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What's good about the jobless numbers
Job vacancies shown in a newspaper
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TEXT OF INTERVIEW
Bill Radke: Employers cut far fewer jobs than expected last month and instead of rising, the July unemployment rate came down from 9.5% to 9.4%. That's according to the Labor Department this morning.
Marketplace's Jeremy Hobson is with us live. Hello.
JEREMY HOBSON: Good morning, Bill.
RADKE: So how good is this news really?
Hobson: Well, we lost 247,000 jobs in July, and obviously if you're one of the people who lost a job or you know someone -- as many of us do -- who lost a job in July, you're saying how could you say that's good news? Well here's the reason. Because economists were expecting 330,000 -- at the high level 330,000 jobs in July. We lost 443,000 in June. So the good news is the trajectory of job losses is now decidedly better than it was. We are slowing the number lost each month. And the hope is, Bill, that over the next several months the nation will actually start adding jobs again.
RADKE: So how does the unemployment rate drop if so many people got laid off last month?
Hobson: It's a good question. And the answer is that the workforce dropped by 422,000 people. That means a lot of people have stopped looking for jobs. And that's why a lot of economists say the actual unemployment is much higher than 9.4 percent, which is what the Labor Department says it is today. If you count the people who have given up looking for work, and the ones who aren't working as many hours as they want to, you're several percent higher than 9.4.
RADKE: And I understand the White House has come out and commented on this. What did they say?
Hobson: Yeah well the Treasury secretary had said before this number came out that the unemployment rate wouldn't start to drop until next year. As we mentioned, it dropped just slightly today to 9.4 percent. But the White House is saying they still expect the number to eclipse 10 percent this year. And the reason for that is as those people who dropped out of the job market come back in, then you're going to see that number go higher again.
RADKE: OK. Marketplace's Jeremy Hobson joining us live. Thanks.
Hobson: Thank you Bill.
About the author
Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead. Follow Jeremy on Twitter @jeremyhobson
Jeffrey Frankel of the National Bureau of Economic Research thinks the recession may have ended in July. To Frankel and others immune from the recession this is a hot academic issue. To the many Americans unemployed, under-employed (skill and pay wise), and those who have given up searching for employment the recession is in full force and growing. The Bureau of Labor Statistics does not count as unemployed those in the categories above even though it estimates their number. The BLS’s semantics is deliberate: to make the economy appear better than it is thereby undermining demand for equitable social and economic reforms like unemployment and health care. Doing this distorts the facts about the labor market and the economy. If all the people who the BLS does not count were counted the unemployment rate would be over 16 percent. Aside from government and the health care industry the American economy is still shrinking.
That’s not all. Credit default swap prices on Turkish or Russian bonds are lower than those of New York city or California. This means emerging economies will probably outperform large industrial economies. It means the stocks of those countries will outperform those in large industrial economies. The IMF forecast developing economies will grow between 1.5 and 4.7 percent in 2010, whereas developed economies will shrink by 3.8 percent in 2009 and grow 0.6 percent in 2010. A plausible consequence is that America’s financial industry (being bailed out at our expense) will be investing more in developing countries. That, in turn, means that more American jobs will be offshored to developed countries, especially at the higher end of the skill hierarchy (see Alan Blinder’s ‘How Many Jobs Might Be Offshorable?’, March 2007) ensuring that America has another “jobless recovery.â€
The Department of Labor figures are meaningless when they can drop a half million people (ok 422,000 people) from their count because they consider them to be no longer looking for jobs. That is absolutely ridiculous. Do they only consider those drawing unemployment to be "look for jobs"? Why doesn't the government stop this multi-decade scam and actually report how many people are out of work... not just those they consider to be "looking for jobs"?
