Sunday, April 4, 2010

More Problematic Details Surface For March Non-Farm Payrolls Report

Yesterday, we took on the much fawned-over payroll report and pointed out, that despite the collective cheer from Wall St. and the Obama Administration, when properly analyzed, it STUNK!(

More details are coming in and they confirm exactly what we said.  The recovery in jobs is nothing more than a phantom and is highly likely to be just a temporary blip.

Unemployment can be measured several ways.  The headline number, also known as "U-3", is a very narrowly defined measure which conveniently excludes key segments of the labor market.

The Labor Department's more comprehensive gauge of workforce under-utilization, known as "U-6″, accounts for people who have stopped looking for work or who can’t find full-time jobs.  Though the rate is still 0.5%  below its high of 17.4% in October, its continuing de-coupling from U-3 indicates the job market has a long way to go before growth in the economy translates into relief for workers.

In March, U-6 ROSE 0.1% to 16.9%, despite the supposed creation of hundreds of thousands of jobs.

The official 9.7% unemployment rate is arrived at by including people who are without jobs or, who are able to work and have actively sought employment in the prior four weeks.  The “actively looking for work” definition is fairly broad - including people who either contacted an employer, employment agency, job center, friends or sent out resumes.

The U-6 figure includes everyone in the official rate plus so-called  “marginally attached workers”  —  those who are neither working nor looking for work, but say they want a job and have looked for work recently.  It also includes people who are part-time because they can't find full-time work.

During the Clinton Administration, "discouraged workers"  —  those who had given up looking for a job, were re-classified so as to be counted only if they had been "discouraged" for LESS than a year.  This time criteria defined away the long-term discouraged workers.  The remaining short-term discouraged workers (less than one year) are included in U-6.

The always erudite Dr. Williams of ShadowStats, ( has created an unemployment aggregate which removes the extensive government massaging to provide a more realistic gauge of unemployment.

Known as the "SGS-Alternative Unemployment Measure", Williams adds the excluded long-term discouraged workers back into the total unemployed, resulting in a measure more consistent with real personal experience.  The resultant SGS-Alternate Unemployment Measure rose to about 21.7% in March from 21.6% in February.

The 21.7% unemployment rate is not as high as the purported peak unemployment in the Great Depression (1933) of 25%, but the SGS level is probably about as bad as the peak unemployment seen in the 1973 to 1975 recession.

The Great Depression unemployment rate was estimated well after the fact, and with 27% of those employed working on farms, true comparisons are difficult to make.  Today, less than 2% of the labor pool works on farms.  Thus, for purposes of a Great Depression comparison, Dr. Williams believes it is more appropriate to consider the estimated peak non-farm unemployment rate in 1933 of 34% to 35%.

They keep spinning and we keep cutting through the BS.  Marko's Take is on the job, so you don't need a PHD or a lie detector!

We want to wish everyone a Happy Easter. 

Marko's Take

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