Friday's Jobs Report: Monkey Numbers

Friday the highly anticipated jobs number report was released, showing that employers cut 524,000 jobs in December and that the unemployment rate jumped to 7.2%.

This is the headline number that most people focus on. There are however some problems with this number. Now with unemployment becoming a bigger problem, more and more people are finding that this measurement may not really be telling the whole story. The U3 rate which is the one that everyone reads about in the headlines does not include things like part-time and discouraged job seekers. For a little bit more definition on those stats, the govt. defines things as follows:

"Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. For further information, see "BLS introduces new range of alternative unemployment measures," in the October 1995 issue of the Monthly Labor Review."

To get a better picture of true unemployment, many people have been downloading the U6 report from the government labor website linked here.

U6 report

Labor Force Statistics from the Current Population Survey

Series Id: LNU03327709Not Seasonally AdjustedSeries title: (Unadj) Special Unemployment Rate U-6Labor force status: Aggregated totals unemployedType of data: PercentAge: 16 years and overPercent/rates: Unemployed and mrg attached and pt for econ reas as percent of labor force plus marg attached

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
1998 9.3 8.9 8.9 7.7 7.6 8.4 8.5 7.8 7.6 7.3 7.2 7.3 8.0
1999 8.5 8.2 7.9 7.4 7.1 7.9 7.7 7.2 7.0 6.7 6.8 6.9 7.4
2000 7.8 7.6 7.4 6.6 6.8 7.2 7.2 7.0 6.6 6.3 6.8 6.7 7.0
2001 8.1 7.9 7.6 7.1 7.2 8.2 8.1 8.1 8.2 8.7 9.0 9.3 8.1
2002 10.5 10.1 9.9 9.4 9.2 9.8 9.9 9.5 9.0 9.0 9.4 9.6 9.6
2003 11.0 10.8 10.4 9.8 9.7 10.6 10.5 10.0 9.8 9.5 9.7 9.6 10.1
2004 10.9 10.3 10.4 9.3 9.3 9.8 9.8 9.3 8.9 9.1 9.1 9.1 9.6
2005 10.2 9.9 9.4 8.7 8.6 9.3 9.1 8.8 8.5 8.1 8.4 8.4 8.9
2006 9.2 9.0 8.5 7.9 7.9 8.7 8.8 8.3 7.6 7.6 7.8 7.8 8.2
2007 9.1 8.7 8.3 7.9 7.9 8.5 8.6 8.4 8.0 7.9 8.1 8.7 8.3
2008 9.9 9.5 9.3 8.9 9.4 10.3 10.8 10.7 10.6 11.1 12.2 13.5 10.5

As you can see here we have an increase of 1.3% to 13.5% unemployment in December. Many people including myself think this is a better more accurate number for understanding the current unemployment situation.

It is also interesting to note that a loss of 1.3% of jobs from a labor force of about 254 million with slightly more then a 65% participation rate equals job losses of more then 1 million jobs from November to December. Almost double that which was reported.

Interesting also is that even though the scales are somewhat different (U6 at 6% unemployment is good) the U6 numbers represent a 10% increase in the unemployment rate vs just a 5.8% increase in the U3 from Nov to Dec.

Something to think about and keep an eye on going forward.

Disclosure: None

Comments

[John Lounsbury:]

You make some good points.

There are others publishing articles that I trying to put a good spin on Friday's report. You are looking deeper at what's going on.

Jan 11 06:26 PM

[John Lounsbury:]

sorry for typo -

Replace ..."that I trying to put a good spin... '
with :...that are trying to put a good spin..."

Jan 11 06:28 PM

[Leonard the...:]

Hi John,

I wish the real view showcased all of these things. It bothers me that most people don't see or understand these other labor reports that are not widely disseminated.

Not that I'm all about spreading doom and gloom and all that, just want to really understand the situation as best possible.

Leonard

Jan 11 11:53 PM

[secmaven:]

And the "seasonal adjustment" of 200M plus jobs must be added back, which it will when December is recalculated like November just was. The actual jobs lost in December pushes 800,000. But the stock market has already "discounted" this right? No problem on the NYSE. Business as usual. Buy 'em while they are cheap and on sale!

Jan 12 12:05 PM