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No good news on Unemployment

February 7, 2011

Last week’s unemployment rate of 9% was spun by legacy media to be a really great development. An example from TheTownTalk.com in Louisiana:

A national unemployment rate that is dropping at its sharpest rate in more than 50 years…

What the writer refers to is the 3 month drop from 9.8% in November to 9.4% in December to 9% in January. Good news, right?

Not quite.

Let’s look at all the statistics rather than cherry-pick ones that support a certain point of view: namely, that the economy is finally getting better and that the government’s economic policies are the reason.

Below is the unemployment rate, seasonally adjusted, from the Bureau of Labor Statistics:

 

So we’re only back to the April-May 2009 level: not much of an improvement. The really bad news: the unadjusted rate is 9.8%. Some sources, such as this Washington Post report, suggests that the news wasn’t even better because of the winter weather on the east coast;  The seasonally adjusted numbers already take that kind of thing into account. Only 32,000 net jobs were created.

So why does the unemployment rate look good? Part of the answer is that it measures unemployment claims. No claim, you’re not unemployed. What about those people who ran out of benefits or just stopped looking for a job? They are not counted. A better metric might be a measure of who is working: the employment rate! Here’s that graph:

 

The graph’s legend is a little hard to read here; I recommend you go to the source at Zero Hedge which also contains additional analysis. What this graph reveals is that employment as a percentage of the total population is at a 26-year low: not since March 1984 has such a small percentage of the population been employed. The rapid fall on the right-hand side comes at about the June 2009 point; the peak of employment is in June 2001.

When you look at the two charts and the very small number of jobs added in January, you really can’t conclude that the economy is on the rebound. In fact, quite the opposite: total numbers of people employed is way down.

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