October Employment Report: What Really Happened?
Posted by Larry Doyle on October 5, 2012 10:13 AM |
Was the unemployment report released this morning gamed by the powers that be in Washington? Former General Electric CEO Jack Welch thinks so and had this to say in a tweet released right after the report:
Well, while Welch and many others believe a conspiracy is at work, let’s take a harder look at the numbers.
How is it that the rate could drop by .3% while the actual number of jobs created came in line with expectations at 114k? Prior months revisions of +86k jobs added helps, but the 3-month average of approximately +145k jobs added is barely enough to keep the overall level of unemployment flat. The fact that many of the revisions were in government payrolls, primarily education, raises questions given the pressures we know exist in many municipalities throughout the nation.
Additionally, how is it that the rate could drop by .3% while the more broadly defined U-6 rate of unemployment remained unchanged at the elevated level of 14.7%?
The key to the change in the unemployment rate is the fact that there were a lot of people who reportedly found part-time work. Bloomberg highlights this fact in writing:
Some 582,000 Americans took part- time positions because of slack business conditions or those jobs were the only work they could find.
Part-time positions can influence a report to this magnitude? How convenient. The numbers within the household survey are highly volatile and subject to serious revisions. At this month’s rate of change, we could still have the worst economy since the Great Depression, but a 5% rate of unemployment by mid-2013. We would also be ridiculed as a nation of liars and fakers. (Please see my other commentary this morning).
A positive within the report is that average hourly earnings moved higher by .3%. However, the overall labor force participation rate remained unchanged at the lowest level of the last thirty years. What is the labor force participation rate?
A measure of the active portion of an economy’s labor force. The participation rate refers to the number of people who are either employed or are actively looking for work. The number of people who are no longer actively searching for work would not be included in the participation rate.
Add it all up and my ‘sense on cents’ conclusion is that our nation’s economy continues to suffer from a serious case of ‘walking pneumonia.’ In fact, given the latest GDP reading of 1.3%, I think there is a greater likelihood our economy slips back into recession given ongoing economic drag from Europe, a decline in economic activity from Asia, and the fiscal cliff here in America.
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