons. The agency is staffed by professional civil servants with specialized knowledge of such fields as economics and statistics. With the exception of the Commissioner of Labor Statistics, who is nominated by the president and subject to confirmation by the U.S. Senate, none of the agency’s employees are political appointees; even the current commissioner is a career civil servant who is performing the job on an acting basis.

What Do They Count?
The United States is a large country with a sizable labor market. In September, almost 244 million Americans were old enough to be potentially in the civilian labor market, and 155 million persons were either employed or unemployed; the remainder were not participating in the labor force (seasonally unadjusted figures). Similarly, employers had nearly 134 million positions on their payrolls, of which 83.4 percent were in the private sector (again, seasonally unadjusted figures).

These estimates come from two different random surveys sponsored each month by the BLS. The first survey is the Current Population Survey (CPS), which is conducted for the BLS by the US Census Bureau. Each month, the CPS contacts 60,000 households chosen as representative of the civilian noninstitutional population ages 16 and older. A household selected for inclusion in the study participates eight times over an 18-month period. Interviews occur during the week containing the 19th of the month and ask for information pertaining to the week containing the 12th of the month. Participation is voluntary, and all responses are treated as confidential. (Note that different methods are used for state and local estimates.)

The second survey is the Current Employment Statistics (CES) program, which is a federal-state partnership that began in 1915. Each month, the BLS surveys some 486,000 individual business establishments and solicits information about wages, hours, and the total number of jobs on their payrolls during the week that includes the 12th of the month. The survey covers all types of payroll positions (supervisory, non-supervisory and production) and inquires into both full-time and part-time posts.

Because the survey frame is derived from unemployment insurance records, the CES only covers establishments subject to the unemployment insurance system, meaning that agricultural workplaces, domestic employers, and unincorporated small businesses not subject to unemployment insurance taxes are excluded. That said, almost all employed Americans work for establishments covered by unemployment insurance. Furthermore, the connection of survey coverage to the unemployment system means that is is possible to check the survey data against administrative tax records, which is done through a third BLS program called the Quarterly Census of Employment and Wages. Participation in the CES is voluntary, and responses are confidential. Also, the BLS suppresses any information that might permit the identification of individual business establishments.

As hopefully is clear from the preceding discussion, the CPS and CES measure two different things. The CPS measures persons, or individual human beings, typically those age 16 and older. The CES, meanwhile, is a measure of jobs, or positions on the payrolls of individual business establishments. There is not a 1-to-1 relationship between the number of persons and the number of jobs, due partly to persons who hold multiple jobs. Additionally, the two surveys have different geographic frames of reference. The CPS groups people by their place of residence, while the CES categorizes jobs by the place of work. So, a person who lives in Wake County, North Carolina but works in neighboring Durham County would be counted as employed in Wake County under the CPS, but his/her job would be included in the Durham County tally in the CES. It is because the surveys measure different things that they sometimes yield seemingly contradictory results, such as a large jump in employed persons occurring alongside seemingly modest growth in the number of payroll positions, which is what happened in September.
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Around The Dial – October 5, 2012

Economic policy reports, blog postings, and media stories of interest:

• Paul Krugman points out the politics of pre-existing conditions.
• Jordan Weissman wants to “ban the term ‘small businesses’ from all future debates.”
• Under the Dome reports on the many right answers to a a person’s tax rate.
• Joseph Stiglitz is mystified by monetary policy in the US and Europe.

Payrolls Expand, Unemployment Falls In September

CHAPEL HILL (October 5, 2012) – The national labor market added 114,000 more jobs than it lost in September. That payroll growth, while modest, helped to reduce the national unemployment rate to 7.8 percent, which was the lowest rate (seasonally adjusted) recorded since January 2009, when the rate also equaled 7.8 percent. Despite the improvements, job growth remained weak in September, and unemployment was elevated.

“September marked the 24th consecutive month of job growth in the United States,” said John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “Over the past three months, the national economy has netted an average of 146,000 jobs per month, a pace that, while positive, is insufficient to drive unemployment down to pre-recessionary levels anytime soon.”

In September, the nation’s employers added 114,000 more payroll positions than they cut. Gains occurred mainly in the private sector (+104,000), though government payrolls netted 10,000 positions due to a rise in state government education jobs tied to the start of the school year. Additionally, the payroll employment numbers for July and August underwent positive revisions; with the updates, the economy gained 323,000 jobs over those two months, rather than the 237,000 positions previously reported.

Within the private sector, payroll levels rose the most in the education and health services  sector (+49,000, with 88.8 percent of the gain occurring within the health care subsector), followed by the trade, transportation, and utilities sector (+25,000, with 68.4 percent of the growth occurring in the transportation and warehousing subsector). The manufacturing, sector, meanwhile, shed 16,000 positions, of which virtually all were tied to the manufacture of durable goods. All other industrial sectors experienced few changes in payroll levels.

“The American economy has added jobs every month for two years and has netted 1.3 million positions so far in 2012,” noted Quinterno. “The current average rate of job growth nevertheless will fail to close the large jobs gap facing the United States anytime soon.”

Slack labor market conditions were evident in the September household survey. Last month, 12.1 million Americans (7.8 percent of the labor force) were jobless and seeking work. The unemployment rate was the lowest one posted since January 2009, when 7.8 percent of the labor force also was unemployed. In September, the size of the labor force grew by 418,000 persons, and the share of the population participating in the labor force rose to 63.6 percent, a rate that nevertheless was below the one recorded last September. The share of the adult population with a job similarly rose yet remained at a depressed level (58.7 percent). Nevertheless, compared to a year ago, more Americans were working in September 2012, and fewer individuals were unemployed.

Last month, the unemployment rate was higher among adult male workers than female ones (7.3 percent versus 7 percent). Unemployment rates were higher among Black (13.4 percent) and Hispanic workers (9.9 percent) than among White ones (7 percent). The unemployment rate among teenagers was 23.7 percent. Moreover, 6.7 percent of all veterans were unemployed; the rate among recent veterans (served after September 2001) was 9.7 percent. At the same time, 13.5 percent of Americans with disabilities were jobless and seeking work (not seasonally adjusted).

Jobs remained scarce in September. Last month, the underemployment rate equaled 14.7 percent. Among unemployed workers, 40.1 percent had been jobless for at least six months with the average spell of unemployment lasting for 39.8 weeks. The leading cause of unemployment remained a job loss or the completion of a temporary job, which was the reason cited by 54.3 percent of unemployed persons in September. Another 27.4 percent of unemployed persons were reentrants to the labor market, while 10.4 percent were new entrants. Voluntary job leavers accounted for the remaining 7.9 percent of the total.

“Although the unemployment rate dropped to a 44-month low, the American labor market remains in distress,” observed Quinterno. “The overall rate of job growth is sub-par, and there simply are not enough jobs for all the Americans who desire work.”

“The drop in the unemployment rate in September should not obscure the fact that joblessness in America is at a level that would have been considered a national crisis in any recessionary period prior to the most recent one.”