November Unemployment Statistics Analyzed
The Bureau of Labor Statistics job loss data brought cheer to the markets with only 11,000 job losses suffered in November compared to the 125,000 estimated by economists. Additionally the unemployment rate fell from 10.2% to 10.0%.
But isn’t that a contradiction? If we have 11,000 more people unemployed, how can the unemployment rate fall? That’s simple, it’s spin.
More than a glance at the headline number and a bit of detailed analysis will clarify things. The 10.0% unemployment rate is based on a survey of households. The job loss number is based on a different survey of business and government. So they can conflict, as they clearly do today.
The unemployment rate fell because we only have 15.4 million Americans looking for work. If you aren’t looking for work, you don’t count.
So digging deeper we find that the size of the labor force fell by nearly 100,000 jobs, the third straight decline. We don’t have fewer unemployed people, we have a smaller work force because people have given up looking for work. The participation rate—the percent of the population employed or looking for work—fell to 65%, the lowest since the recession began.
News that there is some improvement in the jobs situation, while welcome, would be better if it wasn’t so clouded in statistical manipulation. While the headline says things are better, the bottom line is that fewer people are employed.
Could there be motivation for spinning good economic information as we approach year end and Christmas? Of course.
As we know, a lot of the economic behavior of consumers is based on emotions. If we feel things are getting better, we’ll spend more and increase economic activity.
Assuming we all would like a solid economic recovery, then this spin is exactly what everyone wants to happen as it will spur the recovery. So in this case, it’s good spin, but it’s spin nonetheless.
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