Misunderstanding Unemployment Data

A friend quite sarcastically writes:  

“its a disaster that only 94.8% of all people looking for a job in this country can find one”   

Um, no.

The number referenced is the percentage of people working, relative to the total labor pool. The 5.2% unemployment rate does not represent, as suggested below, a percentage of unsuccessful job hunters.

Here’s how to track this: Go to The Street.com’s free Economic Calendar.  Most people get the Unemployment Rate, and stop there. But as I mentioned previously, the headline number can be misleading. There are severalother measures you can review. If you look at the Augmented unemployment rate — created by Greenspan to give a fuller read on the Economy — its over 8%. And, if you use BLS’s U-6 — the broadest measure of Unemployment, which adds back in discouraged workers — we’re closer to 9.3%.

Here’s another interesting data point: Look at the Pool of available workers — its been going down since mid-2002, despite the continually rising total U.S. population. Curious, huh?

This helps explain why the Unemployment rate has been going down — its not because more people are getting jobs; Rather, its because the labor pool keeps shrinking.

Remember, a percentage is a fraction with 100 understood as the denominator. Unemployment Rate is 100 minus the Employment Rate % (workers/labor pool).

There are only two ways to make the unemployment percentage smaller: Make the numerator bigger (more people getting jobs) or make the denominator smaller (less people in the labor force). The unemployment rate has been going down due to the NILFs: People NOT IN the LABOR FORCE.

This has very significant ramifications for the broader economy, as well as the market. Investors are advised that they ignore the fine print at their own financial peril . . . 

Category: Economy

Lost Jobs Found: Elapsed Time, 46 Months

Category: Economy

Job Gains: How have Presidents fared?

Jobs-data-palooza continues, with an analysis of the jobs data for each Presidential term, by Global Insight (via WSJ).

Note that most Presidents tend to get too much blame and take too much credit for economic gaisn and losses. That said the WSJ reported that "Bush gained jobs during his first term but in percentage terms, his job
creation record compares poorly to that of almost every previous presidential
term for which comparable data is available, according to research firm Global

Three charts show how the present administration is faring vis-a-vis past Presdients:

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Category: Economy, Politics

Employment Report: Let the Rationalizations Begin!

Category: Economy

Economists React to Jobs Data

Category: Economy

VOTE: Best Financial Industry/Investment Blog

Category: Web/Tech

VIX collapse

Category: Markets

Category: Economy, Markets

Barrons picks up “Psychology & the Impact on Market Internals”

Category: Media

Bloomberg TV (02/03/05)

Category: Media