You may call me a wet blanket (or worse); although I'd prefer to be perceived as a reality check, at least as far as today's less-worse-than-normal government employment/unemployment report is concerned. So, here goes...
(NOTE: Bigtime h-t to the Economist's View blog.)
Three facts about the current unemployment/employment situation that are not being highly publicized in today's Monthly Employment Situation Report by the US Department of Labor's Bureau of Labor Statistics:
Fact #1:
We are back to where we were, exactly ten years ago, in terms of number of people employed in this country.
Total Nonfarm Private Employment, 1999-2009
(In Thousands)*
July, 1999: 108803
August, 1999: 108959
July, 2009: 108924
*Establishment data, seasonally adjusted.
Fact #2: The employment-to-population ratio fell, month-over-month.
Fact #3: The primary reason as to why the unemployment rate dropped from 9.5% to 9.4% today: The labor force partipation rate fell even more than the the decline in the employment to population ratio.
Paul Krugman gives us some more reality-based insight about all of this, today, in: "Jobs paradox?"
Jobs paradox?
Paul Krugman
August 7, 2009, 10:00 am
Some readers have asked how it's possible for unemployment to fall when the economy is still losing jobs, albeit at a slower rate. The answer is a bit annoying.
First, the jobs number and the unemployment number are based on different surveys -- a survey of establishments in the first case, a survey of households in the second. Sometimes employment rises by one measure while falling by the other, although it happens that this month there isn't much difference in the jobs number. (The establishment survey is considered a more reliable measure of month-to-month job changes.)
Second, how do we measure unemployment? Contrary to what some correspondents think, it doesn't have anything to do with receipt of unemployment insurance. It comes, instead, from a survey in which people are asked whether they're working and, if not, whether they're looking for work. And what this month's data show is a relatively large rise in the number of people "not in labor force" -- neither working nor looking for work. That's how the unemployment rate can fall even with fewer people working.
Isn't U6, the broadest measure of unemployment, supposed to include people who are discouraged and stop looking? Yes -- but at least according to the survey, that's not the reason more people have dropped out of the work force.
--SNIP--
...when you have the kind of scene we have now -- the employment situation is drifting down, but not plunging -- occasional mixed signals are likely. No big deal.
Krugman closes by telling us that "things are sort of stabilizing" but by no means is anything improving...yet.
Also today, the the White House is managing expectations by reminding/telling us that we're definitely going to see 10% unemployment in coming months: "White House: We're Still Going to 10% Unemployment."
And, personally, I think it'll go significantly higher than that in 2010; perhaps well beyond 11%, or even 12%. And, of course, this is just the Bureau of Labor Statistics' U.3 Unemployment Index we're talking about, with the BLS' U.6 Index being a good two-thirds (67%) to three-quarters (75%) greater than that. (Yes, I believe the U.6 Index may reach or exceed 20% within the next 12 months; and, of course, certain regions of the country, as well as a variety of demographic skews, are already well beyond that threshold.)
Thus, we enter the "new normal," with unemployment staying at unacceptably high levels for many, many years.
The primary reason I see the current situation worse than some (who would call themselves more optimistic) is due to an ongoing, worsening depression in our nation's residential and commercial real estate markets fueling negative numbers across-the-board, essentially creating a ripple effect in unemployment, government revenues (at all levels), manufacturing, and in general. But, more about that at another time...gotta' go, still working this Friday afternoon.
(As some/many of you reading this already know, a quick review of my recent diaries [actually going back almost two years on matters relating to our economy] will provide you with links to supporting information for my brief comments, today.)
But, here are a couple of other, related viewpoints:
NPR: "Why The Unemployment Rate Fell."
Business Week: "The Calm before the Storm?"
Just keeping it real, folks.
Peace!