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Despite the headline emphasis on jobs gain, the most commonly reported unemployment rate (“U.3”) rose to 9.6 percent. The unemployment rate that includes that part of “discouraged workers” still counted by the government as unemployed (“U.6”) rose to 16.7 percent.
By Paul Craig Roberts 08 September 2010 Trends Research Institute
A statistically meaningless increase in August private sector jobs data “eased recession concerns,” Bloomberg reported on September 3. Private sector jobs gains came in 27,000 above the consensus forecast of 40,000.
We see the touted jobs gain as nothing but statistical noise. The Bureau of Labor Statistics' 95 percent confidence interval in reporting of monthly change is +/- 129,000 jobs. Yet, “stocks climbed around the world” as a result of a statistically meaningless jobs gain. The flimsy jobs report “sent stocks to their best pre-Labor Day week in two decades” (MarketWatch).
“The worst fears were not realized,” declared Stephen Stanley, chief economist at Pierpont Securities. “The double-dip talk was probably misplaced,” said Maury Harris, chief economist at UBS Securities.
These are strong conclusions to be drawn from a statistically insignificant result. But anything will do to fend off reality.
Looking behind the headlines at the BLS August jobs report, we see an unsettling picture. Total nonfarm payroll jobs fell by 54,000 from the previous month, due to a 121,000 decline in state employment jobs and federal census worker employment.
Moreover, it takes approximately double the reported 67,000 private sector jobs gain each month just to stay even with the growth in the work force.
Despite the headline emphasis on jobs gain, the most commonly reported unemployment rate (“U.3”) rose to 9.6 percent. The unemployment rate that includes that part of “discouraged workers” still counted by the government as unemployed (“U.6”) rose to 16.7 percent. The unemployment rate estimated by John Williams of shadowstats.com, which includes all discouraged workers, is 22 percent.
The U.3 unemployment rate of 9.6 percent, the “happy rate,” amounts to 14.9 million Americans out of work. The U.6 unemployment rate corresponds to 25.9 million out of work Americans. The 22 percent rate, estimated according to the official government methodology of 1980, means that 34.1 million Americans are out of work.
These are heavy numbers. Yet, “recession fears have eased” on the basis of a statistically meaningless gain of a few thousand jobs. At the August rate of job gain, it would take ten years to reduce unemployment by eight million assuming no further growth in the labor force, which would still leave us with many millions of unemployed.
Where were the 67,000 new private sector jobs, whose increase of 27,000 above expectations “eased recession fears”?
Twenty-eight thousand of the new jobs were in health care and 12,000 in social assistance. Ambulatory health care services and hospitals accounted for health care’s contribution to employment.
BLS reports that “the return to payrolls of 10,000 workers who were on strike in July” added 10,000 construction jobs.
New employment for waitresses and bartenders added 12,000.
Meanwhile, manufacturing lost 27,000 jobs in August.
Astonishing, isn’t it, that 12,000 jobs for waitresses and bartenders, 10,000 returning construction strikers, and 40,000 jobs for ambulatory health care services, hospital orderlies, and social assistance can cause world stock markets to rise.
The 17th century Dutch Tulip Mania, in which single tulip bulbs sold for more than ten times the annual income of a skilled craftsman, has nothing on our modern scientific era, a time of high economics and even higher finance, when meaningless monthly job gains can send up world stock markets.
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The unemployment rate estimated by John Williams of shadowstats.com, which includes all discouraged workers, is 22 percent.
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