I continue to be amazed at the negative comments made by many economists with regard to the recent unemployment number. This is one month's set of data, which appears to be in sync with a recent minor slowdown in money growth (a slowdown which has now ended). Given the intensity of the recent Great Recession, it is not hard to understand that the lay person who is not looking at all the data would think the unemployment situation is just as bad as it was at the peak of the recession, but this is simply not the case, but the pros should have a better understanding. Here's a ShadowStats graph showing the duration of unemployment is far from its peak, and generally trending downward.
Further, the recent small increase in unemployment was largely the result of a huge seasonal adjustment haircut. I'm always suspicious of seasonal adjustments up or down, because there can be real underlying factors that can cause the seasonal factors to distort rather than bring clarity to economic data, so it should be noted that the non-seasonally adjusted payrolls number was up by 376,000 in June versus the SA report of 18,000. Got that? In terms of real people, there was actually an increase in jobs by 376,000. In other words, the BLS seasonal adjustment factor disappeared 358,000 real jobs.
Bottom line: The BLS numbers are a very rough guide to what is going on in the economy. You need to look at trends, and other data to get a true picture of what is going on in the economy. The current data, coupled with the recent accelerating money supply growth suggest to me that we are headed for another mad, manipulated spike up in the economy, duration unkown. The one certainty is that it will be very price inflationary. given the amount of new money already in the system.
I don't think the shock by the mainstream economic community is as much about the number as it is about their gross inaccuracy in predicting the job gains. These guys were so far off that it leaves one to question how much these guys really understand their models, the validity of those models and the basic economic theory on which those models were built. The seasonality adjustment, while questionable, certainly would have been considered in their algorithms, or at least they thought it was. What is clear is that there appears to be a major disconnect between the BLS data and the results of the econometricians and their labor forecast models. I think what this also does is call into question the validity of the other forecast models that also may be way over optimistic like the labor forecast models.
ReplyDeleteI think the gov. economists know what's really going on and are trying to create a false nadir to give the impression that Obama on the ropes (i.e. setting employment expectations at disaster levels). When employment does come back by years end and early next year it'll look like Obama's fine interventionist economic policies are finally working -just in time for to be re-elected.
ReplyDeleteI can see Obama with his arrogant swagger now: "You didn't have faith in me back in the summer of 2011. I told you we'd start coming through this. We'd just need a little patience" These new jobs are a result of our continued investment in America's future. But let's not get complacent. Our work is not done. We need four more years to see these policies to fruition."
Yuck! I'm getting sick to my stomach just thinking about it.
The biggest factor in the increase in the number of weeks unemployed must have a relationship to the length by which the unemployment payments have been extended.
ReplyDeletei.e. if the unemployment benefits last "x" weeks, and then are extended by "y" more weeks, I would expect the average number of weeks each person is unemployed to immediately enlarge by (close to) y.
I would like to see a graph of the average number of weeks people are unemployed that also graphs how many weeks of unemployment benefits are given.
I know several people who tell me, "I have another six months of unemployment payments left, then I'll start looking for a job."
And 358000 non-SA jobs in the month of June is very poor versus prior Junes.
ReplyDeleteThat's why you focus on the labor participation rate - and what THAT rate is showing you is that there is nothing bullish about the employment situation. It remains a structural event.
ReplyDelete