Unemployment Revised: What's Another 617,000 More Jobs Lost Among Friends?

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Includes: AGG, DIA, SPY
by: Daryl Montgomery

The Bureau of Labor Statistics (BLS) just revised its figures for 2009 and these now show that there was an extra 617,000 jobs lost in the U.S. economy last year. This works out to 51,000 more jobs lost on average per month than the U.S. government reported. Since there is no reason as of yet to think the Bureau is doing a better job in 2010, investors might want to subtract this number from future employment reports to get a more accurate read of what is really going on in the U.S. labor market.

The numbers being reported are bad enough as is. January Non-Farm Payrolls showed a loss of 20,000 jobs (perhaps that should be minus 71,000). According to the Bureau's recent numbers, jobs have been lost every month since the recession began in December 2007, except for last November. While the job losses for the other eleven months of 2009 were revised to show a greater loss of 38,000 to 101,000 jobs, November was inexplicably adjusted upward by 60,000. One major media outlet emphasized this one positive number while neglecting to mention that December had an extra loss of 65,000 jobs, which more than offset the increase in November. Something similar happened in the December 2009 employment report where an extra 15,000 jobs appeared in November, but at the same time 16,000 jobs disappeared in October. Some might find this activity an indication of manipulation.

With today's revisions for 2009, the U.S. government now admits that 8.4 million jobs were lost during the recession. Even though there was more than an extra 600,000 people who lost jobs in 2009 than was previously acknowledged, the BLS reported that the total number of unemployed decreased and that the unemployment rate fell from 10.0% in December to 9.7% in January. The BLS specifically stated that the "number of persons unemployed due to job loss decreased by 378,000 to 9.3 million". They further stated, "In January, the civilian labor force participation rate was little changed". Those who took first grade arithmetic might be puzzled by these highly inconsistent numbers and statements.

The key to how well the U.S. economy is doing is how many jobs are being created in the private sector. To get a ballpark figure, investors should not just subtract the 51,000 job error rate from the BLS monthly numbers, but also the number of jobs that the government has created - reported as 33,000 in January. This would indicate that the private sector lost 104,000 jobs last month.

It has been more than two years since the recession began and the U.S. economy is still bleeding jobs, although the government is doing its best to hide the true extent of the problem. To actually reduce unemployment, the U.S. economy will have to add 200,000 or more jobs a month to compensate for new entrants into the labor force and the return of discouraged workers. There is no reason to believe that this will be happening anytime soon.

Disclosure: None