Friday, December 02, 2011

Unemployment fell?

Well, as you know the devil is always in the details and there are plenty of issues to look at in this month's jobs data.

** First, could Google or Facebook or Twitter lend the government some servers?  The Bureau of Labor Statistics publishes their monthly jobs report on the first Friday of every month and every month their website goes down for extended periods of time as every analyst from London to Singapore tries to pour through the data.  Bear with me, much of the info I have rec'd so far is second hand.

Again, the headline that every news outlet seems to be running with is: "JOBLESS RATE FALLS TO 8.6%".  While this is in fact true, it's more a function of math than of an improving jobs outlook.

The unemployment rate is a fairly complex calculation but for our purposes let's say simplify it.  Imagine a country with 100 people and 10 of them our out of work.  In this simple example our unemployment rate is 10/100 = or 10%.  Now, imagine that 5 of the unemployed just get tired of looking for work so they are no longer classified as "unemployed" or part of the the labor pool.  This means they vanish from the calculation and next month you have 5 unemployed / 95 people in the labor force = 5.3% unemployment !!!  Hurray, we're all saved!

Of course, those 5 people still don't have jobs, but why muddy the waters with facts.

So now, let's come back to the real world.  In the US, last month the civilian labor force fell by 315k people that disappeared - basically they stopped looking.  Removing them from both the numerator and denominator of the unemployment calculation drove the steep drop in unemployment.  Eventually, people will figure this out but it may take a day or so.

Our total labor force participation dipped back to 64% which is dismal and the average term for the long-term unemployed is now 40 weeks. 

The market seems to be happy with this data but I'm not sold on it. 

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