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Misreading the job numbers
The consensus over January's employment report seems to be "cautious optimism." It's "a cause for hope, but not celebration" is how the president put it. That's an understatement. The unemployment rate fell below 10%, but it would have been better news if the unemployment rate had risen.
Here's the report from the Bureau of Labor Statistics and here's President Obama's response.
House Speaker Nancy Pelosi seized on the unemployment rate dropping from 10% to 9.7%:
Today's jobs report marks a welcome step in the right direction for our economy and our families: the unemployment rate is going down.
Pelosi is getting ahead of herself. What's she going to say when the unemployment rate goes back up? It most likely will, and that'll actually be the time to start feeling more encouraged. The people who've given up looking for work aren't being counted in the labor force. When they are counted again, they'll add to the ranks of the unemployed, but their reentry into the job search means they believe there are prospects. Our Economics Correspondent Chris Farrell explains using the example of someone interviewed for the employment survey:
Mrs. Jenkins tells the interviewer that her daughter, Katherine Marie, was thinking about looking for work in the prior four weeks but knows of no specific efforts she has made. Katherine Marie does not meet the activity test for unemployment and is, therefore, counted as not in the labor force.
When the Katherines of society decide it's worth looking for work, the unemployment rate will go up. They'll be officially labeled as unemployed, largely reflecting greater optimism about jobs and the economy. The unemployment rate will start declining again if their job-hunting optimism proves right.
That being said, there is some reason for optimism in January's report. Sung Won Sohn of the Smith School of Business and Economics puts it this way:
Aside from the battered construction and state-and-local government, employment is on an uptrend. Even in manufacturing, jobs increased for the first time since the recession began... There are other telltale signs pointing to the improvement in the labor market. The workweek, hourly earnings and the hiring of temporary help have risen. These are good omens for the job market. Employers want to be cautious about hiring and test waters before taking on full-time employees.
The net loss of jobs was 20,000 in January. That's an enormous improvement from last January when nearly 800,000 people lost their jobs. But 8.4 million Americans have been put out of work total, and we're still not cutting into that number.
The next few months will indicate whether the jobless recovery starts giving way to a jobs recovery. If hours continue to increase, some of the temporary jobs turn into permanent ones and yes, if the unemployment rate ticks back up for a bit, then it means people besides the president and the House speaker see cause for hope.
As I.F. Stone once said the main thing to understand about goverments is that they lie. The current regime in D.C. continues that venerable tradition.
For a more honest and accurate read see Shadow Government Statistics. The rate is around 22 percent.
http://www.shadowstats.com/
In her press release title "Where Are The Jobs, Mr. President," Nancy Pelosi railed against the president and said that even though the unemployment rate had dropped, it was still high and proved that his policies were failures.
Of course, that was August of 2003 and the unemployment rated had gone from 6.2% to 6.1%. I wonder why she didn't release a similar statement about this latest report?
<a href="http://www.house.gov/pelosi/press/releases/Aug03/prWherearetheJobs080103... target="_blank">Link to Pelosi Statement</a>
There is really only one cause and one answer to the "Jobs" problem:
Manufacturing.
We need to make things. Every time you hear that 'green shoots' are sprouting in the economy--it's always something like "Wal-mart sales are up". NO! That's *not* a green shoot! That just means more of our money went to China or South Korea.
We can't thrive as a nation consisting of mostly service jobs--Best Buy salesmen, Wal-mart greeters, and burger-flippers and car-salesmen. We need to create wealth and the core way to do that is to add value to something--manufacturing.
Look at the demographics--we used to be a nation who made things. And we had a service sector to support those who made things. Now that most things are made in China, et. al, we're one big service sector supported by...what?? Loans, false mortgage wealth, and more loans.
This ain't gonna change folks, until our underpinnings are solid--meaning when we get a core 'rank and file' demographic of manufacturing jobs. And with the way China cheats with it's currency and billion-strong cheap-labor market, a tarriff is a perfect short-term starting fluid to get things going again.
That doesn't change the argument. According to the same number, Full Employment (the amount of work the economy is SUPPOSED to be at) sits at 12%.
Pulling the U6 and that new number out and comparing it to this one is like reading the temperature at different times of the day.
Note the 'dip' at the end of ALL of the stats? That's the drop in unemployment that everyone is jumping on. Whether you read the 'stated figures' or the 'shadow figures' it doesn't change the fact: less people are out of work now than last month. Also note that all three run in lock step. When the media reports a 4% raise in 'unemployment' the 'true' number basically runs at about the same amount.
In fact, it's even MORE clear now. Since all three numbers went down, we know it's not just people who gave up looking for work or grabbed part time work as Cashiers.
The only time that it's misleading is when you try to compare one number with another, like when someone mentions that we have 22% unemployment but forgets to mention that 12% of that same figure is 'normal'.
I keep wondering which numbers they used for analysis the Great Depression. I am pretty sure it isn't the number broadcasted today. So, the news teams can yell, "Hooray! the number is no where near Great Depression levels.", when in fact the U6 number is getting really really close. But heck, this was only a recession right?
