Is Unemployment Only 9.5%?

You remember Friday’s gruesome employment report, right? Floyd Norris has taken a second look at it, and found something quite surprising:

Unemployment rates remained steady at 9.5 percent. And the number of jobs actually rose, by 80,000. And the number of jobs for college-educated Americans rose more than in any month in the last six years.

That big hike in unemployment to 10.2%, and all the other terrible, horrible, no good, very bad jobs numbers turn out to have been entirely a function of the BLS’s seasonal adjustments. As Norris writes:

All this may be very reasonable, and there is no way I can think of to test whether the seasonal adjustments are reliable. But I suspect seasonal factors are less important this year, when the economy may be changing directions, than they normally are.

Now even the unadjusted numbers aren’t all sweetness and light, especially when it comes to those with less education. But it does make sense to think that seasonal factors aren’t going to be the same this year as they are in other years.

Comments

[JaysonCabral:]

Yeah, I imagine the number has got to be higher than that. It's such a crazy time right now.

Nov 10 02:48 PM

[Robert Mart...:]

Felix,


Thanks--this was news to me.

If seasonal adjustment factors boosted the U-3 unemployment rate from 9.5% to 10.2%, this should be front-page news. Strangely, I haven't seen this reported in the media or on SeekingAlpha.

It makes sense to me: An improvement in the employment outlook is consistent with massive liquidity and global reflation. Loose monetary and fiscal policy WILL eventually boost economic growth, though at the cost of inflation.

Lest I be misunderstood, I'm just observing the reflation, and NOT justifying government intervention (lest I be savagely beaten by a roving band of Austrian economists).

Rob

Nov 10 03:57 PM

[John Galt:]

When trends work in your favor, tout them no matter what. When they don't work in your favor, play them off and call them lagging indicators.

Are you seriously trying to say that the BLS is over reporting unemployment by less than 1% because there are many people who say they are under reporting it by 5 to 10%... You know, changing the rules during the game kind of thing.

Nov 10 04:14 PM

[Mark Bern:]

Standing still is not really that great as businesses should have begun gearing up for the big holiday season. Manufacturers, importers, distribution centers, transportation companies should all have been hiring during October. If hey don't need more employees that probably means that demand is slack. That also may mean that retailers won't be hiring as many extra staff this year either. Will the delivery companies need more holiday workers in the warehouses or for deliveries? If we don't start to see a significant uptick from these extremely low levels of employment, I would expect to see employment to fall further faster than usual in January. But then the seasonal adjustment will assume layoffs so the drop will be muted. So, in the end, it all evens out.

Spinning this as a green shoot would not be all that appropriate, IMO. If we see decent growth in employment in November (something equal to the usual increase) then we can start cheering. I'd be more than a little cautious if we see another drop because that would mean that retailer expectations are for less business than last year. Help me here. I sometimes get confused. But would less be more in today's environment? I mean, if holiday retail sales come in below last year should that be reported as "not as bad as expected?"

Nov 10 04:19 PM

[optionsgirl:]

The only stats I believe are from shadowstats.com!

Nov 10 04:48 PM

[User 353732:]

Only Government Statistics are true. Reality is what Big Govt says it is.

All those people who say they have no jobs, no income, no credit and are out of their homes are obviously lying...Never trust the Middle Class household.
People giving up in despair after months of looking for a job....lies, all lies.
Job openings plummeting.....lies, all lies.
Small businesses dying because of credit suffocation.....lies, all lies.

The next revision to the Statistics will be even truer and more real . It will be revealed there is no unemployment........ just shiftless, incompetent, ignorant , Middle Class men and women who refuse to avail themselves of the many splendid jobs that have been and are being created and saved. Since they refuse to get these magical jobs, Middle class unemployed and underemployed will no longer be counted.

Nov 10 05:20 PM

[Russ Wetherill:]

You're right, the seasonal numbers are probably different this year than normal. But, instead of lower than normal, they might also be higher than normal too. So what?

You can either believe in the methodology of the model, or question specific equations or assumptions in the model. But, to dismiss what you obviously don't understand just because you disagree with the result, frankly, raises questions about your objectivity.

The whole point of the seasonal adjustments is to correct for seasonal trends that might cause one to misinterpret what the data is telling you. If you want to know whether unemployment improved in October as a result of steps taken in September, then you might want to factor out seasonal Halloween jobs, since this might skew the data. Ignoring the Halloween jobs effect in October might show an improving job market when the job market is actually deteriorating. This is also true for Christmas, summer jobs, etc. Without seasonal adjustments, the data would be truly worthless to direct efforts to improve the job market.

Nov 10 05:20 PM

[Wildebeest:]

Non seasonally adjusted U6 was up 0.3% to 16.3% so whats your point?

And what is Norris' take on 5.6 million people who currently want a job but not being included in BLS unemployment stats because they aren't classified as "marginally attached"? i.e according to an email reply I got from the BLS, while they are classified as "wanting a job" for whatever reason they do not get included in the U6 stats. This number of "want a job" not includeds is growing.

I hasten to add I'm not suggesting a conspiracy--the BLS were actually very forthcoming in discussing this when I emailed them--but it does add another layer of gloom to an already gloomy number.

Nov 10 05:25 PM

[Mark Bern:]

Of course, there is a much higher number of people retiring earlier than they had planned because they lost their jobs. After watching their retirement nest egg get ravaged if they had anything in stocks; after experiencing a 30-40% drop in their home value; after being laid off permanently, they had no other choice but to apply for social security. The alternative may have been to consider becoming homeless. According to our benevolent leaders these people are not unemployed. They lost their jobs. But they can't be counted because they applied for retirement benefits. They didn't want to retire, nor could many of them afford to retire, but they had no choice. They have to eat! But they'll never be unemployed. They'll never be counted.

Do we count those young people who would like to enter the job market but haven't yet found that first paying job? The fact is that the number of people who want to work is still rising and the number of jobs available is still dropping. I expect the official announcement that the recession is over any day now.

Nov 10 05:45 PM

[Graham and ...:]

"war is peace. freedom is slavery. ignorance is strength. (1984). George Orwell knew it in 1948 (with the last two digits reversed).


On Nov 10 05:20 PM User 353732 wrote:

> Only Government Statistics are true. Reality is what Big Govt says
> it is.
>
> All those people who say they have no jobs, no income, no credit
> and are out of their homes are obviously lying...Never trust the
> Middle Class household.
> People giving up in despair after months of looking for a job....lies,
> all lies.
> Job openings plummeting.....lies, all lies.
> Small businesses dying because of credit suffocation.....lies, all
> lies.
>
> The next revision to the Statistics will be even truer and more real
> . It will be revealed there is no unemployment........ just shiftless,
> incompetent, ignorant , Middle Class men and women who refuse to
> avail themselves of the many splendid jobs that have been and are
> being created and saved. Since they refuse to get these magical jobs,
> Middle class unemployed and underemployed will no longer be counted.

Nov 10 06:20 PM

[RATHER FISH:]

Who's working or not working test.
Ask someone who is working if they know what....HAMP OR UNDERWATER .. "buzz word means" Try it you'll be amazed.

Nov 11 10:10 AM

[Heaven, Hel...:]

The U-6 number, or underemployment, is the real number to be focused on here and seasonally adjusted or not, it is perilously high.

Nov 11 10:24 AM