Welcome to the VetJobs Veteran Employment Situation Report covering July 2012. This report will be in three parts. The first will summarize the Bureau of Labor Statistics report on the labor market, the second covers where the jobs were created, meaning where the best chance of finding employment may be, and the third covers the employment situation in the veteran market.
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DOL reports that job growth slowed sharply in August. As the economist Bruce Steinberg says in his Tea Leaf report, “With a 0.2% drop in the unemployment rate but rather anemic job growth numbers, this month’s employment report will provide fodder for both political parties to say their policies are the ones needed for this economy and the other party’s policies are failing.”
Total nonfarm payrolls increased by 96,000, lower than the 125,000 gain expected by Wall Street economists. Adding to the sense of weakness, job growth in the past two months was revised down by 41,000. The unemployment rate unexpectedly declined to 8.1% in August from 8.3% in the previous month but the drop was due to a smaller labor force. Economists forecast the future unemployment rate to hold steady at 8.3% and other economists say the real unemployment rate would be around 11% if all the “dropouts” were added back in.
DOL reports the number of unemployed persons in the United States was little changed at 12.5 million. However, when you consider all forms of unemployment the total is closer to 23,000,000 unemployed people.
The 8.1% unemployment rate in August was the result of a fairly large decline in the size of the labor force. The private sector added only 103,000 jobs in August, which was a disappointment from July’s gain of 162,000 but better than June’s increase of only 63,000. When the decline in government jobs are factored in, the overall job growth in August was 96,000. That was not as good as July’s increase of 141,000 but better than June’s gain of 45,000.
The August 8.1% unemployment rate was lower because, although the number of employed persons declined by only 119,000, the labor force contracted by 368,000 but there also were 250,000 fewer unemployed persons. So, despite the fact there were fewer people employed, the labor force shrank by a much bigger number at the same time as the number of unemployed persons declined as well. In terms of the math, to get the interest rate down, DOL increased the denominator.
The employment-to-population ratio declined by 0.1 point to 58.3, which was the same level it was a year earlier. However, the labor force participation rate is down by 0.2 points, to 63.5%. It was 64.1 in August 2011 so year over year it is going the wrong direction.
Since the beginning of the year, job growth has averaged 139,000 per month, compared with an average monthly gain of 153,000 in 2011. This number reinforces the fact that the economy is slowing down. Another way to say this is the recovery which started in 2009 in recovering at a decreasing rate. This is not good.
Normally, the unemployment rate should have gone up with a report of only 96,000 new jobs, but DOL was able to push the rate down by claiming more people have given up looking for work. The problem here is it is not clear as to how DOL calculates how many have dropped out of the economy. As we are in a political year, you can expect more use of dropouts in order to lower the unemployment rate as we move closer to the election. Many economists think the real unemployment rate is around 11%, and the total unemployment rate when considering those who want jobs, are underemployed or working part time jobs is 15% to 18%.
Of serious concern, the labor force participation rate fell to the lowest level since September 1981! Both the civilian labor force (154.6 million) and the labor force participation rate (63.5%) declined over the month. The employment-population ratio was essentially unchanged at 58.3. These are not good trends. The labor participation rate has been steadily declining in 2012. These are not a good indicators and again reinforces the recovery is non-existent and the stimulus packages did not work.
The bottom line from the above data is the economy is still not recovering and employers are still reluctant to start major hiring.
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WHERE THE NEW JOBS WERE CREATED
For those looking for work, the strongest segments of the economy that were hiring in August were food services and drinking places, professional and technical services and health care. All added jobs.
When looking at new job creation, one must keep in mind that if more people have been let go from work than new jobs created, you have a negative number. Since we are in a political year, you will hear a lot of politicians tout large numbers of jobs created, like 4.5 million private sector jobs created in the past 29 months. While that sounds impressive, the real number that should be touted is how many net new jobs have been created, i.e., after deducting the number of lost jobs from the created jobs, is there a positive number. For the last three years the total has generally been negative. The jobless rate has remained in a narrow range of 8.1% to 8.3% since January. The economy still has not created net new jobs to get everyone employed.
Employment in food services and drinking places rose by 28,000 over the month. Over the past 12 months, this industry has added 298,000 jobs.
In professional and technical services, employment increased in August in computer systems design (+11,000) and management and technical consulting services (+9,000). Over the past 12 months, these industries have added 79,000 and 69,000 jobs, respectively but not net new jobs enough to recover from 2008
Health care employment grew by 17,000 in August, with gains in ambulatory health care services and in hospitals. From June through August, job growth in health care averaged 15,000 per month, compared with an average monthly gain of 28,000 in the previous 12 months. This is another sign of growth at a decreasing rate.
Employment in utilities was up by 9,000 in August as employees returned to work after a labor-management dispute. These are not new jobs, but people going back to existing jobs.
Finance and insurance added 11,000 jobs in August. Employment continued to trend up in wholesale trade. Employment in temporary help services changed little over the month and has shown little movement, on net, since February. In August, employment in other major industries changed little.
Manufacturing employment edged down (-15,000) in August. Employment in motor vehicle and parts manufacturing was down by 8,000 over the month after increasing by 14,000 in July. Firms in this industry laid off fewer workers than usual for factory retooling in July and recalled fewer workers than usual in August. This contributed to the seasonally adjusted increase in July and decrease in August. The manufacturing index is watched closely as manufacturing is an engine that stimulates the economy and creates three to five spin off jobs for every manufacturing job created. Decreases in manufacturing means economy is moving backwards.
In August, the number of unemployed persons was little changed at 12.5 million, and the proportion of those people who have been jobless for 27 weeks or more also was little changed at 40.0%.
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VETERAN UNEMPLOYMENT REPORT
The BLS Current Population Survey (CPS), also referred to as the Household Survey, reports there were 21,132,000 veterans alive in August, down from 21,163,000 in July, a loss of 31,000 veterans. There were 10,948,000 veterans in the workforce in August, up from 10,173,000 in July. This is an increase of 775,000 veterans in the workforce and is reversing a previous steady decline of veterans in the US workforce. Some of the increase could be accounted for from returning members of the National Guard & Reserve.
The CPS overall veteran unemployment rate for all veterans in August is 6.6%, down from the July rate of 6.9%, a decrease of .3%. There were 720,000 unemployed veterans in August, down from the 752,000 unemployed veterans in July. This is a decrease of 32,000.
The fact that the veteran overall unemployment rate is lower than the national unemployment rate continues to indicate that as a class they are still having better success finding employment than non-veterans. This is reinforced by how there have been fewer unemployed veterans each month.
An area where there has been a veteran unemployment issue is in the 18 to 29 year old group. The unemployment rate for the 18 to 24 year old veterans in August remained at 19.9% (45,000 unemployed). A substantial number of the unemployed 18 to 24 year olds are in the National Guard and Reserve which would explain their high unemployment rate.
For comparison, the overall unemployment rate for all 18 to 24 year olds (veterans and nonveterans) in August rose to 15.6% (3,064,000), up from 15.5% (3,214,000) in July, but a decrease of 50,000 unemployed. The decrease may be a result of the dropout rate.
VetJobs anticipates the unemployment rate for the young veterans will increase more as DOD continues to furlough 140,000 active duty troops and more of the National Guard and Army Reserve brigades start picking up the work of the active duty troops and employers continue to shy away from hiring as a new employee an active member of the National Guard & Reserve due to the constant call-ups. Employers cannot run their companies when their human capital is taken away for 12 months or more.
One should remember that after every downsizing of the active duty troops (post WWII, Korea, Vietnam and during the Clinton years) the use of the National Guard and Reserve went up. It appears that the same trend is again occurring as National Guard and Army Reserve brigades start picking up the tasks of the downsized active Army brigades.
BLS reports that the employment status of Gulf War II veterans rose from 8.9% (174,000) in July to 10.9% (227,000) in August. This is probably a reflection of the National Guard and Army Reserve brigades who have been returning from Kuwait over the summer. Many of the brigades had unemployment rates in the 30% to 60% range. Once back, their numbers would be picked up by DOL.
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Finally, I commented in our July Veteran Employment and Situation Report that went out on August 6 on a USA Today article that quoted General Odierno, Chief Staff Officer of the Army, as saying the National Guard and Reserve will be going to seven weeks of training each year. As it turns out, USA Today had it all wrong.
After a lot of confusion created by the USA Today article, the Army Times reports,
After 11 years of war and as the U.S. draws down in Afghanistan, soldiers in the Army National Guard and Army Reserve will largely see a return to the peacetime schedule of drilling one weekend a month and two weeks a year.
However, in an effort to maintain the components’ readiness and combat edge, some soldiers can expect additional training days as they get closer to the fifth year of the Army Force Generation model.
The Guard and Reserve are on a five-year rotational ARFORGEN model, which progressively resets and trains units for possible deployment. Units spend a year in reset and three years in training. During the fifth year, they are available for mobilization and deployment if needed.
“The vast majority of the Army National Guard will go back to one weekend a month and two weeks of annual training, as well as schools and other professional military education [that] soldiers do throughout their careers,” Lt. Gen. William Ingram, director of the Army National Guard, said Aug. 4 during an interview on C-SPAN.
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