Skip to comments.David Rosenberg's Explanation Why The Real Unemployment Rate (U-3) Is 12%
Posted on 03/04/2011 9:52:04 AM PST by FromLori
Pretty much precisely what noted earlier today: "A couple of behind-the-scene facts: from October to February, an epic 700k people have left the work force. If you actually adjust for the fact that the labour force participation rate has plunged this cycle to a 27-year low the unemployment would be sitting at 12% today. Moreover the employment-to-population ratio the so-called employment rate stagnated in February at 58.4% and is actually lower now than it was last fall when double dip was the flavour du jour."
PAYROLL REVIEW NICE JOB, SHAME ABOUT THE PAYCHEQUE, from Gluskin Sheff
The widespread reaction to the jobs report today is uniformly positive. I think a dose of reality is really needed here. It may as well come from this pen. The headline print of +192k was in line with published estimates but following the slate of ISMs and the ADP report, the whispered number was closer to +250k. Of course, there were the upward revisions to the back-data that showed net gains of +58k so one could easily respond that adjusted for these, the topline did indeed meet these whispered estimates. The employment diffusion index jumped to a 13-year high of 68.2% from 60.1% in January, but beware of peaks and troughs in this index (i.e. it would have been a mistake to extrapolate the 17% low in this job dispersion measure at the March 2009 market trough).
Here is what I think is important: because of the winter storms, we really have to average out the past two months. So the January-February average for payrolls is +128k. Allowing for a similar reading in March that we received in February would generate an average increase for the first quarter of around 150k. That is little changed from what employment gains averaged on a monthly basis in the fourth quarter. So while we are seeing positive job growth, it is not accelerating even though we are coming off the most intense impact of the fiscal and monetary easing that was unveiled late last year. In other words, we are disappointed with what is still a lacklustre trend in net job creation, particularly in view of the peak stimulus we are currently experiencing.
What if Q1 is the peak for job growth? If you remember, we ended up with sub-3% GDP growth in the fourth quarter, which is about half of what we should be seeing at this stage of the cycle. And if we are generating jobs at a similar rate in the current quarter, barring a re-acceleration in productivity, growth again will be below 3% at a time when the consensus is closer to 3.5%. But more to the point what if this represents the peak for the year? Because if there is one thing we do know, it is that this quarter contains all the incremental policy easing impact on the macro data.
What was particularly discouraging was the fact that both the wage number and the workweek were flat. Nominal wages, in fact, have been stagnant in three of the past four months. Weekly average earnings have also been flat or negative in three of the past four months. How on earth can these statistics possibly be viewed as bullish for the economy? The year-over-year-trend in average weekly earnings in the past three months has softened from 2.6% to 2.5% to 2.3% today. At the same time, it is probably reasonable to assume that surging food and fuel costs will bring headline inflation to, and possibly through, 3% in coming months. In other words, the growing risk of falling personal income in real terms, even with the positive growth in payrolls, is a glaring yellow light as far as the consumer spending outlook is concerned.
Aggregate hours worked only managed to tick up 0.2% in February after a flat January. That is total labour input bodies and hours. So assuming a trend-like productivity performance, we are talking yet again about sub-3% GDP growth, which by itself is okay but considering the peak impact of all the fiscal and monetary steroids being administered this quarter, it is actually disappointing.
Yes, the unemployment rate dipped again to a 22-month low of 8.9% from 9.0% in January and the nearby high of 9.8% in November. This reflected a 250k risein Household employment the third increase in a row and a flat participation rate. A couple of behind-the-scene facts: from October to February, an epic 700k people have left the work force. If you actually adjust for the fact that the labour force participation rate has plunged this cycle to a 27-year low the unemployment would be sitting at 12% today. Moreover the employment-to-population ratio the so-called employment rate stagnated in February at 58.4% and is actually lower now than it was last fall when double dip was the flavour du jour.
All that matters in these employment reports is what the jobs environment means for income, because workers generally spend in the real economy. With credit harder to come by, and with fiscal policy soon to become more focussed on austerity, it is the income that the labour delivers that will prove to be the critical determinant of the economic outlook. So while the spin may be over near-200k headline payroll gains, another dip in the headline unemployment rate, the organic income backdrop can really only be described as tentative, at best, especially in real terms as gasoline prices make their way to $4 a gallon by the time Memorial Day rolls around.
They are published by the BLS every time they publish the unemployment rate. It just ruins all the conspiracy theories if you say that.
The fed is using the exact same standard for calculating unemployment now as it did then. During Bushs recession it was the libs claiming that true unemployment was higher and that his administration was deceiving the public. Everyone likes the agreed upon measure while it is saying the things that they want it to say. They start complaining when it doesnt support their message.
It would be nice if conservatives on this board rose to the standards --- of both logic and fairness --- at least somewhat higher than liberals.
What's worse is the situation in which they help socialists to weaken our institutions. When libs were attacking unemployment figures and methodology, there was not talk about fundamental changes in our economy. Now the very institutions of markets and democracy are in question.
And all those "conservatives" piling up on the Fed, Wall Street, Goldman, CEOs all the sins invented by the MSM just help destroy the essence of this country.
Thank you again for your informative and accurate post. Perhaps other people on this thread will read it and refrain from behaving at the lib standards.
Thank you, but I did understand what you meant.
Don’t worry TQ, I have seen plenty enough Bagdad Bennies to know they are lying.
You do know that the statistics he spouts have been squeezed, stomped, stretched, pounded and otherwise massaged in order to present what he wants them to look like. Don’t you?
>>>>>Youve founded these statistics.
No, I found these statistics on BLS.
Debate it on-thread.
Debate personal attacks like being called a commie because I don’t support the socialist bankers who supported obama?
That’s right I don’t and why bother to have rules if you are not going to enforce them? This goes on constantly with this poster and toddsterpatriot.
So debate this I have not yet donated this year to Free Republic but I did last year $50.00 and if that’s how things are going to work I won’t be donating this year at all. This site is not worth posting to at all and you and the vicious posters can kiss my ass.
Im doing Gods work. Meet Mr Goldman Sachs
Baracks Wall Street Problem is Now Americas
JPMorgan CEO Jamie Dimon Donates Serious Cash to Democrats
JPMorgan Chase Asked to Stop Funding ACORN
Tax receipts tell the real story.
The govt can propagandize all they want about percentages.
There’s a sh!tload of people unemployed and underemployed.
Our bankers have learned to privatise profits and socilize losses.
Hang in there.
Our bankers have learned to privatize profits and socialize losses.
Anybody else want FromLori to quit? I don't.
Don’t make the rate too high. They’ll want to pretend it’s low once a Pubbie is back in the White House.
The raw, non-massaged or modified U6 unemployment number now stands at 23.8%!!!
Don’t you even THINK about leaving! I value your threads and posts and while we don’t always agree I think you’re terrific.
It’s Friday- relax a bit and don’t take personal attacks personally ;) The minute they get personal they’ve lost the debate!
Unfortunately, with JimRob in the hospital fighting for his life, some admin moderators have chosen to disregard some of his rules and allow flames and personal attacks when the feelings expressed agree with said Moderators’ views.
There are a few on this board who have their lips firmly planted on Goldman Sachs' ass, but far fewer than there once were.
There are many, many, more who appreciate yours and Chunga's posts.
Neither do I. Stick around!
You are over the target, that is why you’re getting flak.
Another question: What’s the point of “seasonally adjusted”? Just because someone is involved in agriculture or another “seasonal” employ, does that make them any less unemployed when they are out of a job?
We all have our specialties, and areas of knowledge, but that may come at the expense of business knowledge and such a page would help fill the gap.
As for the jerks and the tolerance of them here, well, that has been a problem in the past and still is. The religion forum is radioactive with rabid bigots stinking up the place. The Neo Confederates are about to start their spring offensive against the “Yanks”, and the cop haters are only a post away. The Evolutionists are currently on sabbatical with the global warming crowd, and might not be back for a while.
But for all of that, this is the 8th most popular conservative site on the net. You are reaching 100 times as many interested people as those that nip at your heels. Only you can say if the service of reaching those of us that want the info is worth the hassle you go through to get it to us.
Personally, Thank you.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.