Mar 11 2013

Print this Post

Read the Fine Print in the Unemployment Statistics

Share to Google Plus
Irrational Exuberance...

Irrational Exuberance…


Unemployment is down and more jobs are being created.  America, my fellow citizens, is on the mend.

At least that’s the story after the Bureau of Labor Statistics (BLS) released its latest unemployment report for February.  According to BLS, the economy added an impressive 236,000 jobs, lowering the unemployment rate to 7.7 percent, the lowest since December 2008, at the onset of the Great Recession.

And certainly Wall Street thought this was great news.  The DOW set a new record of 14,397, with NASDAQ and the S&P also enjoying gains.

But is this really the solid good news that Americans have been longing for?

Sadly, no.

And you do not need to be a rocket scientist to find the data which is in plain sight in the BLS release. You just have to read further than the headlines.

As I have noted in previous posts on BLS statistics, the Labor Department parses its numbers so that percentages reflect specific groupings of unemployed that, purposefully or not, seem to highlight an improving employment trend.

For instance, while the official unemployment rate is 7.7 percent, that figure does not include people employed part-time due to lack of full-time employment, or the marginally attached, who want to work and had looked for work in the previous 12 months, but have not found a job.  That combined figure – known in BLS terms as U6, would show an unemployment rate of 14.3 percent.

But we have been through this comparison many times before and the disparity is almost always dismissed as inside baseball; Obama opponents seeking to put the worst light on the economy.

So, here is something different to consider from the latest report.

While the BLS reported highlighted 236,000 new jobs in February, a look at the companion tables on broader employment trends (Table A-1)  shows that 296,000 Americans dropped out of the labor force in February. So instead of optimistic gains, a comparison of these two statistics would show a net 50,000 job loss.

Don’t hold your breath waiting for someone to make this a news story.

But is this an outlier, or part of something bigger? Consider the broader trends in the US economy.

Q-IV  `12 GDP came in with growth of 1/10th of a percent, a virtual stall speed for the economy. Personal income for Americans declined by 1.3 percent in January 2013. Industrial production  declined by 1/10th of a percent in January, with its manufacturing subset declining by 4/10ths of a percent. And back to that unemployment report – 40 percent of Americans who fit the official definition of unemployed by BEA have been so for more than 27 weeks, or almost seven months.

Do these sound like the statistics of an economy in sustained recovery?

Indeed, would the stock market be reaching new highs if the Fed wasn’t pumping the $85 billion a month into the economy (over $2 trillion cumulatively with QEI, II & III), creating an ocean of cheap money that allow the big money players to essentially arbitrage in the DOW?  Consider when was the last time that the DOW was reaching new highs without companion increases in incomes and  a genuine, expanding jobs market? When has the DOW been so disconnected from the fortunes of the American economy writ large?

All Americans want a real economic recovery. But sadly, the real data shows that this isn’t the case. The measures of success are artificial, be they statistics or stock market rallies.

And ominously, all Potemkin recoveries eventually have to come to grips with reality.

A reckoning is sadly unavoidable.






Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>