Breaking: 85,000 Jobs Lost in December, Unemployment at 10%

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Friday January 08, 2010 · 5:33 AM PST

2010/01/08 · 05:33

The BLS just released the December Employment Situation Report, which showed a much greater than expected loss of 85,000 jobs. The unemployment rate remained unchanged at 10% and the closely followed (now) U-6 rate ticked up by .1% to 17.3%.

In good news, November was revised up (as I predicted) to a positive 4,000 jobs.

UpdateVirtually every number in this report was bad on both an unadjusted and adjusted basis. The household survey showed a large loss in unadjusted jobs and the hit to both the participation rate and employment-population ratios were very large (-.3 each). Also, another 800,000 people dropped out of the labor force in December and the total of those who dropped out and still want a job is now at 6.3 million people (out of the 83 million not in the labor force).

Last Update Link to my examination of historical seasonal adjustments and birth/death factor.

The bad news here is that both the labor participation rate and employment-population rate fell (to 64.6 and 58.2 respectively).

A close examination of the seasonal adjustment and birth/death factor used for this report can be instructive, as it will explain a bit better what we are really seeing compared to past years. The average (last 5 years) seasonal adjustment for December was -.56%, this compares to the seasonal adjustment used for December 2009 of -.69%, which equates to a difference of 171,000 jobs. This means that the BLS thought that the adjusted seasonal factor for December needed to be greater for this year due to additional seasonal factors that were not in place in the recent past (and had they used the historical adjustment we would have seen a positive 87,000 jobs). The birth/death adjustment used for December 2009 was +59,000 jobs. This compares to the five year December average birth/death adjustment of 65,000 jobs. Since I believe that the birth/death adjustment is much more akin to an additional seasonal adjustment instead of an actual real-time economic look into business creation (due to its consistency on a monthly basis), this means that December 2009 was viewed by the BLS as being a an average month on birth/death terms.

Overall, this is a fairly negative report and definitely is a blow to the idea that we are going to see any kind of steady increase in jobs for the near future (unless they revise the seasonal adjustment).

Update Please rec this to get an economic discussion on employment on the rec list whether you agree with my position or not. Economics on the rec list are good.

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