June’s jobs gains, released this morning, show that 287,000 new jobs were added in June, an impressive rebound after only 11,000 new jobs were added in May (revised down from from 38,000 at the time of the release).

This year’s monthly job gains and losses can indicate how the economy is doing once they are corrected to account for the pattern we already expect in a process called seasonal adjustment. The approach for this seasonal adjustment that is presently used by the Bureau of Labor Statistics (BLS) puts very heavy weight on the current and last two years of data in assessing what are the typical patterns for each month.

In my paper “Unseasonal Seasonals?” I argue that a longer window should be used to estimate seasonal effects. I found that using a different seasonal filter, known as the 3x9 filter, produces better results and more accurate forecasts by emphasizing more years of data. The 3x9 filter spreads weight over the most recent six years in estimating seasonal patterns, which makes them more stable over time than in the current BLS seasonal adjustment method.

I calculate the month-over-month change in total nonfarm payrolls, seasonally adjusted by the 3x9 filter, for the most recent month. The corresponding data as published by the BLS are shown for comparison purposes. According to the alternative seasonal adjustment, the economy added 286,000 jobs in June (column Wright SA), almost identical to the official BLS total of 287,000 (column BLS Official).

Data updates released today for prior months also reveal some differences between my figure and the official jobs gains from prior months. The official BLS numbers for May were revised down from 38,000 new jobs to a dismal 11,000. My alternative adjustment shows that the economy actually lost 6,000 jobs in May, down from 17,000 jobs gained at the time of the release. [i] The discrepancies between the two series are explained in my paper.

In addition to seasonal effects, abnormal weather can also affect month-to-month fluctuations in job growth. In my paper “Weather-Adjusting Economic Data” I and my coauthor Michael Boldin implement a statistical methodology for adjusting employment data for the effects of deviations in weather from seasonal norms. This is distinct from seasonal adjustment, which only controls for the normal variation in weather across the year. We use several indicators of weather, including temperature and snowfall.

We calculate that weather in June brought up the total by 25,000 jobs (column Weather Effect), but this should be considered a transient effect. Our weather-adjusted total, therefore, is 262,000 jobs added for June (column Boldin-Wright SWA). This is not surprising, given that weather in June was in line with seasonal norms.

It’s good to see the jobs numbers rebounding this month. The May number was somewhat affected by the Verizon strike. Also, it is important to remember that pure sampling error in any one month’s data is large, and that could explain part of the weak employment report for May. Averaging over the last three months, employment is expanding by about 150,000 jobs per month—a healthy pace, although a bit of a step down from last year.

a. Applies a longer window estimate of seasonal effects (see Wright 2013). The June 2015 to May 2016 values in this column have been corrected to remove a coding error that affected the previously reported values.

b. Includes seasonal and weather adjustments, where seasonal adjustments are estimated using the BLS window specifications (see Boldin & Wright 2015). The incremental weather effect in the last column is the BLS official number less the SWA number.

[i] Note that, due to a small coding error, my alternative seasonal adjustment for May, at the time of the release, should have been 17,000 new jobs, not -4,000, as was reported in my previous post. In addition to the underlying data revisions, and correcting for this error, the revised alternative seasonal adjustment for May is -6,000 jobs added (second row of column Wright SA).

Event Information

China’s outbound investment is expected to increase by leaps and bounds in the next decade. Chinese companies are poised to become a major economic force in the global economy. Outbound direct investment by Chinese companies presents unprecedented opportunities for both Chinese companies and their global partners.

The relatively brief history of Chinese companies’ outbound investment indicates, however, that Chinese outbound FDI faces many hurdles both at home and in the destination countries. How can we assess the regulatory, financial, labor, environmental and political risks faced by Chinese multinational companies? What remedies can mitigate such risks for the Chinese firms, for the host countries of Chinese investment and for the Chinese government and people?

The Brookings-Tsinghua Center for Public Policy co-hosted with the 21st Century China Program at UC San Diego, and in collaboration with the Enterprise Research Institute and Tsinghua’s School of Public Policy and Management, a two-day conference at Tsinghua University in Beijing, China, on September 23 and 24, 2013. The conference gathered leading experts, policy makers and corporate leaders to examine the latest research on trends and patterns of Chinese outbound direct investments; the regulatory framework and policy environment in China and destination countries (particularly, but not only in the U.S.); and the implications of Chinese outbound direct investment for China’s economic growth and the global economy. Keynote speakers of each day were Jin Liqun, chairman of China International Capital Corporation, and Gary Locke, U.S. ambassador to China. Mr. Jin suggested that China’s foreign direct investment companies should cooperate with local firms and be willing to talk to the local governments about their problems. Ambassador Locke, on the other hand, introduced the advantages of the U.S. as an investment destination country. He also agreed that investors were supposed to get local help to achieve success.

The audiences included major Chinese companies, service providers in the area of overseas direct investment, policy makers and scholars.

Read more about the speakers and the conference agenda »

Video

• Overview of China's Overseas Investments: Trends, Patterns and Comparison
• Chinese ODI: Motivation and Policy Environment
• Risk Management in Chinese ODI
• China's Outbound Direct Investment - Gary Locke Keynote Address
• Regulatory Environments in Destination Countries (Non-U.S.)
• Regulatory Environments in Destination Countries (Focusing on the U.S.)
• Labor, Environment, and Community Relations in Destination Countries

Transcript

• Keynote speech of U.S. Ambassador to China Gary Locke (.pdf)

Event Materials

• Remarks of Ambassador Locke
• Brian Beglin slides
• Daniel Levine slides
• Jiang Heng slides
• LIU Qian
• Matt Ferchen slides
• Steve Olson slides
• Tang Xiaoyang slides
• Thilo Hanemann slides
• Weiyi Shi slides
• Kang Rongping slides
• Duan Zhirong slides

The pace of employment gains slowed in January from the torrid pace of the previous three months. The latest BLS jobs report shows that employers added 151,000 to their payrolls in January, well below monthly gains in October through December. In that quarter payrolls climbed almost 280,000 a month. For two reasons, the deceleration in employment gains was not a complete surprise. First, the rapid growth payrolls in the last quarter did not seem consistent with other indicators of growth in the quarter. Preliminary GDP estimates suggest that output growth slowed sharply in the fourth quarter compared with the previous two. Second, I see few indicators suggesting the pace of economic growth has picked up so far this year.

It’s worth noting that employment gains in January were far faster than needed to keep the unemployment rate from increasing. In fact, if payrolls continue to grow at January’s pace throughout the year, we should expect the unemployment rate to continue falling. As usual in the current expansion, private employers accounted for all of January’s employment gains. Government payrolls shrank slightly. The number of public employees is about the same as it was last July. Over the same period, private employers added about 213,000 workers a month to their payrolls. In January employment gains slowed in construction and in business and professional industries. Payrolls shrank in mining. Since mining payrolls reached a peak in September 2014, they have fallen 16 percent. Manufacturing payrolls rose slightly in January, but payroll gains have been very slow over the past year. Employment in the temporary help industry contracted in January. The industry has seen no net change in payrolls since October.

Average hourly pay in private companies edged up in January. The average nominal wage was 2.5 percent higher than its level 12 months earlier. This is a faster rate of improvement compared with what we saw earlier in the recovery, when annual pay gains averaged about 2.0 percent a year. The modest acceleration in nominal pay gains has occurred against the backdrop of slowing consumer price inflation. The combination has given workers real wage gains approaching 2.0 percent over the past year.

The BLS household survey showed a small drop in unemployment. The jobless rate fell to 4.9 percent, just 0.3 points above its average level in 2007, the last year before the Great Recession. The drop in unemployment was the result of a rise in the number of survey respondents who were employed. The labor force participation rate increased in January, and it has increased 0.3 points since October.

This rebound in labor force participation is modest compared with the drop that occurred between 2008 and 2015. From 2007 to January 2016 the adult participation rate fell 3.4 percentage points. Roughly half the drop is traceable to population aging, but the other half is due to factors related to the deep slump or to long-term factors that have affected Americans’ willingness to enter or remain in the workforce. If we assume all of the drop was due to factors that have temporarily discouraged jobless adults from seeking work, then we can recalculate the unemployment rate to reflect the rate we would see if all of these discouraged workers were reclassified as unemployed. That calculation suggests the current unemployment rate would be about 7.4 percent rather than 4.9 percent.

It is of course unlikely all the adults who’ve dropped out the labor force would stream back in if job finding got easier and real wages continued to rise. It is encouraging to see, however, that participation is now climbing after a long period of decline. Over the past four months, the labor force participation rate of 25-54 year-olds increased 0.5 percentage points.

The latest BLS jobs report shows little sign employers are worried about the future strength of the recovery. Both the employer and household surveys suggest U.S. employers have an undiminished appetite for new hires. Nonfarm payrolls surged 242,000 in February, and upward revisions BLS employment estimates for January added almost 21,000 to estimated payroll gains in that month.

The household survey shows even bigger job gains in recent months. An additional 530,000 respondents said they were employed in February compared with January. This follows reported employment gains of 485,000 and 615,000 in December and January. Over the past year the household survey showed employment gains that averaged 237,000 per month. In comparison, the employer survey reported payroll gains averaging 223,000 a month.

These monthly gains are about three times faster than the job growth needed to keep the unemployment rate from climbing. As a result, the unemployment rate has fallen over the past year, reaching 4.9 percent in January. The jobless rate remained unchanged in February because of a continued influx of adults into the workforce. An additional 555,000 people entered the labor force, capping a three-month period which saw the labor force grow by over 500,000 a month. The labor force participation rate continued to inch up, rising 0.2 percentage points in February compared with the previous month. Since reaching a 38-year low in September 2015, the labor force participation rate has risen 0.5 points.

More than half the decline in the participation rate between the onset of the Great Recession and today is traceable to the aging of the adult population. A growing share of Americans are in late middle age or past 65, ages when we anticipate participation rates will decline. If we focus on the population between 25 and 54, the participation rate stopped declining in 2013 and has edged up 0.6 percentage points since hitting its low point. The employment-to-population rate of 25-54 year-olds has increased 3.0 percentage points since reaching a low in 2009 and 2010. Using the employment rate of 25-54 year-olds as an indicator of labor market tightness, we have recovered about 60 percent of the employment-rate drop that occurred in the Great Recession. Eliminating the rest of the decline will require a further increase in prime-age labor force participation.

Two other indicators suggest the job market remains some distance from a full recovery. More than a quarter of the 7.8 million unemployed have been jobless 6 months or longer. The number of long-term unemployed is about 70 percent higher than was the case just before the Great Recession. Nearly 6 million Americans who hold part-time jobs indicate they want to work on full-time schedules. They cannot do so because they have been assigned part-time hours or can only find a part-time job. The number of workers in this position is more than one-third higher than the comparable number back in 2007. Nonetheless, nearly all indicators of labor market tightness have displayed continued improvement in recent months.

February’s surge in employment growth and labor force participation was accompanied by an unexpected drop in nominal wages. Average hourly pay fell from $25.38 to $25.35 per hour. Compared with average earnings 12 months ago, workers saw a 2.2 percent rise in nominal hourly earnings. Because inflation is low, this probably translates into a real wage gain of about 1 percent. While employers may have an undiminished appetite for new hires, they show little inclination to boost the pace of wage increases.