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The Bureau of Labor Statistics today reported that the unemployment rate improved in September to 7.8%, from 8.1%. But the unemployment rate does not tell the whole story because it ignores dubious decreases to the labor force, labels people working part-time who are seeking full-time work as employed, and forgets the disenchanted group of Americans who have been unemployed so long that they no longer believe they can even find work. The under-employment rate was unchanged for the month of September, showing the same misery as in August. It's what really matters to our nation and to the unaccounted for suffering.

The calculation of the under-employment rate, which takes into account the number of Americans working part-time for economic reasons and the detached workforce, follows here. If we add back the excluded 2.561 million displaced workers to the labor market, and include the 8.613 million underemployed part-timers in the unemployed count, adjusted unemployment is found to be ((12.088M + 2.517M + 8.613M) / (155.063M + 2.517M)) * 100 = 14.7%. Last month, the rate was ((12.544M + 2.561M + 8.031M) / (154.645M + 2.561M)) * 100 = 14.7%, or the same misery.

Oftentimes, this data is skewed by decreases to the labor force. This month, however, a near perfect match between decreased unemployment, increased part-time employment and an increased labor count is what kept the rate in check. Note, however, that it was the increase in part-time employment which drove the unemployment rate improvement. There are not more people working full-time, generally speaking.

Stocks are celebrating the gains this morning, with the SPDR S&P 500 (SPY) up a half of a percentage point in the early going. The shares of cyclical financial and significant employer Bank of America (BAC) is up 1.5%. Cyclical benefactor of employment and the consumer spending that comes with it, Ford (F), sees its shares up 1.3%. Employment services firm Robert Half International (RHI) is up 1.0%, and employment services and information firm Monster Worldwide (MWW) is higher by 0.8%. These gains remain questionable, though, considering the underemployment rate. However, even the under-employment rate here is likely understated.

The under-employment rate captures some of the important factors but likely still underestimates true under-employment and unemployment. It's because it misses the long-term attrition of the labor force. Some 40% of our unemployed, or 4.8 million Americans, have been lacking work for 27 weeks or longer. A great number of Americans have been unemployed for even longer periods than that, and when they stop receiving unemployment insurance via the extensions legislation, many likely stop reporting their unemployment. Thus, they drop off the BLS' radar screen and off of the data being celebrated today. For traders, this means temper your enthusiasm.

Source: The Under-Employment Rate Shows Same Misery