The Truth About Unemployment Numbers 25 comments
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Nowadays, it is often wise to step away from business news sources, and look at original data sources, in order to learn the truth.
If we look carefully at the original information published by the U.S. Department of Labor, we see some surprises. The news stories which have run in CNBC, Marketwatch and Bloomberg, hailing "good unemployment numbers" were not conveying accurate information. Here is the real truth (source):
The advance number for seasonally adjusted insured unemployment during the week ending June 6 was 6,687,000, a decrease of 148,000 from the preceding week's revised level of 6,835,000. The 4-week moving average was 6,757,500, an increase of 2,250 from the preceding week's revised average of 6,755,250…
The one word "insured" makes a universe of difference. They are not speaking about the total number of people who are unemployed. They are talking about the number of people still entitled to unemployment benefits. If you stay unemployed long enough, in other words, you drop off the rolls.
It is unlikely that they found jobs, given that the overall unemployment rate keeps rising very fast. In the western United States, for example, jobless rates have risen rise well above 10% (see here).
The harsh reality is that, in all probability, 148,000 people are no longer entitled to collect a check. They are "uninsured" and collecting nothing. They do NOT represent a reduction in the unemployed, but, rather, represent the number of people who have been on unemployment insurance so long that they've run through all of their benefits. That's not good for them, and it's not good news for the economy.
Initial claims for the week of June 13th actually rose by 3,000 from the week before (June 6th) (source). That is bad. It means that America is still shedding jobs at a substantial rate. Indeed, if these 148,000 people had not been moved out of the insured category of people collecting checks, to the uninsured category, the moving average would have increased to 6,905,500. That is also very bad news.
However, those things are not as bad as the fact that the same report (source) also notes that the “states reported 2,359,537 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending May 30, an increase of 102,946 from the prior week."
Let me explain. The EUC program was created on June 30, 2008, by the Supplemental Appropriations Act of 2008 (P.L. 110-252). It makes up to 13 additional weeks of federally-funded unemployment benefits available to unemployed individuals.
With their benefits running out, each week henceforth, we will see anywhere from 100-200,000 people dropping from being "insured" to being "uninsured". They will no longer qualify for an unemployment check. That means they'll have less money, or no money at all, to spend in stores, restaurants and elsewhere. These unfortunate people must be numbered among the "permanently unemployed". Having been unemployed for so long, many have become bereft of hope, and are penniless, and desperate.
In spite of it all, some Wall Street spinmeister, who either doesn't know what he is talking about, or is purposefully intent on misleading the public, will boldly announce that the "new unemployment numbers show the economy is improving" and/or "we've hit bottom and recovery is imminent."
Disclosure: Neither long nor short on anything mentioned in the article.
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Good point, obviously uninsured and insured unemployed should be reported together with total unemployment.
I don't believe you've used ShadowStats information and was wondering what you think of their approach? They claim unemployment U6 is over 20%
www.shadowstats.com/al...
theburningplatform.com...
Steve Armstrong
Imagine how lovely the country if they only stayed receptionists; the lawyers I mean.
who exhaust their benefits, including the 13 week extention, fall off the radar at that time. Their next move is to some form of public assistance, in states that still provide it. We all know that the spin doctors use the numbers to reinforce their particular position, and
that most stats are MADE UP on the spot......
Many of my friends are in such situation. They end up unemployed for long stretches of time and often turn to consulting, even for their old employers, at the same level of pay but without benefits, penson plans, tax witholding, etc.
This number is at an extreme low.
Consider all those on SSI who are there because there is no work available in the current job market for them given their physical or mental abilities. The bar for this is quite low.
And what's worse, any jobs being created are at an average wage that is lower than those which have been lost. Result: less consumer spending power to dig us out of the current economic morass.
On Jun 21 09:01 AM Steve Armstrong wrote:
> The # that nobody talks about is the "under-employed" people. There
> are lawyers working as receptionists, etc. It's a huge #.
>
> Steve Armstrong
Even companies which can afford to hire and should be hiring don't - when confronted by dismal numbers -- so while the published stats maybe a bit of smoke & mirror - it is good to "emphasize" any good news -- however small -- since it will help change the mindset and get us away from the doom and gloom thinking which has frozen all types of investment.
Folks, the economy will never improve untill employment increases. It may be a lagging indicator, but directional improvement is needed now. I am no fan of govt. stimulus or TARP -- but if the govt is going to spend our money - I would prefer it to be spend to directly increase employment.
More needs to be said about how many people are now collecting welfare benefits and how many are drawing down their lifetime savings to stay afloat. Those are really the clues to the how big the unemployment problem really is.
On the "bright" side, even during the 1930's Great Depression there were many substantial Bear rallies of +20% or more, so, at least for the nimble, and with sad irony, I believe there will be some very good times to make very good money. Good luck to all.