I have just finished looking at the latest employment situation report and there is absolutely no good news there. This report is miles apart from the jobless claims data I reviewed last week and does not confirm we are anywhere close to a bottom. The headline number here was 8.5% unemployment, a 26-year high. However, upon digging a little deeper, even that number is relatively benign because of change in methodology. Below is a synopsis of what the further details reveal:
- The headline number of 8.5% unemployment on a seasonally-adjusted (SA) basis is 9.0% on an non-seasonally adjusted (NSA) basis.
- While the number of unemployed increased 700,000 to 13.1 million (SA), there are a further 5.5 million (SA) not in the labor force who want a job if they could have one. Adding these two numbers together gets one to 11.9% unemployment.
- Many workers have been discouraged or are marginally attached, factoring these workers in gets us to 15.6% unemployment, which is certainly a depressionary-statistic.
- While the SA number for unemployed is only 13.1 million, the NSA number is MUCH greater at 13.9 million unemployed. I discount the seasonal-adjustments due to the unusually pronounced nature of the downturn. Therefore, one should expect the SA numbers to still need to play ‘catch-up.’ Translation: upside surprises should be expected (high unemployment numbers).
- My favorite employment related-statistic, the year-on-year change in the unemployment rate, is a coincident or leading indicator. It is still rising. The SA change is 3.5%, up from 3.2% in February. The real NSA number is 3.8% up from 3.7%. As a point of reference, the worst climb since the depression is 4.2% in October 1949. I would expect that is where we are headed. (In 1932 this number reached 10.7% and in 1938 it reached 8.6%).
- Labor force participation rate dropped to 65.4% as more and more workers get discouraged.
- Hours worked (SA and NSA) are at a record-low 33.2 hours per week suggesting even more distress among those currently employed.
Update: the link here to the BLS website shows all the major unemployment numbers from the headline number (U-3) to the most comprehensive number (U-6). My explanation of U-6 doesn’t give the full picture which is: “Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.”
The charts below are seasonally adjusted data.
The gray bars above indicate recessions. What you should notice above is that recessions don’t end until the change in the unemployment rate peaks. Whether we peak late this year is a matter of pure speculation at this point.
The long and short: the employment situation report paints a grim picture and it is getting worse.
Sources: Employment Situation Summary - U.S. Department of Labor