It’s the Unemployment, Stupid

 Barrometrics Views: It’s the Unemployment, Stupid

Yesterday I came across a segment  on Fox News where the anchors were casting doubt on the US Job recovery. If Fox is starting to query the numbers, it’s only a question of time when the main stream programs hop on the band wagon. And, it’s about time.

Figure 1 shows the most current chart from ShadowsStats. We see not only a difference in the levels of unemployment, but since 2012, a difference in the direction – SS has the numbers going sideways to up whereas the official numbers are heading South. (BTW the difference between U3 and U6 lies in the fact that the former does not see long-term unemployed as ‘unemployed!).

So why the difference between SS and the official numbers?

Part of the reason lies in the use of ‘seasonal adjustments’ that are so vague that you just about create any number you want; part of the reason lies in the way part time unemployed are used to bolster the numbers. To see how this is done, read 10 Terrifying Facts About US Jobs in the section, “The Rise of the Part-Time Worker“.

Despite the official numbers, the FED must realise that the job front is the major weakness in the US ‘recovery’. Sooner or later, it will be forced to release the funds locked in at the St Louis Fed to Main Street. The main job creators have been the SMEs. Right now they are unable to expand due to the fact the US banks have stringent bank loan conditions – unusually so.

And that’s because they don’t need to lend. After all they are getting commercial rates at the St Louis FED. Should the FED stop paying commercial rates the the St Louis FED, the banks will be forced to again begin lending to the SMEs.

But, here’s the bind the FEDC is in. Release of the deposits into Main Street will raise inflation fears and pressure to raise rates. In turn, that may be the Black Swan that breaks the belief that the FED will do whatever it takes to keep the stock market afloat.

It will be interesting to see what the FED will do.

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FIGURE 1 ShadowStats Unemployment

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