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Jan 07 2012

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The Truth About December Unemployment

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A Picture is Worth a Thousand Words

Christmas came late for the Obama administration.

It arrived yesterday in the form of the latest unemployment figures.

8.5%.

Say it with me now.

“Eight point five percent!”

The Mainstream media could barely contain their glee.

“The lowest unemployment rate in three years.”

 “Fresh evidence of a recovering economy.”

“A new and significant challenge to Republicans who planned to run against Obama’s stewardship of the economy.”

But that it were true….

An honest look at the unemployment rate would tell a different and more complicated story.

First, on the positive side, 200,000 new jobs created is a hopeful harbinger. It was easily one of the best months for job creation in 2011.

 But 200,000 new jobs is at the low end of job creation necessary just to meet growing population.  In order to actually put a serious dent in unemployment, the job creation number would need to be 300-400,000 for a year or more.

If the job creation report were a student, we’d be high-fiving a kid who managed to get a “D” average.

Perhaps more important, the reported  8.5 percent unemployment rate is truly a manipulated figure by the Bureau of Labor Statistics (BLS)  It’s simply not representative of the unemployed.

For instance, it doesn’t include people who are working part time that want to work full time, or, more importantly, those who are “marginally attached” who are neither working or looking for work, but otherwise able to work.

If you include those people the actual unemployment rate is 15.2%

Worse statistically, BLS bases its monthly unemployment figure on the total labor force participate rate for that month. That figure has dropped steadily since December 2008, when it was 61 percent, to today when it is 58.5 percent.

So, in December 2008 61 percent was the total pool. In December 2011, 58.5 was the total pool.

But what happened to counting those 2.5 percent?

 If BLS calculated the unemployment figure accurately, yesterday’s report would show an unemployment rate of over 11 percent, without taking into account the marginal workers and part timers.

That’s troubling bordering on deceptive.

Beyond the silly calculation games, the facts in the BLS report remain troubling.

 Long term unemployed (27 weeks or more) did not decline and remains durable at 42.5 percent of total unemployed. Unemployment for minorities is in crisis, with African American unemployment at 15.5 percent and Hispanics at 11 percent.

As far as the December data that informed the increase in jobs, it is noteworthy that 50,000 positions were added in the transportation and warehousing sector, derived from hiring at courier services such as UPS and large warehousing operations such as Amazon.

While the BLS is supposed to take into account seasonal changes in employment that would represent holiday hiring, the Wall Street Journal reported that certain economists believe that these were indeed temporary positions that will be eliminated in January; removing 25 percent of the job growth for December.

We’ll see how that pans out next month.

So, new jobs does translate into good news.  But let’s not get ahead of ourselves.

Eric Lascelles, chief economist at RBC Global Asset Management was quoted in the Wall Street Journal today, identifying four prime factors in today’s unemployment.

“First, the glacial pace of economic recovery; second, a sectoral mismatch of workers’ skills to available jobs; third, a geographic mismatch, hastened by the housing bust, that leaves workers trapped in areas with few jobs; and fourth, the rising efficiency in the workplace.”

There is nothing – nothing – in the Obama economic agenda that addresses any of these elements. Indeed, Obama policies have contributed to the structural impediments that prevent robust recovery and job growth.

The real truth is that to the extent there is any job creation at all, it is despite the President’s policies.

That is the actual message hidden in yesterday’s manufactured good tidings.

 

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