ciel's  Instablog

There was key information in Friday's unemployment releases central to a lot of our questions about our recovery.

First off, is anyone here really surprised that the official unemployment rate has finally hit double digits?
I'm sure there are the spinsters who will get on TV and talk radio to suggest that this would not have happened had Obama not been in office, but the level-headed at least know better.

October's 10.2% is actually even much worse than it looks.

How to read Employment/Unemployment numbers.

Figuring The U3 Has Changed Dramatically Over Time
CEPR did a study about a year ago comparing the way headline unemployment is computed since the mid-90s to the way it was added up before the 90s. Using the methods employed prior to the most recent computational changes, we would have to add about 1.4 points to the headline numbers from about 1994 on if we want to compare U3 to the years prior to that.

Thus, October's 10.2% U3 is really much more accurately described as 11.6% U3, if you really want to hold it up against the early 80s or early 70s business cycles, for example. Using this more constant reporting method actually gives us a headline unemployment rate the highest we have seen since the 1930s by far.

Monthly Jobs Data Actually Come From Two Different Surveys
Most people do not know this. Our jobs reports issued each month are actually taken from two entirely different surveys that use two entirely different methods.

The one that gives us the net jobs gained or lost comes from payroll data taken from medium and large sized businesses. An obvious weakness of this survey then is that it misses small (and most of the brand new) businesses. This is known as the Establishment, or "Payroll" Survey.

The one that gives us the headline unemployment rate we see in the newspapers is the Household Survey. This entirely different survey is done by literally calling people at random and asking if they are working or not, and if not, why not. The obvious strength in this method is that it does also catch small businesses. An obvious weakness is that it isn't looking at hard data, the way the Payroll Survey does (which basically counts paychecks issued by large and medium size businesses).

The Great Recession appears to be getting followed up
by The Mother of All Jobless Recoveries... or Something Worse
Typically coming out of a recession the survey to follow is the Household Survey, because it catches turning points in the labor market that the Payroll Survey misses. (More new jobs coming out of recessions are created by small-sized businesses). Well, guess what. Apparently all the jobs Pollyannas out there must have been ignoring the fact that there is still a major and worsening credit crisis going on in America, and it is no longer centered in the big money banks. Small businesses and individuals are arguably experiencing their worst credit contraction since the Great Depression. Is it any wonder then that we are simply not yet even creating jobs, or at the least losing them at a seemingly less hostile pace, if even on levels typically seen in previous "Jobless Recoveries?"

A Few Concerning Internals Within Today's Job Data

• Outside of actually being in recession, we've rarely or never seen the U3 go up by 0.4 points month-to-month.
• Even with the U3 going up by 0.4 points, this increase occured with a very sizable drop in the labor force participation. In other words, the +0.4 was not the result of people reporting that they got back in to the labor market. It occurred despite an alarming spike in the number of respondents who reported that things were so bad they gave up looking! The broader U6 actually leaped from 17.0% to 17.5%, another kind of month-on-month increase rarely if ever seen outside of actually being in recession.
• The average hourly workweek remained unchanged at a record low 33.0 hours. Recessions are rarely or barely over if the average hourly workweek is still falling or has yet to come up off the floor and start rebounding.

A few other data points from today:

Long-Term Unemployed Hits Another New Record High

Graph Credit: Calculated Risk (Click for full-size)

Liesman, Barbera, Zandi, Santelli & Malpass Discuss
Great Recession Vs.Other Post WWII Recessions