Deep Water Horizon Rig Employment
Off-Shore Moratorium
The economic impact of shutting down a deep water drilling rig is no doubt massively expensive. But employment impact is different. As a benchmark, the employment on the BP rig was 126 persons. It is reported that wages average about 100k per year for those workers. However, I could not find that person anywhere, except in the management ranks according to National OES data! Furthermore, most if not all support workers, according to the BLS, make less than 1/2 that unsubstantiated amount.
Interestingly, as soon as we get into a multiplier discussion, the numbers start off ridiculously high and go up from there. But a multiplier over two is not reasonable or supported in any research and especially not in this case. One primary reason is the service nature of the JOBS we are talking about, NOT the industry multipliers.
Rig Count
Of all the rigs out there, only 4% are off shore! (Baker Hughes) Therefore few if any support persons are going to be affected by a stoppage of drilling; as a result of 94 percent of their support services not being located off-shore. A potential economic impact is close to 400 million a year, which includes a multiplier. More likely however, those wages are moved to another location, or just paid, the result being no impact. The reason is most companies can not afford to idle (loose) those skilled workers.
Simple calculation: (number of rigs, 33 * employment, 126/rig * wages, 100k)
Unemployment Definition (BLS)
Unemployment Data
Unemployment numbers are one of the few data sets that are reported and analyzed in the media. Unfortunately, most of the current media analysis is flawed because writers don’t understand the definition of unemployment as reported by the Bureau of Labor Statistics (BLS). Here is a link to that definition(pdf). This post is to help you understand the basic definition of unemployment.
Key Points for Everyday Analysis:
Civilian Labor Force (labor force): These are the people who are counted, age 16 and older. It does not include folks in institutions such as prisons, nursing homes, military, etc.
Employed: This term applies to anyone did any work on the 12th of each month as paid employee at a farm or business, 15 hours or more in a family business, or had job but was on vacation, sick, absent due to bad weather, etc. Even those holding more than one job are counted only once.
Unemployed: People who weren’t employed on the 12th, but were available to work and were looking for work over the past four weeks.
Unemployment Rate Calculation: The ratio of unemployed to civilian labor force, expressed as percent.
Analysis Discussion:
What happens in the labor force makes a difference in the unemployment rate – specifically when people enter and exit. As an example, if more people enter the labor force than can find a job, the unemployment rate goes up.
Always consider the three classifications in the calculation; labor force, employment and unemployment. Focus on trends, not individual points. Compare trends, not points, from one year to the next. Think about what happens in the labor force during the year, such as a big layoff, teachers being hired in the fall, hurricanes. Review the Current Employment Statistics (CES) establishment survey data for clues to employment changes by industry.
Don’t confuse the neighborhood unemployment rate with the official BLS unemployment rate. True, if your neighbor is unemployed her unemployment rate is 100 percent, but this number has no correlation to the official unemployment rate.
Think of the unemployment rate as a tide. Thus, a drop of water tells you very little. Only by standing back and looking at the coastline can you discern the effects of water level change. You may not like the BLS definition, but the trend it produces is powerful.
How is unemployment calculated? See Unemployment Calculation Method and Documentation
Unemployment South Carolina- April 2010
The Post and Courier missed the main point in the April unemployment numbers. The story here is the labor force, or in this case the decrease in labor force (moving in the wrong direction). Mary Graham from the Charleston Metro Chamber got it right by thinking about this from a seasonal perspective. The surprise is that there should have been an up tick, but instead the labor force dropped a whopping 18K from April 2009, a bad year in itself. In addition to these data, employment actually DROPPED 17K from 2009 (BLS). There is nothing in the data to be pleased with.
I would encourage the Post to speak with experts on these data or become more educated before writing an article. These are important data that need to be reported accurately since they affect so many.
The pdf link tells the real story of unemployment for the state of SC. Note the disturbing drop in labor force and the deep employment recession. (pdf)
Unemployment- Let’s add it up one more time!
The post and courier reported the December monthly unemployment data for South Carolina. Unemployment is the most often quoted number and also the most misunderstood of the economic data floating around. Even for a seasoned professional, it is easy to get crossed up. This particular article referenced two unrelated data sets while discussing South Carolina unemployment.
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When citing unemployment detail, employment numbers need to be culled from the same data set. The recession started in December of 2007. Employment since then decreased by 113,820, not the 109,900 in the article. However, what is most interesting, and left out, is persons on unemployment increased by 150,693 over this same time period! (Employment pdf) So not only are there less employed, but also more unemployed. It is likely this number will creep higher over the next couple of months to 14 percent (Feb 09), partly as a result of re-benchmarking and partly due to the South Carolina economy. But where did the 109,900 come from? That number is Unadjusted Current Employment Statistics (CES) employment data from the “establishment survey”, a different program. I really like these data and often use them in conjunction with unemployment data thus providing a better picture of where jobs may have been gained or lost. CES data in this situation, should not be compared to unemployment data. Unemployment data is derived from the Current Population Survey (CPS), “the household survey”. This survey is the labor force measure for the nation.
CES Data- the poser
CES is reported two ways. Over longer timelines, Seasonally Adjusted CES data is a better estimate of employment, while Unadjusted Seasonal data is more acccurate in real time. I have to admit I tend to default to Unadjusted Seasonal data, but there is a time and place for Adjusted and this may be that time. My default to unadjusted is a result of statistical variations with Seasonally Adjusted data, most could give a hoot about- but they are there.
“CES data are a coincident economic indicator and are often cited in national and local newspapers, magazines, and reports. This press generates enthusiasm, curiosity and a wealth of outside material for supplementary reading. The College of Business Administration at the University of South Carolina uses seasonally adjusted employment as an indicator of current employment trends in South Carolina. The regional Federal Reserve Banks use CES data in easy-to-understand economic applications….”. Source: Bureau of labor Statistics
The CES table shows the difference in data sets for the state of South Carolina. (CES pdf) The unadjusted is 109,900 with adjusted coming in at a loss of 102,200. 102 seems a little soft in this economy and, consequently, it is another reason for not quoting the sum of change in the face of unemployment data from the household survey. The bigger picture is which direction is employment going in the future. I will try to address that by looking at migration.
10 Years of Less Employment
Employment
The economy lost another 85,000 jobs in December 2009. It is not uncommon for most of us to focus on the economy month to month, however there are bigger numbers looming on the horizon which are just as important. Recently, Dean Baker calculated employment losses for the decade. He estimates private employment declined by a little over 1.5 million for the decade. In addition to that he states based on the annual benchmark revision, total employment loss is closer to 2.4 million.
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Employment and unemployment calculations are confusing. One reason is the different surveys and assumptions which are used to calculate employment and unemployment. The employment which is referenced above is calculated using what is referred to as the establishment survey. The establishment survey is the Bureau of Labor Statistics Current Employment Statistics (CES) program.
Using historical data from CES, one can calculate the employment losses over the decade. My spreadsheet (pdf) (in 1000’s) demonstrates two ways to calculate this number, one based on last month of 1999 versus the last month of 2009 and an alternative which takes an average over each year, 1999 and 2009, and calculates the difference. Regardless these are large numbers. It is important to note that these are establishment (CES) data rather than the Current Population Survey data. As demonstrated, one is able to make this 1,549,000 jobs loss calculation.
The last portion of this article highlights something called a benchmark revision. Since the CES is a survey the BLS “checks” and makes revisions to the data, by comparing it to a census of employment. This census is the Quarterly Census of Employment and Wages (QCEW). There is actually a good deal of work that goes into this method and the BLS needs to get credit for going though the process.
What is interesting about this year, which Mr. Baker notes, is that we will experience an unusually high adjustment (pdf). Past adjustments have been plus or minus two-tenths. This year the adjustment could be a downward (worse) adjustment of six-tenths or more. Putting these two numbers together one derives the 2.4 million plus/minus job loss over the last decade.
