Sunday, January 8, 2012

Cooking The Employment Numbers

The Labor Dept.'s December's job numbers - 200,000 jobs created and 8.5% unemployment - were celebrated throughout the MSM as proof that the economy is turning around.  The numbers, as always, are seasonally adjusted.  But what is different about this year's seasonal adjustment is that the Labor Dept. deviate's significantly upward with past December adjustments.  Tom Blumer at BizzyBlog has the analysis:  

Yesterday’s raw result, if achieved in either of those two Decembers [2004 and 2005}, would have led to a seasonally adjusted result of about 140,000 — 60,000 less than reported.

In the private sector (blue boxes at right), the raw result in December 2005 of 94,000 jobs lost was only 14,000 jobs worse than the -80,000 reported for December 2011, yet yesterday’s seasonally adjusted result was 74,000 jobs higher (212K vs. 138K). What’s more, the nearly breakeven raw result in December 2006 (only 6,000 jobs lost) led to 37,000 fewer job additions after seasonal adjustment than yesterday (175K vs. 212K).

It would seem that the Labor Dept. has learned new math. In any event, as I have pointed out so often before, the focus on Labor's U-3 number, in this case 8.5%, is ridiculous because it discounts a vast number of long term unemployed, deeming them to have voluntarily left the workforce. The U-6 unemployment number captures more of the long term unemployed, as well as those who are working part time simply because they cannot find full term employment. A comparison of the U-3 and U-6 numbers gives a better feel for true unemployment situation - and it is not 8.5%

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