BarroMetrics Views: The Employment Rate
Friday’s Non-Farm Payroll produced a quandary for many market commentators: the new jobs came in way below expectations (36,000 when the minimum expectation was 50,000) but the employment rate rose! How is this possible?
My answer: the manipulation of the employment data by the US Bureau of Labour Statistics is finally coming home to roost. Here is what I think caused the apparent dichotomy
- According to the Non-Farm, 504,000 “dropped out of the labor force” (stopped looking for a job) in January. The Bureau treats these as employed (!!??); as a result this makes the unemployment numbers look better than it is. It’s only in the mind of bureaucrats that – if we are so disillusioned with looking for a job that we stop looking, it means we are employed. (!!?? I can’t get over the thought convolutions on this line of thinking).
- The Bureau treats any employment (including part-time) as full-time.
- The seasonal adjustments allow the Bureau to ‘pretty up’ the picture as it sees fit.
The true picture:
- Gallop came out with some interesting numbers:
- According to Gallop, the unemployment rate actually increased to 9.8% at the end of January.
- Gallop’s measure of “underemployment” (those that are unemployed plus those that are working part-time but want full-time employment) was 18.9% at the end of January.
- Zero Hedge states that if we add those who have stopped looking for jobs but want a job to the official unemployment numbers, unemployment is actualy12.8%
- Finally note that the US Labour Dept revised down by 215,000 the number of new jobs in 2010.
The US employment picture is not a pretty one; you cannot have any meaningful recovery without its improvement. Yet the S&P continues to grind up. What gives?
I’ll deal with this question tomorrow.